Production of new single-family homes and apartments increased 1.5 percent to a seasonally adjusted annual rate of nearly 700,000 units in January, according to figures from the U.S. Commerce Department. The National Association of Home Builders says this marks the second-best pace of overall housing production since October of 2008.

"Today’s solid housing starts report indicates that builders are putting more of their crews back to work, and adds to the growing field of evidence that the overall housing market is gradually but consistently moving in the right direction," said Barry Rutenberg, chairman of the NAHB and a home builder from Gainesville, Fla.

Rutenberg also pointed to recent builder surveys that indicate a steadily increasing optimism regarding market conditions while the number of improving housing markets nationwide have grown over the past six months.

"The fact that the three-month moving average for housing starts has now increased for nine consecutive months and is approaching the 700,000 mark for the first time since October of 2008 is indicative of a solid recovery in housing activity stemming from recent firming in employment and consumer confidence measures," said David Crowe, NAHB chief economist "That said, housing production is still far from what would be considered normal in a healthy market, and many challenges remain for home builders in terms of tight credit conditions, difficult appraisals and the continued flow of foreclosed properties on the market - all of which are certainly slowing the pace of improvement in both housing and the overall economy."