U.S. housing starts rose 3.6 percent last month, reaching a seasonally adjusted 894,000 annual rate, the U.S. Commerce Department reported.

It’s the highest level of new-home construction since July 2008.

"This report is in line with our latest builder surveys, which show improving confidence and optimism in the marketplace as buyers take advantage of low mortgage rates and very attractive prices," said Barry Rutenberg, chairman of the National Association of Home Builders and a home builder from Gainesville, Fla. "Builders are acting to meet rising demand while continuing to exercise caution by pulling a modest increase in the number of single family permits as the market continues to gradually gain its footing."

Permits for single-family housing starts were flat at 594,000 while multi-family starts rose 11.9 percent to 300,000.

"Today's report bears out similar changes in other economic indicators that housing continues to recover at a slow — but steady — place, and is right in line with our expectations of modest month-to-month growth," David Crowe, the association’s chief economist. "However, we still have a long way to go to get back to normal production as inaccurate appraisals, tight lending conditions for home buyers and policy uncertainties continue to impede the recovery."