U.S. housing starts rose 5.9 percent last month to a seasonally adjusted annual rate of 896,000 units, the National Association of Home Builders said.

Citing new information from the Census Bureau and the Department of Housing and Urban Development, a boost in multifamily housing construction is credited for much of the increase. Single-family housing saw a slight decline for July, officials said.

"Builders are making every effort to keep up with the rising demand for new homes and apartments, and construction in both sectors is running well ahead of the pace we saw at this time last year," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. "However, ongoing issues with accessing credit and limited supplies of finished lots and labor are making it tough to do that, particularly for single-family builders."

Despite the challenges, NAHB chief economist David Crowe said he expects the housing market to continue improving.

"Today's report is in line with our forecast for continued, gradual strengthening of housing starts and permit activity through the rest of the year," Crowe said. "The double-digit bounce-back on the multifamily side was in keeping with typical month-to-month volatility in that sector, while the sideways movement in single-family was a result of unusually wet weather in the South and West."