Construction of homes and apartments in the United States grew by 10.5 per cent in August, the Commerce Department reported Tuesday.

Housing starts reached a seasonally adjusted annual rate of 598,000. That's the highest level since April.

Housing starts in the U.S. reached a seasonally adjusted annual rate of 598,000 in August, it's highest level since April. (Gerry Broome/Associated Press)

Applications for building permits — a sign of future activity — also grew, rising nearly two per cent to an annual rate of 569,000.

The gains in starts were driven mainly by apartment and condominium construction, which rose 32 per cent from July, and not from the much larger single-family homes sector.

Single-family homes, which represented about 73 per cent of the market in August, grew more than four per cent.

The news comes a day after the U.S. National Bureau of Economic Research declared that the "Great Recession" had officially ended a year ago, Jennifer Lee, a senior economist with BMO Capital Markets, noted in a commentary.

"U.S. housing, where it all began, came out and handily beat expectations."

Housing starts rose 25 per cent from their bottom in April 2009, but remain 74 per cent below their peak in January 2006.

Builders are struggling with weak demand for new homes caused by high unemployment and a glut of foreclosed homes.

They benefited in the spring from federal tax credits, but those expired in April.

"Housing starts have stabilized over the last couple of years, but at levels which are still too weak," Lee said.

"But with the number of new homes for sale at the lowest level in four decades and mortgage rates at record lows, some demand for construction is being sparked."

With files from The Associated Press