U.S. developers started work on new homes at a faster pace in July, partly reversing a sharp drop the previous month. The figures suggest that housing construction is maintaining its recovery.

The Commerce Department says builders began work last month on houses and apartments at a seasonally adjusted annual rate of 896,000. That was up 6 percent from June, though below a recent peak of just over 1 million in March. Construction began on 26 percent more apartments, a volatile category, but 2.2 percent fewer single-family houses.

Applications for permits for future home construction also rose, though mostly because of apartments. Permits rose 2.7 percent to 943,000, boosted by a 13.5 percent jump in apartment permits. Permits for single-family homes dipped 2 percent.

In June, builders had sought the most building permits for single-family homes in five years. Americans are buying more new homes, and builders are increasingly optimistic that demand will keep rising. Both trends should spur more construction. New-home sales jumped in June to their highest level in five years.

And a measure of homebuilder confidence rose for a fourth consecutive month in August to nearly an eight-year high. The National Association of Home Builders/Wells Fargo builder sentiment index, released Thursday, rose to 59 from 56 in July. That is the highest level since November 2005. A reading above 50 indicates that more builders view sales conditions as good rather than poor.

Home prices and construction began to recover early last year, and the recovery has picked up in recent months. It has offset some of the drag this year from higher taxes and federal spending cuts.

Slow but steady hiring and historically low mortgage rates have encouraged more people to buy homes. Increased demand, along with a tight supply of homes for sale, has pushed home prices higher. It's also made builders more optimistic about the market for newly built homes, leading to more construction and jobs.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.

Despite the lift from housing, the economy has been sluggish this year. It expanded at just a 1.7 percent annual rate in the April-June quarter after a 1.1 percent annual rate in the first three months of the year.(AP)