By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) - U.S. builders started construction on homes in September at the fastest rate since July 2008, a further indication that the housing recovery is strengthening and could help the economy grow.

The Commerce Department said Wednesday that builders broke ground on single-family homes and apartments at a seasonally adjusted annual rate of 872,000 in September. That's an increase of 15 percent from the August level.

Single-family construction rose 11 percent. Apartment building increased 25.1 percent.

Applications for building permits, a sign of future construction, jumped nearly 12 percent to an annual rate of 894,000, also the highest since July 2008.

"If there was any doubt that the housing market was undergoing a recovery, even a modest one in the face of the terrible 2008 decline, those doubts should be erased by now," said Dan Greenhaus, chief global strategist at BTIG.

Construction activity is now 82.5 percent higher than the recession low hit in April 2009. Activity is still well below the roughly 1.5 million rate consistent with healthier markets. Still, the surge in construction suggests builders believe the housing rebound is durable.

"Today's data reinforce the view that while housing is not going to be the driver of economic activity that it was in the middle of the prior decade, neither will it be the anchor on activity that it has been in recent years," Greenhaus said.

Construction activity rose in three of the nation's four regions. The biggest increases came in the West and South. Housing starts increased by nearly 20 percent in both regions. Construction of new homes and apartments rose 6.7 percent in the Midwest. Housing starts fell 5.1 percent in the Northeast.

Builder confidence reached at a six-year high this month, according to a survey by the National Association of Home Builders. The group's index of builder sentiment rose to a reading of 41. While that's still below the level of 50 that signals a healthy market, it has steadily climbed over the past year from a reading of 17.

Sales of new and previously owned homes have been slowly improving this year, and home prices are starting to show consistent gains.

Record-low mortgage have encouraged more people to buy. And the Federal Reserve's aggressive policies could push long-term interest rates even lower, making home-buying affordable for the foreseeable future.

Housing is expected to keep improving next year. But many economists say economic growth will stay muted until companies step up hiring and consumers start spending more.

Though new homes represent less than 20 percent of the housing sales 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 data from the home builders group.

• <p> With low unemployment, the <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-washingtonDC.pdf">nation's capital</a> -- along with its economically secure suburbs in northern Virginia -- is currently the best-situated city economically.</p>
• <p> While unemployment remains high, stabilized household budgets and solid credit are helping <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-boston.pdf" target="_blank">Boston</a> weather the storm.</p>
• <p> In <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-minneapolis.pdf">Minneapolis</a>, St. Paul and Bloomington, Minn., things are looking up. Credit is slowly rising, while household budgets and housing markets are steadily improving.</p>
• <p> Historically, Hawaii has been one of the more stable states in the union economically, and it never suffered the dire declines that some areas did during the Great Recession. Today, credit, unemployment and housing in <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-honolulu.pdf">Honolulu</a> have all returned to reasonably healthy levels.</p>
• <p> Late in 2011, household budgets in <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-dallas.pdf" target="_blank">Dallas</a> made a sharp turnaround. Paired with a solid credit rating and a slowly improving housing level, things there are looking bright.</p>
• <p> <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-houston.pdf">Houston's</a> unemployment, housing, and net worth have all turned the corner recently, and its credit rating is slowly improving, suggesting that Texas' biggest city may have a bright future.</p>
• <p> Several of <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-denver.pdf" target="_blank">Denver's</a> economic indicators -- including net worth, credit and employment -- are trending slightly downward, but a strong improvement in household budgets and a slight improvement in housing both suggest that things may be looking good for the Mile-High City.</p>
• <p> Despite taking a slight downward turn, <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-newyork.pdf">New York's</a> credit levels remain among the highest in the country, and its household budgets are steadily rising. On the other hand, stagnation in its net worth and housing levels, paired with rising unemployment, suggest that the future may be a little shaky for the city that never sleeps.</p>
• <p> While its ratings aren't quite as impressive as those of other top 10 cities, almost all of them have been slowly going up in the last few months. In other words, don't let it's relatively low rating confuse you: <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-pittsburgh.pdf">Pittsburgh's future</a> could be promising.</p>
• <p> Another metropolitan area whose statistics don't tell the whole story, <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-kansascity.pdf">Kansas City's</a> relatively low rating disguises the fact that &quot;Paris of the Plains&quot; is climbing out of the hole that the Great Recession plunged it into.</p>
• <p> In many ways, <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-philadelphia.pdf">Philadelphia's</a> position is slowly improving. Unfortunately, however, Pennsylvania's largest city has a deep hole to crawl out of.</p>
• <p> A slightly improved housing situation is the sole shining light in <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-chicago.pdf" target="_blank">Chicago's</a> economic indicators. As for the rest, they are all trending downward.</p>
• <p> With an aggregate economic score that is almost 10 points behind frontrunner Washington D.C., St. Louis is struggling to improve its post-recession circumstances.</p>
• <p> Several of <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-cleveland.pdf">Cleveland's</a> indicators are trending slightly upward, and its household budgets are undergoing a sharp rise. Unfortunately, with relatively low scores across the board and a falling employment rate, it looks like a tough haul lies ahead.</p>
• <p> While its credit, employment and net worth levels are slightly down, <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-sandiego.pdf" target="_blank">San Diego</a> is doing relatively well. Unfortunately, like much of California, it was particularly hard hit by the recession and faces a difficult path back to economic stability.</p>
• <p> With the worst employment score of any major city, <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-losangeles.pdf">Los Angeles'</a> continues to reel from the recession.</p>
• <p> While its credit and household budget indicators look promising, <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-atlanta.pdf">Atlanta's</a> housing and employment remain at crisis levels.</p>
• <p> With employment and housing sharply improving, the future should be bright for <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-miami.pdf">Miami</a>. However, those rates remain among the worst of any metropolitan area in the country.</p>
• <p> <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-detroit.pdf">Detroit</a> was struggling before the recession, and continued crisis-level unemployment and housing suggest that the struggle is far from over.</p>
• <p> Unemployment is slowly trending upward in <a href="http://www.credability.org/assets/cdi/msa/2012Q1MSA-tampa.pdf">Tampa</a>, but housing continues to head south -- it has the second-worst score of any major city.</p>
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