The Commerce Department said Thursday that builders broke ground on houses and apartments at a seasonally adjusted annual rate of 954,000. That's 12.1 percent higher than November's annual rate and nearly double the recession low reached in April 2009.
For the year, builders started work on 780,000 homes. That's still roughly half of the annual number of starts consistent with healthier markets. But it is an increase of 28.1 percent from 2011. And it is the most since 2008 - shortly after the housing market began to collapse in late 2006 and 2007.
Steady job gains, record-low mortgage rates and a tight supply of new and previously occupied homes available for sale have helped boost sales and prices in most markets. That has made builders more confident.
"The strong rise in single-family starts is a clear indication of builder confidence in the sales outlook," said Pierre Ellis, an economist at Decision Economics, in a note to clients.
In December, the pace of single-family home construction, which makes up two-thirds of the market, increased 8 percent. It is now 75 percent higher than the recession low reached in March 2009.
Apartment construction, which is more volatile, surged 23 percent last month.
Applications for building permits, a sign of future construction, inched up to a rate of 903,000 - a 4 1/2 year high.
Confidence among homebuilders held steady in January at the highest level in nearly seven years. But builders are feeling slightly less optimistic about their prospects for sales over the next six months, according to a survey released Wednesday.
In November, sales of previously occupied homes rose to their highest level in three years, while new-home sales reached a 2 1/2-year high.
Those factors have helped make homebuilders more confident and spurred new home construction. But homebuilders' are still warily watching the current standoff in Washington between President Barack Obama and Congress over several approaching budget deadlines, including the need to boost the nation's $16.4 trillion borrowing limit.
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 homebuilders association.
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