WASHINGTON (AP) — U.S. builders started work on more homes in August, driven by the fastest pace of single-family home construction in more than two years. The increase points to steady progress in the housing recovery.

The Commerce Department said Wednesday that construction of homes and apartments rose 2.3 percent to a seasonally adjusted annual rate of 750,000 last month. That's up from 733,000 in July, which was revised lower from last month's initial estimate.

Single-family housing starts rose 5.5 percent to an annual rate of 535,000 homes, the best pace since April 2010. Apartment construction, which can be volatile from month to month, fell 4.9 percent.

Applications for building permits, a good sign of future construction, fell to an annual rate of 803,000. Still, that's down from a four-year high of 811,000 in July, which was revised higher.

The rate of home construction has risen nearly 60 percent since hitting a recession low of 478,000 in April 2009. It's still half the pace considered healthy. But the steady gains suggest the housing recovery could endure.

"Housing is clearly in a recovery mode," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics. He said home construction should add about 0.3 percentage point to overall economic growth this year.

The broader economy may also benefit from recent and more sustainable gains in home prices. When that happens, Americans typically feel wealthier and spend more. Consumer spending drives 70 percent of the economic growth.

The August gains in housing starts were uneven across the country. They were led by a sharp 20.7 percent increase in new construction of homes and apartments in the Midwest. Starts also rose 3.7 percent in the South. But they fell 12.6 percent in the Northeast and 4.3 percent in the West.

Confidence among builders rose in September to the highest level in more than six years, according to a survey released Tuesday by the National Association of Home Builders/Wells Fargo. And builders are more confident that sales will improve over the next six months, the survey noted.

Sales of both new and previously occupied homes are running ahead of last year. Home prices are increasing more consistently, in part because the supply of homes has shrunk and foreclosures have eased. And mortgage rates remain near record lows, a strong enticement for potential buyers with good credit.

Even with the gains, the housing market remains weak. Many would-be buyers are having difficulty qualifying for loans or can't afford the larger down payments being required by banks.

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 the NAHB's data.

The Federal Reserve last week announced new stimulus measures intended to keep mortgage rates low for the next few years.

Fed Chairman Ben Bernanke said the bank would purchase $40 billion of mortgage-backed securities each month until the job market improves "substantially." That could push down longer-term interest rates and spur more borrowing and spending.

The Fed also hopes that lower mortgage rates will accelerate the housing market recovery and boost home prices. That, in turn, could make people feel wealthier and more willing to spend, which would bolster economic growth.