WASHINGTON (AP) - U.S. builders broke ground on the most new homes and apartments in nearly four years last month, the latest evidence of a slow housing recovery.

The Commerce Department said Wednesday that housing starts rose 6.9 percent in June from May to a seasonally adjusted annual rate of 760,000. That's the highest since October 2008.

Single-family housing starts rose for the fourth straight month to a two-year high. Apartment starts, which can be volatile, increased after falling in May.

The number of permits to build homes, a sign of future construction, fell 3.7 percent to 755,000. But that's down from May's three-and-a-half-year high. Permits for single-family homes edged up to the highest level since March 2010. Permits to build apartments declined.

Despite the gains, the level of housing starts and permits are roughly half what economists consider healthy.

Still, the beleaguered housing market is showing modest gains while the rest of the economy has weakened. Federal Reserve Chairman Ben Bernanke highlighted the improvement in otherwise gloomy report to Congress on the economy Tuesday.

Builder confidence has jumped since last fall in part because more people are expressing interest in buying a home. A measure of home builder confidence rose to a five-year high, the National Association of Home Builders said Tuesday.

Cheaper mortgages and lower home prices in many markets have made home buying more attractive. Many economists believe that housing construction could contribute to overall economic growth this year for the first time since 2005.

New home sales rose in May to the fastest pace in more than two years. And while sales of previously occupied homes dipped in May, they were nearly 10 percent higher than a year earlier.

More home building also pushed up construction spending in May by the largest amount in five months.

Many people still have difficulty qualifying for home loans or can't afford larger down payments required by banks.

The economy is growing only modestly and job creation has slowed sharply in the past three months. U.S. employers added an average of 75,000 jobs in that time, down from a pace of 226,000 in the first three months of the year.

Though new homes represent just 20 percent of the overall home 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 taxes, according to data from the home builders association.