WASHINGTON (AP) — U.S. builders started work on single-family houses last month at the fastest pace since the Great Recession began in late 2007.

The Commerce Department says housing starts in July rose 0.2 percent to a seasonally adjusted annual rate of 1.21 million homes. Construction of single-family houses accounted for all of the gains, shooting up 12.8 percent last month to the highest rate since December 2007.

Fueled by steady job gains and low mortgage rates, total housing starts have risen 11.3 percent year-to-date. The market is attracting more buyers and renters, as starts for apartment buildings have climbed 12.2 percent so far this year despite last month's drop.

Approved building permits decreased 16.3 percent in July to an annual rate of 1.12 million, after achieving an eight-year high in June.

But the report also showed the potential limits of new construction as affordability pressures are multiplying in an economy with solid job growth but meager pay raises.

Homebuyers and renters have crowded into the housing market this year, pushing up prices to levels that have worsened affordability and placed a potential cap on sales growth. Builders have relieved some of this financial pressure by ramping up construction, yet the increases in housing starts and building permits still lags the surging demand.

The increased demand primarily reflects an economy operating from a stronger foundation of hiring as the recovery enters its seventh year.

Employers added 215,000 jobs in July, while the unemployment rate held at 5.3 percent for the second straight months. The economy has benefited from nearly 3 million new jobs in the past year, an influx of paychecks that has boosted the housing and construction sectors.

Low mortgage rates have also helped sales. The average 30-year, fixed mortgage rate was 3.94 percent last week, according to the mortgage firm Freddie Mac. That is roughly two percentage points below the historical average.