The U.S. housing market showed its best signs of recovery last year, well above 2013’s level, according to a new Commerce Department report.

Construction on just over a million homes was begun in during 2014, compared to 924,900 in 2013, the highest level since 2007.

December’s activity increased 4.4% above November’s revised rate and was 5.3% higher than compared to the same time a year earlier.

Single-family home starts in December, which makes up the lion’s share of the homebuilding market, increased 7.2% above November’s revised level, hitting a near seven-year high.

Also, the number of new building permits issued for home construction, an indicator of future home building activity, fell 1.9% in December from November’s revised rate but was 1% higher than compared to December 2013. The number of single family home permits issued increased 4.5% in December from November, its best hike since September 2012.

For all of 2014 more than 1 million building permits were issued, 8.8% higher than 2013’s level, the best year since 2007. This compares to a post-recession and record low of 554,000 in 2009 and a 30-year high of slightly more than 2 million in 2007.

“Housing market activity, both starts and permits, have been increasingly volatile as of late, leaving underlying momentum in building moderate at best with levels only modestly above those seen at the start of the year,” said Lindsey Piegza, chief economist at the investment firm Sterne Agee. “Demand for housing remains under pressure with Americans still struggling to accumulate enough wealth to afford a home purchase”

She said that with demand restrained, housing insiders remain cautious not to over saturate the market with additional, new supply of homes, and pointed out the Federal Reserve noted the recovery in housing, while positive, remains disappointingly "slow."