Housing starts rose 3.6 percent to a seasonally adjusted annual rate of 582,000 from a revised 562,000 in May, according to the Commerce Department.

Single-family housing starts were up 14.4 percent on a month-over-month basis as builders rushed to start construction of homes that must be completed by the end of November to take advantage of a special tax break for first time buyers.

It was better than what the economists’ expectations of 530,000 units and was the second straight monthly increase after April's record low of 479,000 units suggesting that the housing market is slowly stabilizing.

New home construction activity was highest in the Midwest in June, where starts increased by 33.3 percent compared to the previous month followed by Northeast where starts rose 28.6 percent.

However, home starts in both the West and the South declined by 14.8 percent and 1.4 percent respectively.

Meanwhile, applications for building permits, a good indicator of future construction, rose almost 8.7 percent to a seasonally adjusted rate of 563,000 in June, the largest increase since December and more that the 530,000 annual rate the economists forecasted.