WASHINGTON – After hitting the highest level of activity seen in nearly four years in the prior month, construction of new houses retreated in July, the Commerce Department estimated Thursday.

Starts fell 1.1 percent in July from June, to an annualized rate of 746,000 units. Starts had jumped a revised 6.8 percent in June to a 754,000 rate, the highest since October 2008.

Economists surveyed by MarketWatch had been looking for a stronger report, with starts forecast to rise to a 765,000 rate.

Overall, analysts are expressing optimism about the nation’s housing market and, with it, prospects for the economy.

“The housing market is continuing to heal and should be a major part of growth in the quarters ahead,” wrote Joel Naroff, president of Naroff Economic Advisors.

In the past year, starts are up 21.5 percent. Starts of single-family homes are up 17 percent.

Meanwhile, building permits increased 6.8 percent to a seasonally adjusted annual rate of 812,000 in July. This is the highest level since August 2008.

According to the government, a building permit usually results in a new housing start roughly within one month.