Whenever you have a whole sentence underlined like this, you should expect a question about modifiers. These can be among the toughest questions, but at least knowing what you're dealing with makes it a little easier.

(A) We open with a prepositional modifier, but there's nothing for it to modify. What goes along "with housing starts jumping..."? Nothing. Also, what is the "this" referring to? Finally, the use of "as well as" instead of the traditional "comma-comma-and" construction is awkward.

(B) This sentence actually has no main clause! We open with the prepositional modifier again (And again, it has nothing to modify), and then we get a possible subject: "this latest evidence". Unfortunately, it never gets a verb! Instead, it's modified again, with a relative clause "that economic growth is being spurred".

(C) Correct answer. This is a form of modifier called APPOSITION, when we use a noun to modify a noun. In other words "the latest evidence" is a noun that further describes (i.e. modifies) the FACT that "housing starts jumped 12.2 percent in February). It's not exactly a beautiful sentence, and I can't say I've seen it much on official GMAT questions in this particular construction, but it definitely wins in this lot.

(D) Subject-verb agreement problem with "housing starts" and "provides". "This" is a pronoun that implies a specific item, so doesn't make sense here. Also, try not to pick answers with "being," which is a universally awkward construction (except for human being!).

(E) In this case, "highest level in almost three years" is an incorrect appositional modifier. It's modifying the first clause of the sentence, but it's wrong because the first clause IS NOT a "level". Compare to C, where the first clause is modified by "the latest evidence." That makes sense, because the first clause IS evidence. Answer choice (E) tries to get back on track by using the correct appositional modifier next, but you can't stack modifiers like this and have any clarity of meaning. Also (E) makes the "as well as" error described in (A).

Hope that helps! Modifier questions require you to have a really strong grasp of grammar, so make sure you know your participles from your prepositions and your adverbial modifiers from your noun modifiers!

-t