The National Association of Home Builders/Wells Fargo Housing Market Index for June rose from a slightly revised level in May to 29, the highest reading since May of 2007.
"This month's modest uptick in builder confidence comes on the heels of a four-point gain in May and is reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today's low prices and interest rates," Barry Rutenberg, chairman of the NAHB, said in a statement.
NAHB chief economist David Crowe said the market could still stand some improvements.
"Builders across the country continue to report that overly tight lending conditions and inaccurate appraisals are major obstacles to completing sales at this time," Crowe said.
Two out of four U.S. regions registered improving builder sentiment in June. The Midwest gained five points to 31 while the West rose by four points to 33.
The Northeast and South each declined two points, falling to 29 and 26, respectively.