"From the builder's perspective, current sales conditions, sales prospects for the next six months and traffic of prospective buyers are all better than they have been in more than five years," said Barry Rutenberg, chairman of the trade group.
"We have come a long way from the depths of the recession and the outlook appears to be brightening," he said in a statement.
The trade group said Tuesday that the Home Builders/Wells Fargo Housing Market Index for builder confidence added two points in August to reach 37, putting the index at its highest level since February 2007.
NAHB Chief Economist David Crowe said the recovery in the housing market was "still at a very fragile stage."
However, "this fourth consecutive increase in builder confidence provides further evidence of the gradual strengthening that's occurring in many housing markets and providing a needed boost to local economies," he said.