This marks a third consecutive month in which the National Association of Home Builders' confidence index has improved, bringing it to its highest point since May 2010, officials said.

Confidence in the U.S. housing market increased for the third straight month according the National Association of Home Builders-Wells Fargo Housing Market Index.

The December index rose two points to 21 from downwardly revised November figures; its highest level since May 2010.

"While builder confidence remains low, the consistent gains registered over the past several months are an indication that pockets of recovery are slowly starting to emerge in scattered housing markets," said Bob Nielsen, NAHB chairman and a home builder from Reno, Nev. "However, the difficulties that both builders and buyers continue to experience in accessing credit for new homes are holding back potential sales even in areas where economic conditions are improving."

It has been a while since builder sentiment was this strong, said NAHB chief economist David Crowe.

"This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend," Crowe said. "While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months."

The NAHB index gauges builder perceptions of the market for the next six months, asking builders to rate expectations as “good,” “fair” or “poor.” It also surveys home builders about customer traffic rates. A number above 50 indicates positive feelings about the U.S. housing market.