The survey uses a 100-point scale to gauge builders’ perceptions of the current market, asking them to rate it from good to poor. It also surveys builder to rate prospective customer traffic as "high to very high," "average" or "low to very low." A score over 50 indicates a majority of builders view conditions as favorable.

"As household incomes rise, builders in many markets across the nation are reporting they are seeing more serious buyers, a positive sign that the housing market continues to move forward," said NAHB Chairman Ed Brady, a builder and developer from Bloomington, Illinois. "The single-family market continues to make gradual gains and we expect this upward momentum will build throughout the remainder of the year and into 2017."

NAHB Chief Economist Robert Dietz agreed.

"With the inventory of new and existing homes remaining tight, builders are confident that if they can build more homes they can sell them,"  Dietz said. "Though solid job creation and low interest rates are also fueling demand, builders continue to be hampered by supply-side constraints that include shortages of labor and lots."

The index is the highest it’s been since October 2015.