Builder confidence in the market for newly built, single-family homes rose three points to an August index score of 59, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index.

This is the fourth consecutive monthly gain, bringing the index to its highest level in nearly eight years, the association noted. Any number over 50 suggests the majority of builders view conditions in a particular segment of the market as "good".

"Firming home prices and thinning inventories of homes for sale are contributing to an increased sense of urgency among those who are in the market," NAHB Chairman Rick Judson said.

"Builder confidence continues to strengthen along with rising demand for a limited supply of new and existing homes in most local markets," noted NAHB Chief Economist David Crowe.

“However, this positive momentum is being slowed by the ongoing headwinds of tight credit and low supplies of finished lots and labor,” he added.

Additionally, two of the three components of the index posted gains in August.

The component gauging current sales conditions increased three points to 62.

Meanwhile, the index gauging sales expectations in the next six months gained a single point to 68.

The traffic index for prospective buyers stayed frozen at 45.