Builder confidence remained unchanged in January, holding a level of 47 on the National Association of Home Builders/Wells Fargo housing market index. This follows eight consecutive monthly gains and continues to be the highest level since April 2006.

"Conditions in the housing market look much better now than at the beginning of 2012 and an increasing number of housing markets are showing signs of recovery, which should bode well for future home sales later this year," said Barry Rutenberg, chairman of NAHB and a Florida home builder.

However, Rutenberg warns uncertainties from fiscal cliff negotiations and a lack of clarity around the mortgage interest deduction could put a damper on housing demand in the months ahead.

Builders' sentiment remains very close to the tipping point of 50, indicating an equal number of builders view conditions as good and poor.

"However, persistently tight mortgage credit conditions, difficulties in obtaining accurate appraisals and the ongoing stalemate in Washington over critical economic concerns continue to impede the housing recovery," said NAHB Chief Economist David Crowe.

The January index gauges a number of components related to home building. Current sales conditions remained unchanged at an index score of 51. However, sales expectations in the next six months fell one point to 49 on the index and the component gauging traffic of prospective buyers gained one point, hitting 37.

"Last year's upward run of this report, which opened 2012 at 25, was very impressive but builders are still warning that credit conditions are too tight and that property appraisals continue, from their perspective at least, to be inaccurate," Econoday added.

Stay tuned to HousingWire for housing starts which will be released tomorrow.