The National Association of Home Builders/Wells Fargo builder sentiment index jumped to 57 this month from 51 in June.
A reading above 50 indicates more builders view sales conditions as good, rather than poor. The index hasn't been that high since January 2006, well before the housing market crashed.
Measures of customer traffic, current sales conditions and builders' outlook for single-family home sales over the next six months vaulted to their highest levels in at least seven years.
Steady job growth, low mortgage rates, rising home prices and tight supplies of homes for sale have supported a recovery in housing this year.