Homebuilder confidence is on the rise

"This is particularly encouraging at a time when other parts of the economy have begun to show softness," he said. 

Still, the housing recovery faces challenges such as tight lending standards, incorrect appraisals and the continued flow of distressed properties onto the market.

"This is greater evidence that the housing market has turned the corner as more buyers perceive the benefits of purchasing a newly built home while interest rates and prices are so favorable," "said Barry Rutenberg, chairman of the NAHB and a home builder from Gainesville, Fla. 

Every component of the index showed gains in July. 

Current sales conditions and traffic of prospective buyers were each up six points, while the component gauging sales expectations for the next six months rose 11 points to 44.

Likewise, every region posted gains in July. 

The Northeast was up eight points, the Midwest gained three points to 34, the South rose five points to 32 and the West increased by 12 points to 44.