U.S. homebuilder sentiment in August rose to its highest level since June 2008 as the National Association of Home Builders/Wells Fargo Housing Market Index increased one point to 18 in August.

It was the highest level since June 2008 and marked the second consecutive monthly gain in the index which measures builder confidence in the market for new, single family homes. The NAHB attributed the rise to the government's tax credit incentive for first-time buyers. Homebuyers want to take advantage of the federal tax credit before it expires.

The HMI increase was the fifth increase this year, signaling that builders think the worst of the housing slump is over..

The NAHB HMI report also showed two out of its three components rose. Sales expectations index was up 4 points to 30. The reading for traffic for prospective buyer went up 3 points to 16 while current sales conditions reading remained at 16.

The report covers 474 residential developers nationwide in a survey, monitoring builders' confidence about market conditions. Index reading higher than 50 indicates builders’ positive sentiment about the market.

The last time it was above 50 was in April 2006.

Builders appear to have the strongest confidence in the Northeast, where a regional component of the NAHB index rose to 24. They appear to have the least confidence in the Midwest, where the index stands at 16.