U.S. builder confidence in the market for newly built, single-family homes in September gained for the fifth consecutive month, a leading industry report revealed on Tuesday.

The builder sentiment index rose three points to 40 this month, which was the highest level since June 2006 and indicated an improving outlook for housing construction, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

"This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction," said NAHB Chairman Barry Rutenberg.

In September each HMI component posted gains. The component gauging current sales conditions climbed four points to 42. The component measuring sales expectation for the next six months increased eight points to 51, while the component measuring traffic of prospective buyers edged up one point.

Any reading below 50 indicates negative sentiment about the market. The index hasn't rebounded above that level since April 2006.

With constant modest improvement recently, the U.S. housing crash is believed to have reached the bottom. However, many economists hold that the market still needs years to recover entirely as the bottom will be prolonged.

Against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials, said David Crowe, chief economist of NAHB.