Builder confidence in the U.S. for newly constructed single-family homes improved in August amid rising demand, the National Association of Home Builders said.

The NAHB/Wells Fargo housing market index rose to 68 in August from 64 in July, with all three components of the index posting gains.

The sales conditions component rose to 74 from 70, while sales expectations over the next six months increased to 78 from 73. The buyer traffic component edged up to 49 from 48.

NAHB Chairman Granger MacDonald said demand has increased due to ongoing job and economic growth, attractive mortgage rates, and growing consumer confidence.

"GDP growth improved in the second quarter, which helped sustain housing demand," NAHB Chief Economist Robert Dietz said, while pointing out that builders continue to face supply-side challenges, such as lot and labor shortages and rising building material costs.