Builder confidence increased 5 points to a level of 83 in September, an all-time high on the National Association of Home Builders/ Wells Fargo Housing Market Index.
The previous highest builder confidence reading on the index was in December 1998 at a level of 78.
Although confidence in the market is high, NAHB warned that rising lumber costs could pose problems in the near future.
"Historic traffic numbers have builders seeing positive market conditions, but many in the industry are worried about rising costs and delays for building materials, especially lumber," NAHB Chairman Chuck Fowke said in a statement. "More domestic lumber production or tariff relief is needed to avoid a slowdown in the market in the coming months."
Lumber prices have skyrocketed during the pandemic, jumping more than 170% and adding $16,000 to the price of a single-family home since mid-April.
Builder confidence levels above 50 are considered positive.