U.S. homebuilder sentiment in August rose to its highest level in over a year, a private survey showed on Monday, adding to mounting evidence that the housing market and economic recession were leveling out.

The National Association of Home Builders/Wells Fargo Housing Market Index edged up to 18 from 17 in July, in line with market expectations.

It was the highest level since June 2008 and marked the second consecutive monthly gain in the gauge, which measures builder confidence in the market for newly built, single family homes.

The NAHB attributed the rise to the government's tax credit incentive for first-time buyers, but warned the small gains in the housing market could be wiped-out if that incentive was not extended when it expires in November.

There is definitely a sense of hope among builders that the worst of the downturn is over and that a turning point is near at hand, said NAHB Chief Economist David Crowe.

Meaningful action by Congress could ensure that this upward momentum continues and that housing can help push the economy back onto solid ground.

Recent data ranging from housing starts to sales have suggested a bottoming in the three-year slump. Housing is at the center of the worst U.S. recession since the Great Depression of the 1930s.

Restoring stability to the housing market is crucial to reviving the economy. The 20-month-old recession is showing signs of winding down.

The NAHB survey also showed two out of three subindexes of the Housing Market Index rising in August.

The current sales conditions gauge was unchanged at 16, while the sales expectations measure for the next six months climbed four points to 30 in August. The traffic of prospective buyers index rose three points to 16 in August. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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