A gauge of U.S. home builder optimism rose in June to the highest level this year as record home sales, mortgage rates of less than 6 percent and rising wages stoked demand.

The National Association of Home Builders/Wells Fargo index of builder confidence rose to 71 this month from 70 in May, the Washington-based group said this week. Readings greater than 50 mean builders view market conditions as more positive than negative.

Mortgage rates near record lows and improving wages are supporting the housing market, even as soaring home prices and speculative purchases prompt concern from policymakers such as Federal Reserve Chairman Alan Greenspan. Several national housing organizations, including the home builders association, raised their sales forecasts this month and now predict record home purchases in 2005 for the first time.

"The favorable financing climate for new homes is proving too attractive for many buyers to pass up, so builders are staying very busy," said Dave Wilson, president of the home building group.

U.S. mortgage applications rose last week by the most since July of last year, powered by a record number of loan requests to buy a home, the Mortgage Bankers Association said today. Cheaper borrowing costs this month also boosted refinancing.

All three components of the builders index rose. The group's gauge of buyer traffic increased to 54 in June from 53. The current sales measure rose to 77 from 76, and sales expectations for the next six months increased to 79 from 77.

Housing sales have been supported by job creation and rising wages. U.S. employers added 898,000 jobs in the first five months of 2005, compared with 1.1 million in the same period a year earlier. Average weekly earnings rose to $541.81 last month from $540.80 in April.

"Chairman Greenspan is trying to get into people's heads to slow the housing market down, but the levels of home sales, mortgage applications and housing starts we're seeing indicate he isn't having any success," John Herrmann, chief U.S. economist at Cantor Fitzgerald LP, a New York brokerage, said before the report. "Until jobs, mortgage rates and home price appreciation go the other way, home sales will continue to expand and builders will remain confident."