Builders’ confidence in the market for new single-family homes climbed as the National Association of Home Builders' housing market index grew to 70 in May from 68 in April.

The 70 reading is the second highest since the downturn.

Thomson Reuters' poll of economists predicted the index would be 68.

“This report shows that builders’ optimism in the housing market is solidifying, even as they deal with higher building material costs and shortages of lots and labor,” NAHB Chairman Granger MacDonald said.

The HMI measure of future sales conditions reached its highest level since June 2005, a sign of growing consumer confidence in the new home market,” according to NAHB Chief Economist Robert Dietz. “Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

The current single-family home sales index rose to 76 from 74 the sales expectations index for the next six months increased to 79 from 75; and the traffic of prospective buyers index dipped to 51 from 52.

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