Builders are feeling more confident about new-home sales, sales expectations for the next six months, and prospective buyer traffic, according to the May reading on the National Association of Home Builders/Wells Fargo Housing Market Index.

The index—which gauges builders’ sentiment on those three indicators—rose three points to 44 in May. Still, it takes a number over 50 on the index to indicate that more builders view conditions as good rather than poor.

All three indicators posed gains in May, with expectations for future sales reaching 53 on the index—the highest level since February 2007, NAHB reports.

“Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates, and strengthening local economies,” says NAHB Chairman Rick Judson. “This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots, and labor.”

The new-home sector continues to battle against low inventories. It will take time for builders to “re-establish themselves following recession-related cutbacks,” says NAHB Chief Economist David Crowe. “Builders’ view of current sales conditions have improved and expectations for the future remain quite strong as consumers head back to the market in force.”
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