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Builder confidence in the market for newly built, single-family homes in the US gained five points in May, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the index’s strongest reading since May of 2007.

“Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB). “It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase.” 

“While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back,” said NAHB Chief Economist David Crowe. “The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices.”

The confidence index was supported by a subsequently released report from the NAHB that the sale of newly built, single-family homes rose 3.3% in April to a seasonally adjusted annual rate of 343,000 units. “The increase in April sales activity is in line with other important housing measures that have shown continued, gradual improvement from the first quarter as more consumers look to take advantage of today’s low interest rates and affordable home prices,” said Rutenberg.

According to Crowe, the April report is representative of the modest but consistent gains the group forecasts for new-home sales through the remainder of 2012.