U.S. homebuilders are feeling more optimistic about their sales prospects, reflecting a pickup in demand and positive expectations about further growth the rest of this year.
The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday rose to 68 this month. That's up four points from a reading of 64 in July and the highest level since May.
Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 since September.
"The fact that builder confidence has returned to the healthy levels we saw this spring is consistent with our forecast for a gradual strengthening in the housing market," said Robert Dietz, the NAHB's chief economist.
Readings gauging builders' view of sales now and over the next six months also rose from last month. A measure of traffic by prospective buyers also increased.
Sales of new U.S. homes are running ahead of last year's pace, reflecting strong demand for homes as the economy has continued to create jobs. The unemployment rate is at a 16-year low of 4.3 percent.
New-home sales edged up 0.8 percent in June to a seasonally adjusted annual rate of 610,000. Sales are up 10.9 percent so far this year. July new home sales data are due out next week.
This year's sales gains have come amid a broader shortage of previously occupied homes listed for sale, which has likely pushed more buyers into new construction.
Even so, sales of new homes remain below historic averages. Builders are contending with a lack of land for construction, a shortage of workers and rising costs for some materials.
This month's builder index was based on 336 respondents.
A measure of current sales conditions for single-family homes rose four points to 74, while an outlook for sales over the next six months climbed five points to 78. Builders' view of traffic by prospective buyers edged up one point to 49.
Most homebuilding stocks were headed higher following the builder sentiment report. Century Communities was up the most, adding 40 cents, or 1.7 percent, to $23.70 in afternoon trading.