Homebuilder confidence in the market for new single-family homes reached its highest level since 2007, according to the Home Builders/Wells Fargo Housing Market Index. At 29, the level is five points higher than last month’s downwardly revised numbers.

“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 and a homebuilder from Gainesville, Fla.

“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.”

Each of the index’s components rebounded from declines in the previous month. The component assessing current sales conditions and the component gauging traffic of prospective buyers each rose five points in May to 30 and 23, respectively, with the traffic component hitting its highest level since April of 2007. The component evaluating sales expectations in the next six months rose three points to 34.

“While homebuilding 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, who said the recovery could be stronger if not for obstacles such as inaccurate appraisals and rising materials prices.

Three out of four regions registered improving builder sentiment in May. This included a six-point gain to 32 in the Northeast, and five-point gains to 27 and 28 in the Midwest and South, respectively. The West posted a two-point decline, to 29.

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