The National Association of Homebuilders (NAHB) announced on Wednesday its housing market index (HMI) rose three points to 66 in May, the highest reading since October 2018.

Economists forecast the HMI to increase to 64.

A reading over 50 indicates more builders view conditions as good than poor.

All three HMI components were higher this month. The indicator gauging current sales conditions rose three points to 72, the component measuring traffic of prospective buyers increased two points to 49, and the measure charting sales expectations in the next six months edged one point higher to 72.

NAHB Chairman Greg Ugalde said: “Builders are busy catching up after a wet winter, and many characterize sales as solid, driven by improved demand and ongoing low overall supply. However, affordability challenges persist and remain a big impediment to stronger sales.”

Meanwhile, NAHB Chief Economist Robert Dietz noted: “Mortgage rates are hovering just above 4% following a challenging fourth quarter of 2018 when they peaked near 5%. This lower interest rate environment, along with ongoing job growth and rising wages, is contributing to a gradual improvement in the marketplace. At the same time, builders continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability.”