The National Association of Homebuilders (NAHB) announced on Monday its housing market index (HMI) rose seven points to 37 in May from an unrevised April reading of 30. This rise in builder sentiment followed the largest single monthly drop in the history of the index in April.

Economists had forecast the HMI to increase to 33.

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

All three HMI components registered gains this month. The indicator gauging current sales conditions increased six points to 42 in May, while the component measuring traffic of prospective buyers climbed eight points to 21 and the measure charting sales expectations surged 10 points to 46.

NAHB Chairman Dean Mon noted: "The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey. At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings."

Meanwhile, NAHB Chief Economist Robert Dietz said: "Low-interest rates are helping to sustain demand. As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen. Other indicators that suggest a housing rebound include mortgage application data that has posted four weeks of gains and signs that buyer traffic has improved in housing markets in recent weeks. However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors."