Builder confidence increased three points in May to a level of 66 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), the highest it has been since October.

Mortgage rates have lowered to just above 4%, a decline that has helped to grow the confidence level, according to NAHB. “This lower-interest rate environment, along with ongoing job growth and rising wages, is contributing to a gradual improvement in the marketplace,” NAHB Chief Economist Robert Dietz stated. However, ongoing labor shortages and rising material costs continue to hold back sales and affordability, according to Dietz.

HMI levels above 50 indicate a generally positive outlook for builders.