Home-builder confidence climbs in May

Getty ImagesWorkers on an Ashburn, Va., townhouse.

The numbers: Builder confidence in the market for newly built single-family homes rose two points to a level of 70 in May, according to the National Association of Home Builders/Wells Fargo housing market index released Tuesday.

The Econoday-compiled consensus was for a 69 reading.

April's reading was downwardly revised a point to 68. Any number over 50 indicates that more builders view conditions as good than poor.

What happened: The component for current sales conditions rose while those for buyer traffic and expectations in the next six months were unchanged.

The big picture: Builders are confident, at a time of low unemployment, a shortage of housing inventory and fairly low mortgage rates.

Rising lumber and labor prices remain a concern, however.

What they're saying: "The solid May report shows that builders are buoyed by growing consumer demand for single-family homes," said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. "However, the record-high cost of lumber is hurting builders' bottom lines and making it more difficult to produce competitively priced houses for newcomers to the market."

Market reaction: U.S. stocks DJIA, +0.25% were lower on Tuesday after an 8-day win streak in markets.

The SPDR S&P Homebuilders ETF XHB, +0.49% fell 1.4% and has dropped nearly 12% this year.