U.S. home-builder confidence in the market for single family homes rose in May amid rising home prices despite increasing building materials costs, an index showed on Wednesday.
The National Association of Home Builders/Wells Fargo Housing Market index edged up three points to 44, from a downwardly revised 41 in April. Economists in a Reuters survey were expecting a reading of 43. Any number over 50 indicates that more builders view conditions as good than poor.
"Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. "This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots and labor."
(Read more: Goldman's DIY View Hinges on Housing)
Each component of the index rose in May. The index gauging current sales conditions inched up four points to 48, while the index measuring expectations for future sales rose a single point to 53, the highest level since February 2007. The index gauging traffic of prospective buyers increased three points to 33.
"While industry supply chains will take time to re-establish themselves following recession-related cutbacks, builders' views of current sales conditions have improved and expectations for the future remain quite strong as consumers head back to the market in force," said NAHB Chief Economist David Crowe.
—Written by CNBC's Katie Little. Follow her on Twitter @KatieLittle