The National Association of Home Builders' monthly housing market index rose to a reading of 37 in May from 34 in April, compared with expectations for a 34 print in a survey compiled by Bloomberg as of 7:30 am ET.
The index was above a reading of 34 a year earlier.
"Recent increases for long-term interest rates will continue to hold back home buyer demand," said NAHB Chief Economist Robert Dietz. "Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges."
The reading for single-family sales, the six-month outlook, and buyer traffic all increased in the month, as did all the housing market index in all four regions of the country.
"The housing market remains soft as higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran continue to dampen buyer demand," said NAHB Chairman Bill Owens. "However, efforts in the House (of Representatives) to modify the 21st Century ROAD to Housing Act could increase the nation's housing supply and help ease builder concerns."