U.S. homebuilders are feeling more optimistic about their business prospects, reflecting a recent surge in sales of newly built homes and a lingering shortage of previously occupied homes on the market.

The National Association of Home Builders/Wells Fargo builder sentiment index released Monday rose to 70 this month. That's up two points from 68 in April.

Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 since September. It hit 71 in March, the highest level since June 2005 during the height of the last housing boom.

The May index exceeded analyst predictions, which called for the reading to hold steady from last month, according to FactSet.

Readings gauging builders' view of sales now and over the next six months also rose from last month, while a measure of traffic by prospective buyers edged lower.

More Americans are seeking homes as job security has improved with low unemployment. But even with construction running ahead of last year's pace, the supply of new and existing homes across much of the country remains tight.

That's been good news for homebuilders this year.

U.S. sales of new homes shot up in March to a seasonally adjusted annual rate of 621,000, the fastest pace in 8 months. Sales were running 12 percent higher during the first three months of this year than during the same period in 2016. April sales data are due out next week.

"Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward," said Robert Dietz, the NAHB's chief economist.

Still, builders continue to grapple with a shortage of skilled construction workers and land parcels cleared for home construction.

Sales of new homes have risen this year despite, or perhaps because, a modest rise in mortgage interest rates.

The average interest rate on 30-year fixed-rate home loans inched up to 4.05 percent last week from 4.02 percent previously, according to mortgage buyer Freddie Mac.

The average stood at 3.57 percent a year ago and averaged 3.65 percent in 2016, the lowest level in records dating to 1971.

This month's builder index was based on 250 respondents.

A measure of current sales conditions for single-family homes rose two points to 76, while an outlook for sales over the next six months gained four points to 79. Builders' view of traffic by prospective buyers declined one point to 51.