U.S. homebuilder sentiment jumped to its highest level in eight months
in May, a private survey showed on Monday, supporting views that the
three-year housing slump might be close to an end.

The National Association of
Home Builders/Wells Fargo Housing Market Index rose to 16 from 14 in
April, in line with market expectations.

The NAHB attributed the
second straight monthly increase in the gauge -- which measures builder
confidence in the market for newly built, single-family homes -- to
the best home buying conditions of a lifetime.

The group's
chief executive officer, Jerry Howard, told Reuters that the two
consecutive months of gains in the index were encouraging.

It is
a very important indicator that we are approaching the bottom and
market stability could be just around the corner, that is what we are
hoping for, said Howard.

We are looking to reach bottom during
the course of this summer and probably bounce along the bottom until
early fall before things really start to get back to normal. We don't
expect market equilibrium until 2012.

The Dow Jones home construction index surged 5.77 percent, led by Lennar Corp after Citigroup upgraded its rating on the second largest U.S. homebuilder to buy.

Federal Reserve's aggressive cuts in interest rates to almost zero
percent and buying of mortgage-backed securities have lowered the cost
of home loans.

That, together with an $8,000 tax credit for
first-time buyers, is helping to lending some stability to the
distressed housing market.

Other housing indicators have recently
shown a sharp slowing in the pace of the market's decline, raising
optimism a bottom is not too far away.

The collapse of domestic house prices and the subsequent global
credit crisis were the main catalysts for the U.S. recession, now in
its 17th month.

The good news is that we likely have the worst
of the housing crisis behind us. The bad news is that the housing
market is only improving with turtle speed, said Torsten Slok, a
senior economist at Deutsche Bank in New York.

The NAHB report also showed two out of three subindexes of the Housing Market Index rising in May.

current sales conditions gauge climbed two points to 14, while the
sales expectations measure for the next six months rose three points to
27. The traffic of prospective buyers index was unchanged at 13 in May.