U.S. homebuilder stocks rose Monday after a report indicated that more builders viewed the housing market favorably in June, with confidence hitting the highest level since May 2007.

In mid-Monday trading, Red Bank, N.J.'s Hovnanian Enterprises Inc. surged 19 cents, or 7.63 percent, to $2.68. Miami-based Lennar Corp. (NYSE: LEN) was up 46 cents, or 1.78 percent, to $26.36. Fort Worth, Tex.-based D.R. Horton Inc. (NYSE: DHI) gained 49 cents, or 3.09 percent, to $16.37.

Luxury homebuilders Toll Brothers Inc. (NYSE: TOL) gained 40 cents, or 1.59 percent, to $25.61, and AvalonBay Communities Inc. (NYSE: AVB) was up 59 cents, or 0.42 percent, to $141.29. Standard & Poor's Homebuilders ETF (NYSEARCA: XHB) gained as much as 1.01 percent in Monday morning trading, even as the Dow Jones Industrial Average and the S&P 500 dipped on euro zone worries.

The National Association of Home Builders, or NAHB, and Wells Fargo's Builder Confidence Index rose to 29 from the previous month's reading of 28. The data comes from questionnaires sent to 337 builders across the country.

This month’s modest uptick in builder confidence comes on the heels of a four-point gain in May and is reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today’s low prices and interest rates,” said Barry Rutenberg, NAHB's chairman, in a statement.

But the reading is still below 50, which indicates that more homebuilders view conditions positively, which hasn't happened since April 2006.

“Builders across the country continue to report that overly tight lending conditions and inaccurate appraisals are major obstacles to completing sales at this time,” said David Crowe, NAHB's chief economist.

More closely watched housing indicators, including the National Association of Realtors' Existing Home Sales index and the S&P/Case-Shiller Home Price Index, are set to be released in the next two weeks.