The housing market, along with the home construction exchange traded funds, are back in full swing, with homebuilder sentiment at a seven year high.

The SPDR S&P Homebuilders (NYSEArca: XHB) was 1.7% higher Monday and iShares U.S. Home Construction ETF (NYSEArca: ITB) gained 1.9%. XHB has increased 16.0% year-to-date and ITB is up 12.9%.

The National Association of Home Builders/Wells Fargo Housing Market index jumped to 52 in June from 44 last month, the largest one month rise since 2002 and 23 points higher year-over-year, reports Leah Schnurr for Reuters. Readings higher than 50 translate to favorable conditions, whereas levels below 50 remain poor.

“Another good sign that the recovery continues,” Jed Kolko, chief economist at Trulia, an online real estate marketplace, said in the article.

The housing market is recovering as prices rise, inventory shrinks and sales improve. Additionally, many homeowners financed home purchases with cheap mortgage rates, with borrowing rates kept artificially lower through the Fed’s bond-buying plan.

“The pent-up demand is there,” Sam Bullard, senior economist at Wells Fargo Securities, said in the article.

Daren Blomquist, vice president at RealtyTrac, though, warns that builders could face headwinds if the recovery entices banks to dump holdings of foreclosed homes onto the market.

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