October homebuilder sentiment highest since May 2010

NEW YORK (Reuters) - Homebuilder sentiment perked up in October to its highest level in a year and a half, though ongoing challenges still kept confidence historically low, the National Association of Home Builders said on Tuesday.

The NAHB/Wells Fargo Housing Market index rose to 18 from 14 the month before, the group said in a statement. It was the highest level since May 2010. Economists polled by Reuters had predicted the index would rise to 15.

Readings below 50 mean more builders view market conditions as poor than favorable. The index has not been above 50 since April 2006.

"This latest boost in builder confidence is a good sign that some pockets of recovery are starting to emerge across the country, as extremely favorable interest rates and prices catch consumers' attention," NAHB chief economist David Crowe said in a statement.

Even so, builders are being squeezed by rising materials costs and low home prices due to the glut of foreclosed homes, Crowe said.

A gauge of single family home sales rose to 18 from 14, which was also the highest level since May 2010. The gauge of sales expectations in the next six months climbed to 24 from 17, the highest since March.

(Reporting by Leah Schnurr, Editing by Chizu Nomiyama)