U.S. builder confidence in the market for newly built, single-family homes in March remained unchanged from February, a leading industry report revealed on Monday.

The builder sentiment index stayed at 28 after increasing for five straight months. The flat reading remained at the highest level since May 2007, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

Cheaper homes and mortgage rates close to all-time lows were helping drive record housing affordability. Meanwhile, the real estate market remains challenged by distressed properties and the threat of more foreclosures that could push down values further.

"While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction and that prospects for future sales are improving," said NAHB Chairman Barry Rutenberg.

The HMI component gauging current sales conditions declined one point to 29 in March, but the component gauging sales expectations in the next six months edged up two points to 36, which is the highest since June 2007. The component gauging traffic of prospective buyers held unchanged at 22.

"Builder confidence is now twice as strong as it was six months ago," noted NAHB chief economist David Crowe. He also noted obstacles on the road to recovery, including persistently tight builder and buyer credit and ongoing inventory of distressed properties in some markets.

Any reading below 50 indicates negative sentiment about the market. The index hasn't rebounded above that level since April 2006.