WASHINGTON, May 18 (Reuters) - Confidence among U.S. single-family homebuilders rose in May, potentially signaling that the worst of the economic downturn was probably over as the country gradually reopens after lockdowns to slow the spread of the novel coronavirus.

The National Association of Home Builders/Wells Fargo Housing Market Index rose seven points to 37 this month after a record plunge in April. The closure of nonessential businesses in mid-March to limit the spread of COVID-19, the respiratory illness caused by the virus, led to record job losses in April and a collapse in manufacturing output and retail sales.

Other indicators have also hinted at a rebound in housing activity, with mortgage applications rising in recent weeks. Still, homebuilder confidence remains low, suggesting the housing market recovery will be slow amid record unemployment.

"As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen," said NAHB Chief Economist Robert Dietz. "However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors."

The survey's measure of current sales conditions rose six points to 42. Its gauge of sales expectations in the next six months jumped 10 points to 46. The prospective buyers index increased eight points to 21 this month.

Confidence increased among homebuilders in the Midwest, South and West, but fell in the Northeast. (Reporting By Lucia Mutikani Editing by Chizu Nomiyama)