traumhaft
dreamlike / wonderful
Describes something as extraordinarily beautiful, wonderful, or ideal, almost like in a dream.
Wir hatten einen traumhaften Urlaub am Meer.
We had a dreamlike vacation by the sea.

dreamlike
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dreamlike / wonderful
Describes something as extraordinarily beautiful, wonderful, or ideal, almost like in a dream.
Wir hatten einen traumhaften Urlaub am Meer.
We had a dreamlike vacation by the sea.

The word is made up of 'Traum' (dream) and the suffix '-haft'. The suffix '-haft' means '-like' or 'like a'. So 'traumhaft' literally means 'like in a dream'.
Die Landschaft war von traumhafter Schönheit.
The landscape was of dreamlike beauty.
This very positive description is often used for experiences and sensory impressions. Typical combinations are 'eine traumhafte Aussicht' (a wonderful view), 'traumhaftes Wetter' (wonderful weather), or 'eine traumhafte Lage' (a dream location). It is also often used as an adverb for emphasis.
Das Hotel hatte eine traumhafte Lage direkt am Strand.
The hotel had a dream location right on the beach.
The rarer, literal meaning 'wie im Traum' (as if in a dream) can be recognized from context. It is usually used in connection with words like 'Zustand' (state), 'Schlaf' (sleep), or in literary descriptions to create an unreal atmosphere.
In der Hitze des Mittags fiel er in einen traumhaften Halbschlaf.
In the heat of midday, he fell into a dreamlike half-sleep.
wonderful
'wunderbar' and 'traumhaft' both describe something very positive. 'wunderbar' is more general and fits many good, beautiful, or pleasant things. 'traumhaft' especially emphasizes that something seems almost ideal or like something from a dream. It works very well for vacations, landscapes, weather, apartments, or beautiful moments. If you simply want to say that something was very good, 'wunderbar' is often more neutral; 'traumhaft' sounds stronger and more vivid.

Der Blick von der Terrasse ist traumhaft, besonders im Sommer.
The view from the terrace is wonderful, especially in summer.
Im Garten hat sie heute einen wunderbaren Nachmittag verbracht.
She spent a wonderful afternoon in the garden today.