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Ongoing building material supply constraints, rising construction costs, and expectations of higher interest rates continue to negatively affect builder confidence in March, reports the NAHB.

The NAHB/Wells Fargo Housing Market Index (HMI), measuring builder sentiment in the market for newly built single-family homes, moved two points lower to 79 in March from a downwardly revised reading in February. This is the fourth month that builder sentiment has declined and the first time that the HMI has dipped below the 80-point mark since last September.

“While builders continue to report solid buyer traffic numbers, helped by historically low existing home inventory and a persistent housing deficit, increasing development and construction costs have taken a toll on builder confidence,” says NAHB chairman Jerry Konter. “We call upon policymakers to act now to ease supply chain woes. Improving access to lumber, OSB, and other materials will help builders increase the supply of badly needed housing and fight inflation.”

The HMI index gauging current sales conditions fell three points to 86, and the gauge measuring sales expectations in the next six months dropped 10 points to 70. The component charting traffic of prospective buyers posted a two-point gain to 67.

Looking at the three-month moving regional scores, the Northeast fell seven points to 69, the Midwest dropped one point to 72, and the South fell three points to 83. The West moved up one point to 90.

“Builders are reporting growing concerns that increasing construction costs (up 20% over the last 12 months) and expected higher interest rates connected to tightening monetary policy will price prospective home buyers out of the market,” says NAHB chief economist Robert Dietz. “While low existing inventory and favorable demographics are supporting demand, the impact of elevated inflation and expected higher interest rates suggests caution for the second half of 2022.”