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Rapidly rising interest rates combined with home price increases and higher construction costs are negatively affecting builder confidence and housing affordability, 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 77 in April. This is the fourth straight month that builder sentiment has declined.

“Despite low existing inventory, builders report sales traffic and current sales conditions have declined to their lowest points since last summer as a sharp jump in mortgage rates and persistent supply chain disruptions continue to unsettle the housing market,” says NAHB chairman Jerry Konter. “Policymakers must take proactive steps to fix supply chain issues that will reduce the cost of development, stem the rise in home prices, and allow builders to increase production.”

Mortgage interest rates have jumped more than 1.9 percentage points since the start of the year and currently stand at 5%, the highest level in more than a decade.

“The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices, and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market,” says NAHB chief economist Robert Dietz.

The HMI index gauging current sales conditions fell two points to 85, and the component charting traffic of prospective buyers posted a six-point decline to 60. The gauge measuring sales expectations in the next six months increased three points to 73, following a 10-point drop in March.

Looking at the three-month moving regional scores, the Northeast posted a one-point gain to 72, while the Midwest dropped three points to 69, the South fell two points to 82, and the West edged one point lower to 89.