A contractor moves roofing material on a home under construction in the Toll Brothers Cantera housing estate on Gale Ranch in San Ramon, California.

David Paul Morris | Bloomberg | Getty Images

Two months ago, builders had never been so happy. Buyer demand, driven by the pandemic-triggered desire for larger newer homes in the suburbs, had builders’ sentiment at an all-time high. Now the rising cost of building homes is making home builders less optimistic.

Builders’ confidence in the single-family home market fell 3 points to 83 in January, according to the NAHB / Wells Fargo Housing Market Index. Anything over 50 is considered positive. Two months ago the index hit a record high of 90. In January 2019, before the pandemic broke out, it stood at 75.

“Builders are grappling with supply-side constraints related to timber and other material costs, a lack of affordable land and labor shortages that are delaying delivery times and increasing pressure on property prices,” said Chuck Fowke, chairman of the NAHB, a contractor Tampa, Florida.

Of the three components of the index, the current sales conditions fell by 2 points to 90. In the next six months, sales expectations fell by 2 points to 83 and buyer traffic by 5 points to 68.

“While housing construction continues to help fuel the economy, limited inventory is hindering more robust growth,” said Robert Dietz, chief economist at NAHB. “A lack of buildable land makes it difficult to meet the strong demand, and rising material prices far outweigh rising house prices, which in turn affects the affordability of housing.”

With a moving three-month average for regional HMI values, the mood in the northeast fell by 6 points to 76. In the Midwest, it rose by 2 points to 83 points. In the south the mood fell by 1 point to 86 and in the west by one point to 95.