By Raeedah Wahid | Bloomberg

U.S. homebuilder sentiment fell in March to a six-month low as labor and supply constraints, along with rising mortgage rates, undermined sales prospects.

The National Association of Home Builders/Wells Fargo gauge decreased to 79 from a revised 81 in February, figures showed Wednesday. The median forecast in a Bloomberg survey of economists called for a March reading of 81.

For more than a year, builders have been racing to meet robust demand, though soaring materials prices and workers shortages have proven challenging. Strong sales have reduced inventory and pushed up prices, helping explain why monthly mortgage payments stand at a record.

Housing affordability may further erode in the coming months as the Federal Reserve prepares more increases to interest rates in order to contain the fastest inflation in four decades.

“Builders are reporting growing concerns (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,” Robert Dietz, chief economist at the NAHB, said in a statement.

“The impact of elevated inflation and expected higher interest rates suggest caution for the second half of 2022,” he said.

The report showed a measure of sales expectations for the next six months slumped by 10 points to 70, the lowest since June 2020. An index of current sales dropped 3 points to a five-month low of 86. A gauge of prospective buyer traffic rose slightly.

By region, the Northeast and the South posted decreases in builder sentiment this month. Confidence improved in the Midwest and was unchanged in the West.