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US homebuilder confidence declined for the fourth consecutive month in April, with higher mortgage rates, rising house prices and elevated construction costs weighing on builder sentiment and housing affordability.

The National Association of Home Builders’ housing market index dropped two points to 77 in April, meeting economists’ forecasts, according to a Refinitiv poll.

The index sits slightly higher than levels hit in the months leading up to the start of the pandemic, but below a historical high of 90 in November 2020. The gauge remains well above 50, a reading above which more builders regard conditions as good rather than poor.

Still, homebuilder confidence has declined in recent months, and demand for new homes has weakened, thanks in part to a rising interest rate environment.

Mortgage rates recently hit 5 per cent, the highest level in more than a decade, with the Federal Reserve appearing set to keep tightening monetary policy this year. Combined with house prices that were pushed higher during the pandemic as monetary policy was kept very loose to support an economic recovery, housing affordability is increasingly falling out of reach for many US homebuyers.

Supply chain issues continues to drive up production costs, posing a problem not just for builders but for homebuyers who are contending with higher mortgage rates and surging house prices.

“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,” Jerry Konter, NAHB chair, said.

A regional breakdown showed the NAHB’s index rose in the south and north-east but fell in the midwest and west.