Reflecting supply-side challenges related to building materials, regulation and labor, the National Association of Home Builders released a report on Monday showing an unexpected dip in U.S. homebuilder confidence in the month of July.

The report showed the NAHB/Wells Fargo Housing Market Index edged down to 80 in July from 81 in June. The modest decrease surprised economists, who had expected the index to inch up to 82.

With the unexpected drop, the housing market index slipped to its lowest level since hitting 78 in August of 2020.

“Builders are contending with shortages of building materials, buildable lots and skilled labor as well as a challenging regulatory environment,” said NAHB Chief Economist Robert Dietz.

He added, “This is putting upward pressure on home prices and sidelining many prospective home buyers even as demand remains strong in a low-inventory environment.”

The unexpected decrease by the housing market index came as the component measuring traffic of prospective buyers tumbled to 65 in July from 71 in June.

The index gauging current sales conditions also edged down to 86 in July from 87 in June, while the gauge charting sales expectations in the next six months rose to 81 from 79.

On Tuesday, the Commerce Department is scheduled to release a separate report on new residential construction in the month of June.

Housing starts are expected to jump by 1.6 percent to an annual rate of 1.597 million, while building permits are expected to climb by 1 percent to an annual rate of 1.700 million.

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