The NAHB/Wells Fargo Housing Market Index (HMI) fell to 80 from 81 in June. Economists had predicted that the index would rise to 82 points.

A reading of more than 50 indicates that more builders consider market conditions to be favourable.

In November 2020, the index reached a new high of 90.

Builders are facing shortages of building materials, buildable lots, and skilled labour, as well as a difficult regulatory environment, according to Robert Dietz, Chief Economist at the National Association of Home Builders(NAHB).

Even though demand remains strong in a low-inventory environment, he added, this is putting upward pressure on home prices and excluding many prospective home buyers.

Home sales have recently been slowed by rising home prices and a lack of supply, and fewer Americans believe now is a good time to buy.

In July, the NAHB survey of single-family home sales expectations rose two points to 81, while a gauge of current sales conditions dropped one point to 86.