By Sharon Nunn 
 

WASHINGTON--A gauge of U.S. home-builder sentiment fell sharply in December because of housing affordability concerns.

The National Association of Home Builders on Monday said its index of builder confidence in the market for new single-family homes fell to 56 in December from the prior month.

Sentiment has pulled back this year as supply constraints, such as lack of buildable lots and increasing construction material costs, continue to weigh on the housing market. At the same time, rising borrowing costs and lackluster housing supply are driving up the cost of purchasing a home, keeping many potential buyers off the market.

Economists surveyed by The Wall Street Journal had expected a higher December reading of 61.

"The fact that builder confidence dropped significantly in areas of the country with high home prices shows how the growing housing affordability crisis is hurting the market," said Robert Dietz, the trade group's chief economist. "This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points."

Still, NAHB Chairman Randy Noel said "recent declines in mortgage interest rates should help move the market forward in early 2019."

November figures for home construction and existing-home sales are due later this week.

Write to Sharon Nunn at Sharon.Nunn@WSJ.com

(END) Dow Jones Newswires

December 17, 2018 10:14 ET (15:14 GMT)