After three straight months of record highs, homebuilder confidence dipped in December.

The National Association of Homebuilders / Wells Fargo Housing Market Index looks at three areas: perceptions of current single family homes sales, expectations for the next six months and traffic rates of prospective buyers. 

After reaching a high of 90 last month, builder confidence in newly single-family homes fell to 86 this month. Housing demand remains strong going into the new year while inventory is considered low. The homebuilders association says rising construction costs, which include labor and materials, impact affordability. 

“As the economy improves with the deployment of a COVID-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes,” said NAHB Chief Economist Robert Diet.

The group’s most recent construction cost survey was conducted in 2019 and  found on average, a builder’s profit is 9.1% of the sales price.