By Evan Sully

(Reuters) -U.S. homebuilder confidence in the market for single family homes fell in July to its lowest level since August 2020, driven by shortages in both supply and labor.

The NAHB/Wells Fargo Housing Market index declined to a reading of 80 this month from 81 in June. Economists polled by Reuters had expected the index to advance marginally to a reading of at 82. A reading above 50 means more builders view market conditions as favorable than poor. The index hit an all-time high of 90 in November 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. "This is putting upward pressure on home prices and sidelining many prospective home buyers even as demand remains strong in a low-inventory environment."

Surging home prices and limited supply has put a lid on home sales recently, and fewer U.S. consumers believe that now is a good time to buy a home.

The NAHB survey's measure of single-family home sales expectations in the next six months rose two points to a reading of 81 in July, while a gauge of current sales conditions decreased one point to 86.

The prospective buyers index fell six points to 65.

Housing starts in June are forecast to rise, according to a survey of economists polled by Reuters about the data due for release on Tuesday.

(Reporting By Evan Sully;Editing by Chizu Nomiyama)