WASHINGTON, April 15 (Reuters) - U.S. homebuilder sentiment deteriorated in April, hitting a seven-month low as the war with Iran led to higher prices for materials and mortgage rates as well as increased economic uncertainty, a survey showed on Wednesday.

The National Association of Home Builders/Wells Fargo Housing Market index dropped four points to 34 this month, the lowest level since September 2025, and staying below the 50 break-even point for 24 straight months. Economists polled by Reuters had forecast the index easing to 37.

"The year started with hopes for housing momentum growth, but risks with respect to the Iran war, energy costs, and declines for consumer confidence have slowed the market," said NAHB Chairman Bill Owens.

The U.S.-Israel war with Iran has pushed up mortgage rates, which had fallen significantly at the start of the year amid expanded purchases of mortgage-backed securities by Freddie Mac and Fannie Mae. Mortgage rates track U.S. Treasury yields, which have risen as the Middle East conflict stoked inflation fears.

The government reported last week that monthly consumer prices increased by the most in nearly four years in March. Consumer sentiment plunged to a record low in April.      

The popular 30-year fixed-mortgage rate averaged 5.98% in late February on the eve of the war. It jumped to 6.46% at the start of April and averaged 6.37% last week, data from Freddie Mac showed. The deterioration in homebuilder sentiment followed news this week that existing home sales fell to a nine-month low in March.

NAHB chief economist Robert Dietz said 62% of builders reported suppliers had increased building material costs due to higher fuel prices, including gas and diesel. Global oil prices have increased by more than 35% since the start of the conflict.

"Energy costs make up approximately 4% of residential construction material input and service costs," said Dietz. "With near-term economic risks elevated, 70% of builders reported challenges pricing homes given uncertainty about material costs."

The cost pressures from expensive gasoline and diesel are in addition to President Donald Trump's sweeping tariffs on imported building materials and appliances. Builders are also facing higher labor costs as the Trump administration's mass deportations have reduced the supply of workers.

With costs rising, builders are pulling back on incentives. The share of builders reporting cutting prices edged down to 36% from 37% in March. The average price reduction slipped to 5% from 6% last month. The use of sales incentives dropped to 60% from 64% in March.

The survey's measure of current sales conditions fell four points to 37, while its gauge of future sales dropped seven points to 42. A measure of prospective buyer traffic decreased three points to 22.