WASHINGTON, June 15 (Reuters) - U.S. homebuilder sentiment fell in June, weighed down by higher mortgage rates and costs for construction materials, a ​survey showed on Monday.

The National Association of Home Builders/Wells Fargo Housing Market index dropped two points to 35 this month. It was the 14th straight month that the index remained below 40, the longest such stretch since the 2011-2012 foreclosure crisis.

Economists polled by Reuters had forecast the index staying steady at 37. The NAHB said rising material costs, elevated mortgage rates and ongoing affordability challenges continued to strain the housing market. 

Mortgage rates have risen as the U.S.-Israel war on Iran drove up oil prices, boosting inflation and Treasury yields.

"With the nation short about 1.2 million homes, builder sentiment will remain soft until barriers are eased and conditions improve for home building," said NAHB chairman Bill Owens. "Congress can help by passing the major housing package now before the Senate."

The rate on the popular 30-year fixed-mortgage has risen more than 50 basis points since the conflict started at the end of February, data from mortgage finance agency Freddie Mac showed. Washington and Tehran on Sunday said they had agreed terms to end ​the war and reopen the Strait of Hormuz.

Prior to the war, the housing market was under pressure from import tariffs, which raised prices of building materials as well as appliances. Residential investment, which includes homebuilding, has contracted for five straight quarters.

Weak demand is forcing builders to offer incentives, including reducing prices to move inventory. The share of builders reporting cutting prices increased to 35% from 32% in May. The average price reduction was unchanged at 6%.

The use of sales incentives rose to 62% ​from 61% in May, marking the 15th consecutive month this share has reached 60% or higher. The survey's measure of current sales conditions fell two points to 38, while its gauge of future sales was steady at 45%. A measure of prospective buyer traffic was unchanged at 25.