* NAHB index rises to 38, below 50 for 23 months

* Mortgage rates rise due to US-Israeli war with Iran

* Builders face high costs, offer incentives to boost

sales

WASHINGTON, March 16 (Reuters) - U.S. homebuilder

sentiment edged up in March, but worries about higher

construction costs and shortages of labor lingered, a survey

showed on Monday.

The National Association of Home Builders/Wells Fargo

Housing Market index increased one point to 38 this month,

remaining below the 50 break-even point for 23 straight months.

Economists polled by Reuters had forecast the index

unchanged at 37. The slight improvement in sentiment likely

reflected lower mortgage rates at the start of the year after

President Donald Trump ordered government-backed mortgage firms

Fannie Mae and Freddie Mac to expand purchases of

mortgage-backed securities.

But mortgage rates have reversed course, rising in recent

weeks as the U.S.-Israeli war with Iran raised oil prices and

stoked inflation fears, driving up U.S. Treasury yields.

Mortgage rates track the benchmark 10-year U.S. Treasury yield.

"Many buyers remain on the fence waiting for lower interest

rates and due to economic uncertainty," said NAHB Chairman Bill

Owens. "Builders are facing elevated land, labor and

construction costs and nearly two-thirds continue to offer sales

incentives in a bid to firm up the market."

Trump's sweeping tariffs, which he pursued under a law meant

for use in national emergencies, have raised prices for building

materials and appliances, while his immigration crackdown,

including raids at construction sites, has undercut labor

supply. Though the U.S. Supreme Court struck down the tariffs,

Trump responded to the ruling by imposing a 10% global tariff,

which he said would rise to 15%.

The Trump administration last week launched two trade

investigations into excess industrial capacity in 16 major trade

​partners and into forced labor as it seeks to rebuild tariff

pressure on trade partners.

The share of builders reporting cutting prices ticked up to

37% from 36% in February. The average price reduction was

unchanged at 6%. The use of sales incentives dipped to 64% from

65% in February, still marking the 13th consecutive month this

share has exceeded 60%. Builders are trying to reduce excess new

housing inventory.

The survey's measure of current sales conditions nudged up

to 42 from 41, while its gauge of future sales rose two points

to 49. A measure of prospective buyer traffic increased three

points to 25.

Trump last week signed an order to eliminate regulatory

burdens associated with housing construction and another easing

regulations related to mortgage costs and home loans. Housing

affordability has become ⁠an increasingly potent political issue

ahead of the November mid-term elections.

"Down-payment hurdles and uncertainty from the conflict with

Iran and the price of oil will be headwinds going forward," said

NAHB Chief Economist Robert Dietz. "The administration's

executive orders issued last week to reduce regulatory burdens

associated with home building are a positive step toward

increasing attainable housing supply."