Association officials said they aren’t worried about the slight decline.

"Even with this slight slip, the HMI remains in positive territory and we expect the market to improve as we enter the spring buying season," said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo.

NAHB chief economist David Crowe agreed.

"The drop in builder confidence is largely attributable to supply chain issues, such as lot and labor shortages as well as tight underwriting standards," he said. "These obstacles notwithstanding, we are expecting solid gains in the housing market this year, buoyed by sustained job growth, low mortgage interest rates and pent-up demand."

The index gauges builders’ perceptions of the single-family housing market, asking them to rate sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate buyers traffic as "high to very high," "average" or "low to very low."

A number above 50 in the seasonally adjusted index indicates that more builders view conditions as good than poor.