Mortgage applications had been lower for much of the summer, and refinances continue to fall, but applications to purchase a home rose 2 percent last week from the previous week, according to the Mortgage Bankers Association.

This, even as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $417,000 or less increased to 4.8 percent, the highest since April 2011. They are still down 6 percent in the past month. Mortgage rates, however, have been moving lower this week on weak economic data.

Higher home prices could also be hurting potential sales, as very low inventories continue to cause bidding wars from coast to coast. Inventories of existing homes are down significantly in most of the nation’s major housing markets.

(Read more: Map: Tracking the recovery)

San Francisco, for example is seeing some of the highest home price appreciation, as listings were down 29 percent in July year over year, according to the California Association of Realtors.

“More homes clearly need to be built in the West to relieve price pressure, or the region could soon face pronounced affordability problems,” Yun said.

Single family housing starts were down 2.2 percent in July month to month, as home builders still struggle to find finished lots and skilled labor. Underlying demand is running nearly twice the rate of housing completions, according to IHS Global Insight. Some home builders admit they are slowing production in order to gain pricing power.

(Read more: Home prices across the US defy gravity)

Article source: http://www.cnbc.com/id/100993579

“A lot of the sub-contractors are seeing an increase in business, yet they’re reluctant to hire staff or have an inability to hire skilled labor, so we’re seeing delays with framers coming onto our properties to frame the houses, we’re seeing challenges with drywall finishers and painters,” says Paul.

Many builders are also seeing supply constraints, as they did not expect to see such a surge in demand. Demand is strong in large part because there is such a small supply of existing homes for sale nationwide, and because banks have been exceedingly slow to work through foreclosures in some states.

(Read More: Home Prices See Record Gain in April)

“About one third of homes sold are completed, down pretty significantly from where we were earlier in the cycle, which was in the 50 to 60 percent range,” notes David Goldberg, an analyst at UBS.

While the major public builders have not voiced concern publicly over risks to their backlogs, the analysts that cover them say if rates continue to rise, they will not be able to ignore it.

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick or on Facebook atfacebook.com/DianaOlickCNBC.

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100849156