Dive Brief:

• Growth in homebuilding — evidenced by an increase in apartment starts in June and rising home sales in May — could be stymied by a lack of available labor and by spiraling land and material costs, according to investment research firm Zacks.

• In addition, tough mortgage underwriting standards, competition among builders and a slower pace of price increases “could hold back the recovery this year,” the firm said in an industry outlook this week.

• Rising supply and labor costs, Zacks said, are “eat[ing] into” homebuilders’ profits, as moderating prices limit the amount they can charge for each house.

Dive Insight:

Positive reports on starts and sales “paint a picture of recovery” that does not account for economic factors that chip away at builders’ gross margins, Zacks said. For example, many homebuilders are spending more to offer incentives to buyers. And low oil prices tend to depress consumer confidence in energy-dependent states like Texas, where some builders are seeing a slowdown in home sales.

The Zacks outlook was dire enough for the firm to caution potential investors in public homebuilder stocks to “take a closer look at these dampeners before investing in this space.”