Homebuilder confidence came in at 39 (out of 100) in March, its lowest reading in seven months, as recorded by the latest Housing Market Index (HMI) reported by the National Association of Home Builders (NAHB) and Wells Fargo.
As measured by the index, current sales conditions for single-family homes fell three points month-over-month to 43. Traffic from prospective buyers also dropped from 29 to 24. However, sales expectations for the next six months stood unchanged at 47.
Close to one-third (29%) of homebuilders cut prices in March, compared to 26% in February. However, the average price reduction of 5% was unchanged month-over-month.
NAHB’s press release says that despite builder optimism about the cutting of regulations, economic uncertainty has caused many builders to take a more cynical outlook.
NAHB Chairman Buddy Hughes and NAHB Chief Economist Robert Dietz both attributed the drop in confidence to high cost pressure from tariffs. Hughes added that there are “other supply-side challenges that include labor and lot shortages.”
While the Trump administration’s tariffs have seen false starts, the uncertainty of their implementation leaves builders needing to prepare for, as an example, price hikes on lumber from tariffs imposed on Canada.
“Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home,” said Dietz. “Uncertainty on policy is also having a negative impact on homebuyers and development decisions.”
Hughes’ statement echoes Dietz’s, but he also stressed the lifting of regulations as a cause for optimism.
“Builders are starting to see relief on the regulatory front to bend the rising cost curve, as demonstrated by the Trump administration’s pause of the 2021 IECC building code requirement and move to implement the regulatory definition of ‘waters of the United States’ under the Clean Water Act consistent with the U.S. Supreme Court’s Sackett decision,” referring to a National Association of REALTORS®-backed challenge to a Biden administration revision to the Clean Water Act.
Regional breakdown
Regionally, homebuilder confidence declined across the four major U.S. census regions.
The Northeast, coming off of a precipitous January-February drop from 65 to 50, saw a slight drop from 50 to 47. The Midwest saw the greatest drop of five points, from 43 to 38. The South experienced a two-point drop from 41 to 39, while the West had the smallest drop-off of one point (35 to 34).
For the full HMI index breakdown, click here.
