Recent months have given homebuilders various reasons for caution: fickle implementation of tariffs which bring building material cost increases, and an uncertain economic outlook despite signs of a more buyer-friendly market.
But the latest data shows that homebuilders’ market confidence has reached a low point.
The latest Housing Market Index (HMI)—published by the National Association of Home Builders (NAHB) and Wells Fargo—tracks homebuilder sentiment toward market conditions and grades it on a scale of 0 to 100. The May 2025 grade was 34, the lowest the index has been in the past year (since May 2024), and the lowest grade overall since the 31 HMI in December 2022.
The NAHB press release attributed this result in part to a “soft spring selling season.” However, the release also noted that the majority of responses were received prior to the May 12 announcement that the U.S. and China had agreed to lower tariffs for 90 days and continue negotiations.
“Builders expect future trade negotiations and progress on tax policy will help stabilize the economic outlook and strengthen housing demand,” said NAHB Chairman Buddy Hughes in the press release.
“Policy uncertainty stemming in large part from the stop-and-start tariff issues has hurt builder confidence, but the initial trade arrangements with the United Kingdom and China are a welcome development,” added NAHB Chief Economist Robert Dietz in the release. “Still, the overall actions on tariffs in recent weeks have had a negative impact on builders, as 78% reported difficulties pricing their homes recently due to uncertainty around material prices.”
Previously, the March 2025 HMI came in at 39, at the time the lowest the index had been since August 2024. The HMI then saw a slight boost in April, coming in at 40 due in part to a dip in mortgage rates. The NAHB also found that multifamily home developer confidence was down in May 2025, for largely similar reasons as low homebuilder confidence.
The three major indices of the HMI all posted losses in May 2025. Current sales conditions dropped eight points month-over-month to 37, while traffic of prospective buyers dropped two points to 23. Builders’ sales expectations over the next six months showed the most comparatively positive result: a mere one point drop to 42.
More than a third (34%) of builders were reported to have cut prices in May 2025, up from 29% in April. This is also the highest level of builders cutting prices since December 2023 (36%).
The use of sales incentives (61%) was unchanged month-over-month in May, as was the rate of price reductions (5%).
Regional breakdown
All four major U.S. census regions posted drops in the seasonally adjusted regional HMI during May, though their ranking from highest to lowest remained largely the same as they were in April.
The Northeast remained the highest-rated on the index, dropping only one point from 43 to 42. The Midwest—previously tied with the Northeast in April—dropped three points from 43 to 40, while the South dropped five points from 38 to 33. The West posted the largest drop (eight points from 36) and the lowest overall result on the index (28).
For the full HMI report, click here.
