by Uncertainties regarding tariffs, interest rates and building-material costs impact overall views about the economy
WASHINGTON — The National Association of Home Builders said that home-builder confidence declined in May based on the industry’s growing uncertainties stemming from elevated interest rates and import tariffs, along with uncertainty over building-material costs and an overall “cloudy economic outlook.”
Builder confidence for new residential home construction was 34 in May, which was down six points from April, according the NAHB/Wells Fargo Housing Market Index issued on May 15. Officials said that it ties with a November 2023 reading and is the lowest since it hit 31 in December 2022.
However, the groups also noted that 90% of the responses received in May were tabulated before the May 12 announcement that the U.S. and China agreed to pause high tariffs on China shipments to the U.S. for 90 days as trade negotiations continue.
“The spring home-buying season has gotten off to a slow start as persistent elevated interest rates, policy uncertainty and building-material cost factors hurt builder sentiment in May,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, North Carolina. He added that builders anticipate that “future trade negotiations and progress on tax policy will help stabilize the economic outlook and strengthen housing demand.”
Earlier in response to the 90-day pause, he noted, “The White House announcement that it has reached an agreement with China that will drastically curtail tariffs on each nation’s goods is a positive step as the two countries work to reach a long-term, mutually beneficial trade pact. NAHB urges the administration to move quickly to obtain fair, equitable trade deals with other nations that will result in the elimination of tariffs that are currently hurting building-material supply chains and raising construction costs.”
The NAHB has conducted this survey for more than 35 years. It gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”
In addition, it asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” It noted that it uses scores for each component to determine the results of the index, with a score over 50 indicating that more builders view conditions as good versus poor.
Other highlights of the survey were as follows:
+ About 34% of builders cut home prices in May, up from 29% in April and the highest level since 36% in December 2023.
+ The average price reduction was 5% in May, unchanged from April, while the use of sales incentives was 61% in May, the same rate as April.
+ All three of the major Housing Market Index indices showed declines in May. This included current sales conditions, which fell eight points to 37, while a segment measuring sales expectations in the next six months fell one point to 42 and a gauge charting the traffic of prospective buyers fell two points to 23.
+ Three-month moving averages of regional HMI scores showed the Northeast fell three points to 44; the Midwest declined one point to 40; the South fell two points to 37; and the West declined two points to 33.
For additional insights into the survey, visit nahb.org/hmi and Housing Economics Plus.
