Washington, D.C.—Builder confidence fell sharply in May as uncertainty remained constant, stemming from elevated interest rates, tariff concerns, uncertain building material costs and a continuously cloudy economic outlook, according to the National Association of Home Builders (NAHB).
“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,” said NAHB chief economist, Robert Dietz. “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.”
Builder confidence in the market for newly built single-family homes was 34 in May—down six points from April—according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This ties the November 2023 reading and is the lowest since the index hit 31 in December 2022.
“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. “However, the overwhelming majority of survey responses came before the tariff reduction announcement with China. Builders expect future trade negotiations and progress on tax policy will help stabilize the economic outlook and strengthen housing demand.”
The latest HMI survey also revealed that 34% of builders cut home prices in May—up from 29% in April and the highest level since December 2023, which was at 36%. Meanwhile, the average price reduction was 5% in May, unchanged from the previous month. The use of sales incentives was 61% in May, the same rate as the previous month.
Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauged builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are used to calculate a seasonally adjusted index—where any number over 50 indicates that more builders view conditions as good than poor.
All three of the major HMI indices posted losses in May. The HMI index gauging current sales conditions fell eight points in May to a level of 37, the component measuring sales expectations in the next six months fell one-point down to 42 while the gauge charting traffic of prospective buyers dropped two points to 23.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points to 44, the Midwest moved one point lower to 40, the South dropped two points to 37 and the West posted a two-point decline to 33.
*Note that 90% of the responses received in May were prior to the May 12 announcement that the United States and China agreed to slash tariffs for 90 days to allow trade talks to continue.