Builder Confidence Remains Low Amid Tariff Concerns and Rising Costs

Increased economic uncertainty due to tariff concerns and high building material costs has kept builder sentiment low, according to the National Association of Home Builders (NAHB) and the Wells Fargo Housing Market Index (HMI). 

“The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity,” says Buddy Hughees, NAHB chairman and a home builder and developer from Lexington, North Carolina. “At the same time, builders have expressed growing uncertainty over market conditions as tariffs have increased price volatility for building materials at a time when the industry continues to grapple with labor shortages and a lack of buildable lots.”

60% of builders reported their suppliers have already increased or announced increases in material prices due to tariffs. Overall, suppliers have increased prices by 6.3% in response to enacted or expected tariffs. Builders estimate a cost effect of $10,900 per home due to this.

The average price reduction in home prices was 5% in April, with 29% of builders cutting home prices. 

A monthly survey conducted by NAHB/Wells Fargo HMI measures builder perceptions of current single-family home sales and sales expectations for the next six months are rated as good, fair or poor, and traffic of prospective buyers is rated as high to very high, average or low to very low. Scores are combined to calculate a seasonally adjusted index where numbers over 50 indicate that more builders view conditions as good.

In April, the HMI index reached 45, two points higher than the previous month. The component measuring traffic of prospective buyers increased to 25 and the sales expectations number fell to 43 points.

“Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” says Robert Dietz, NAHB chief economist. “The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariffs.”