The numbers: As builders became increasingly worried about the rising cost of building as a result of the Trump administration’s tariffs, home-builder confidence dropped to its lowest point in seven months.
March saw a decline in sentiment, primarily due to a decline in both foot traffic from potential purchasers and the state of sales.
The industry organization stated on Monday that the National Association of Home Builders’ monthly confidence index dropped 3 points to 39 points in March. The index was at 51 a year ago.
The Trump administration’s tariffs on imported goods are predicted to increase housing costs.
Additionally, builders anticipate a decline in demand for home purchases as consumers’ decisions to acquire newly constructed homes are influenced by economic policy uncertainties.
Important information: Builders are being alarmed by President Donald Trump’s taxes on items imported from several nations, including China, Canada, and EU nations.
According to builders, the tariffs might result in a $9,200 increase in the average cost of building a home. In January, the most recent month for which data is available, the median price of a newly constructed home sold was $446,300.
More builders are lowering home prices to attract customers, despite the fact that construction costs are predicted to rise.
According to NAHB data, 29% of builders lowered home prices in March, up from 26% in February. March had an average price reduction of 5%, which was the same as the month before.
Additionally, at 59%, the utilization of sales incentives remained same from the previous month. Among these are mortgage-rate buydowns, in which the builder gives the customer a reduced rate for a predetermined amount of time before it rises.
Due to a challenging market, builders are concerned about a decline in buyer demand. In addition to being pricey, with prices gradually reaching all-time highs, the 30-year fixed-rate mortgage rate remains near 7%.
Read more: The OECD recently lowered the U.S. economic projection due to uncertainty and tariffs.
Robert Dietz, chief economist at the NAHB, stated in a statement that “tariffs are putting additional cost pressures on construction firms.” “Uncertainty on policy is also having a negative impact on home buyers and development decisions.”
The total builder-confidence indicator is based on three measures, two of which were down:
– Builders were downbeat about current sales conditions. That gauge fell 3 points.
– Builders expect a fall in traffic from prospective buyers. That gauge dropped by 5 points.
– Their views on sales expectations were unchanged.
Big picture: The market for new homes has been agitated by actions taken by the Trump administration, such as tariffs and significant cuts to federal agencies. According to the most recent poll, builders are worried about their capacity to construct and sell homes.
If builders choose to reduce the number of new houses they are building, the decline in confidence might pose a serious challenge to the housing market.
According to a Realtor.com analysis, America still lacks 3.8 million homes. Because there are fewer resale properties available to buyers, new homes have accounted for a larger portion of home sales during the past two years. According to the business, new homes accounted for 14.5% of all home sales in 2024, the largest percentage since 2005. (Move Inc., a subsidiary of News Corp., operates Realtor.com; Dow Jones, the publisher of MarketWatch, is also a News Corp. subsidiary.)
Home prices may rise even further if builders reduce the number of new homes they produce, which would increase the supply gap.
“Building new homes is a win for the housing market and especially essential for young households that have struggled to form in an era of high housing costs,” the researchers from Realtor.com stated. “More home supply means lower prices, which can bring higher home sales.”
What do they say? The senior U.S. economist at Pantheon Macroeconomics, Samuel Tombs, stated in a note that “the step-up in economic policy uncertainty is already weighing on home sales and buyer interest.”
“Those downbeat expectations are warranted, given the very low net balance of households in both the [University of Michigan] and Conference Board surveys believing now is a good time to buy a home,” he stated.
“People also likely will hold back from purchases right now if they think there is a decent chance that prices or interest rates will be lower in a year’s time,” Tombs stated.
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