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Builder Confidence Falls on Cost Uncertainty

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Economic uncertainty, the threat of tariffs and elevated construction costs pushed builder sentiment down in March even as builders express hope that a better regulatory environment will lead to an improving business climate.

Builder confidence in the market for newly built single-family homes was 39 in March, down three points from February and the lowest level in seven months, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages. At the same time, builders are starting to see relief on the regulatory front to bend the rising cost curve, as demonstrated by the Trump administration’s pause of the 2021 IECC building code requirement and move to implement the regulatory definition of ‘waters of the United States’ under the Clean Water Act consistent with the U.S. Supreme Court’s Sackett decision.

Construction firms are facing added cost pressures from tariffs. Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home. Uncertainty on policy is also having a negative impact on home buyers and development decisions.

The latest HMI survey also revealed that 29% of builders cut home prices in March, up from 26% in February. Meanwhile, the average price reduction was 5% in March, the same rate as the previous month. The use of sales incentives was 59% in March, unchanged from February.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges 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 then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions fell three points to 43 in March, its lowest point since December 2023. The gauge charting traffic of prospective buyers dropped five points to 24 while the component measuring sales expectations in the next six months held steady at 47.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points in March to 54, the Midwest moved three points lower to 42, the South dropped four points to 42 and the West posted a two-point decline to 37. The HMI tables can be found at nahb.org/hmi.

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Builder Confidence Falls on Tariff and Housing Cost Concerns

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Builder sentiment fell sharply in February over concerns on tariffs, elevated mortgage rates and high housing costs.

Builder confidence in the market for newly built single-family homes was 42 in February, down five points from January and the lowest level in five months, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for 2025 expectations in the most recent HMI. Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023.

With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs. Reflecting this outlook, builder responses collected prior to a pause for the proposed tariffs on goods from Canada and Mexico yielded a lower HMI reading of 38, while those collected after the announced one-month pause produced a score of 44. Addressing the elevated pace of shelter inflation requires bending the housing cost curve to enable adding more attainable housing.

Incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible home buyers. The latest HMI survey also revealed that 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024. Meanwhile, the average price reduction was 5% in February, the same rate as the previous month. The use of sales incentives was 59% in February, down from 61% in January.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges 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 then 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 February. The HMI index gauging current sales conditions fell four points to 46, the component measuring sales expectations in the next six months plunged 13 points to 46, and the gauge charting traffic of prospective buyers posted a three-point decline to 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points in February to 57, the Midwest moved two points lower to 45, the West edged one-point lower to 39 and the South held steady at 46. The HMI tables can be found at nahb.org/hmi.

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Builder Confidence Edges Up Even as Market Risk Concerns Rise

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Builder sentiment edged higher to begin the year on hopes for an improved economic growth and regulatory environment. At the same time, builders expressed concerns over building material tariffs and costs and a larger government deficit that would put upward pressure on inflation and mortgage rates.

Builder confidence in the market for newly built single-family homes was 47 in January, up one point from December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

Builders are facing continued challenges for housing demand in the near-term, with mortgage rates up from near 6.1% in late September to above 6.9% today. Land is expensive and financing for private builders remains costly. However, there is hope that policymakers are taking the impact of regulatory hurdles seriously and will make improvements in 2025.

NAHB is forecasting a slight gain for single-family housing starts in 2025, as the market faces offsetting upside and downside risks from an improving regulatory outlook and ongoing elevated interest rates,. And while ongoing, but slower, easing from the Federal Reserve should help financing for private builders currently squeezed out of some local markets, builders report cancellations are climbing as a direct result of mortgage rates rising back up near 7%.

The latest HMI survey also revealed that 30% of builders cut home prices in January. This share has been stable between 30% and 33% since last July. Meanwhile, the average price reduction was 5% in January, the same rate as in December. The use of sales incentives was 61% in January. This share has remained between 60% and 64% since last June.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges 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 then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions rose three points to 51 and the gauge charting traffic of prospective buyers posted a two-point gain to 33. The component measuring sales expectations in the next six months fell six points to 60 because of the elevated interest rate environment. While this serves as a cautionary note, the future sales component is still the highest of the three sub-indices and well above the breakeven level of 50.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased five points to 60, the Midwest moved one point higher to 47, the South posted a one-point gain to 46 and the West fell one point to 40. The HMI tables can be found at nahb.org/hmi.

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Builder Confidence Steady but Signs of Future Optimism in 2025

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Builder sentiment held steady to end the year as high home prices and mortgage rates offset renewed hope about a better regulatory business climate in 2025. Along those lines, builders expressed increased optimism for higher sales expectations in the next months.

Builder confidence in the market for newly built single-family homes was 46 in December, the same reading as last month, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

While builders are expressing concerns that high interest rates, elevated construction costs and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election. This is reflected in the fact that future sales expectations have increased to a nearly three-year high.

NAHB is forecasting additional interest rate cuts from the Federal Reserve in 2025, but with inflation pressures still present, we have reduced that forecast from 100 basis points to 75 basis points for the federal funds rate. Concerns over inflation risks in 2025 will keep long-term interest rates, like mortgage rates, near current levels with mortgage rates remaining above 6%.

The latest HMI survey also revealed that 31% of builders cut home prices in December, unchanged from November. Meanwhile, the average price reduction was 5% in December, the same rate as in November. The use of sales incentives was 60% in December, also unchanged from November.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges 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 then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions held steady at 48 while the gauge charting traffic of prospective buyers posted a one-point decline to 31. The component measuring sales expectations in the next six months rose three points to 66, the highest level since April 2022.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased two points to 57, the Midwest moved two points higher to 46, the South posted a two-point gain to 44 and the West fell one point to 40. The HMI tables can be found at nahb.org/hmi.

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Builder Confidence Moves Higher as Election Uncertainty is Lifted

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Builder sentiment improved for the third straight month, and builders expect market conditions will continue to improve with Republicans winning control of the White House and Congress.

Builder confidence in the market for newly built single-family homes was 46 in November, up three points from October, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index. Future sales expectations posted a notable increase in the November reading of builder sentiment.

While builder confidence is improving, the industry still faces many headwinds such as an ongoing shortage of labor and buildable lots along with elevated building material prices. Moreover, while the stock market cheered the election result, the bond market has concerns, as indicated by a rise for long-term interest rates. There is also policy uncertainty in front of the business sector and housing market as the executive branch changes hands.

The latest HMI survey also revealed that 31% of builders cut home prices in November. This share has remained essentially unchanged since July, hovering between 31% and 33%. Meanwhile, the average price reduction was 5%, slightly below the 6% rate posted in October. The use of sales incentives was 60% in November, slightly down from 62% in October.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges 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 then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI sub-indices were up in November. The index charting current sales conditions rose two points to 49, the component measuring sales expectations in the next six months increased seven points to 64 and the gauge charting traffic of prospective buyers posted a three-point gain to 32.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased four points to 55, the Midwest moved three points higher to 44, the South edged up one point to 42 and the West held steady at 41. HMI tables can be found at nahb.org/hmi.

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Builder Confidence Edges Higher Despite Affordability Headwinds

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With inflation gradually easing and builders anticipating mortgage rates will moderate in coming months, builder sentiment moved higher for a second consecutive month despite challenging affordability conditions.

Builder confidence in the market for newly built single-family homes was 43 in October, up two points from a reading of 41 in September, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

Despite the beginning of the Fed’s easing cycle, many prospective home buyers remain on the sideline waiting for lower interest rates. We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans. However, while housing affordability remains low, builders are feeling more optimistic about 2025 market conditions. A wildcard for the outlook remains the election.

The latest HMI survey also revealed that the share of builders cutting prices held steady at 32% in October, the same rate as last month. Meanwhile, the average price reduction returned to the long-term trend of 6% after dropping to 5% in September. The use of sales incentives was 62% in October, slightly up from 61% in September.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges 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 then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI indices were up in October. The index charting current sales conditions rose two points to 47, the component measuring sales expectations in the next six months increased four points to 57 and the gauge charting traffic of prospective buyers posted a two-point gain to 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased two points to 51, the Midwest moved two points higher to 41, the South held steady at 41 and the West increased three points to 41. The HMI tables can be found at nahb.org/hmi.

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Builder Sentiment Rises as Rates Fall but Affordability Challenges Persist

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With mortgage rates declining by more than one-half of a percentage point from early August through mid-September, per Freddie Mac, builder sentiment edged higher this month even as builders continue to grapple with rising costs.

Builder confidence in the market for newly built single-family homes was 41 in September, up two points from a reading of 39 in August, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This breaks a string of four consecutive monthly declines.

Due to lower interest rates, builders now have a positive view for future new home sales for the first time since May 2024. However, builders will face competition from rising existing home inventory in many markets as the mortgage rate lock-in effect softens with lower rates.

With inflation moderating, the Federal Reserve is expected to begin a cycle of monetary policy easing this week, which will produce downward pressure on mortgage interest rates and also lower the interest rates on land development and home construction business loans. Lowering the cost of construction is critical to confront persistent challenges for housing affordability.

The latest HMI survey also revealed that the share of builders cutting prices dropped in September for the first time since April, down one point to 32%. Moreover, the average price reduction was 5%, the first time it has been below 6% since July 2022. Meanwhile, the use of sales incentives fell to 61% in September, down from 64% in August.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges 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 then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI indices were up in September. The index charting current sales conditions rose one point to 45, the component measuring sales expectations in the next six months increased four points to 53 and the gauge charting traffic of prospective buyers posted a two-point gain to 27.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points to 49, the Midwest edged one-point higher to 40, the South decreased one point to 41 and the West increased two points to 39.

The HMI tables can be found at nahb.org/hmi.

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Top 10 Builder Market Shares for 2023

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NAHB analyzed the national market share data released by BUILDER Magazine in a previous blog post.  Last month, BUILDER Magazine released new data on the top 10 home builders within each of the 50 largest new home markets in the U.S. (ranked by single-family permits) (Figure 1).  It is important to note that this post is not specifically analyzing the top 10 largest home builders nationally and each market can differ in its respective top 10 home builder composition.

The top 10 home builders accounted for varying shares, ranging from 40.1% of single-family permits in the Kansas City area to 98.8% in Columbia, SC.  In 11 metro areas, the top 10 builders’ market share exceeded 90%. Across the 50 largest metro areas, the average market share of the top 10 builders was 78.2%, up from 73.3% in 2022.

Looking at results on a map reveals that Florida, South Carolina, Virginia, and southern California have multiple highly concentrated markets.  Texas and the Northwest include markets with lower levels of concentration.

D.R. Horton made the top 10 builder list in 47 markets, the most among all builders.  Lennar and PulteGroup followed, present in the top 10 builder list of 45 and 35 different metro markets, respectively.

From 2022 to 2023, 34 metro areas saw an increase with their top 10 builders’ market share while nine metro areas saw decreases.  The top 5 metro areas with the biggest increases were:

Los Angeles-Long Beach-Anaheim, CA (90.3%, +26 percentage points)

Myrtle Beach-Conway-North Myrtle Beach, SC-NC (92.3%, +16.4 percentage points)

Riverside-San Bernadino-Ontario, CA (94.9%, +16.1 percentage points)

Cape Coral-Fort Myers, FL (96.2%, +15.3 percentage points)

New York-Newark-New Jersey City, NY-NJ-PA (62.6%, +14.9 percentage points)

Of the nine metro markets that saw decreases in the single-family permit share controlled by their top 10 builders, the five largest decreases were seen in:

Portland-Vancouver-Hillsboro, OR-WA (66%, -8.7 percentage points)

North Port-Sarasota-Bradenton, FL (79.1%, -7.4 percentage points)

Deltona-Daytona Beach-Ormond Beach, FL (72.4%, -7.2 percentage points)

Seattle-Tacoma-Bellevue, WA (59.4%, -5.5 percentage points)

Salt Lake City, UT (59.3%, -4.3 percentage points)

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Builder Confidence Moves Lower as Market Waits for Rate Cuts

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A lack of affordability and buyer hesitation stemming from elevated interest rates and high home prices contributed to a decline in builder sentiment in August.

Builder confidence in the market for newly built single-family homes was 39 in August, down two points from a downwardly revised reading of 41 in July, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the lowest reading since December 2023.

Almost three-quarters of the responses to the August HMI were collected during the first week of the month when interest rates averaged 6.73%, according to Freddie Mac. Mortgage rates declined notably the following week to 6.47%, the lowest reading since May 2023.

Challenging housing affordability conditions remain the top concern for prospective home buyers in the current reading of the HMI, as both present sales and traffic readings showed weakness. However, with current inflation data pointing to interest rate cuts from the Federal Reserve and mortgage rates down markedly in the second week of August, buyer interest and builder sentiment should improve in the months ahead.

The August HMI survey also revealed that 33% of builders cut home prices to bolster sales in August, above the July rate of 31% and the highest share in all of 2024. However, the average price reduction in August held steady at 6% for the 14th straight month. Meanwhile, the use of sales incentives increased to 64% in August from 61% in July, and this was the highest level since April 2019.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges 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 then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index charting current sales conditions in August fell two points to 44 and the gauge charting traffic of prospective buyers also declined by two points to 25. The component measuring sales expectations in the next six months increased one point to 49.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell four points to 52, the Midwest dropped four points to 39, the South decreased two points to 42 and the West held steady at 37. The HMI tables can be found at nahb.org/hmi.

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