The spring home building season is off to a somewhat rocky start, with tariff concerns and higher material costs weighing on builder confidence, according to a monthly survey of single-family home builders conducted by the National Association of Home Builders (NAHB) and Wells Fargo.
The NAHB/Wells Fargo Housing Market Index (HMI), which measures builder confidence in the market for newly built single-family homes, clocked in at 40 in April, inching up one point from March. Any reading under 50 indicates that the majority of builders surveyed lack confidence about the current and near-term outlook for housing.
The survey also showed that 29% of builders cut home prices in April, which was the same percentage as March. The average home price reduction was also unchanged at 5% in April. The use of sales incentives was 61% in April, up from 59% last month.
“The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity,” said NAHB Chairman Buddy Hughes in a statement. “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.”
Regarding the Trump administration’s tariffs on imported goods, 60% of builders surveyed said that their suppliers have already increased material prices or have announced increases.
NAHB reported that suppliers have increased prices by an average of 6.3% in response to tariffs. Builders estimate that the typical cost increase due to tariffs is $10,900 per home, according to NAHB.
“Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” NAHB Chief Economist Robert Dietz noted in a press release. “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.”
The overall HMI is a weighted composite of three indexes that track current sales of new single-family homes, expected sales for the next six months and traffic of prospective homebuyers.
The component indexes revealed that current sales conditions increased two points in April to 45; sales expectations over the next six months fell four points to 43; and prospective buyer traffic climbed one point to 25.
