Builder Confidence Levels Indicate Slow Start for Spring Housing Season
Despite ongoing challenges, builder confidence in the U.S. housing market showed a modest uptick in April 2025. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) rose one point to 40, suggesting a slight improvement in sentiment. This increase may be attributed to a recent dip in mortgage rates, which potentially encouraged some prospective buyers to re-enter the market, providing a boost to sales activity. Additionally, the index measuring current sales conditions climbed two points to 45, indicating a cautiously optimistic outlook among builders.
However, the overall builder sentiment remains in negative territory, primarily due to economic uncertainties and rising construction costs. Tariffs have significantly impacted material prices, with 60% of builders reporting supplier price hikes averaging 6.3%, translating to an estimated $10,900 increase per home. These cost escalations, coupled with labor shortages and a scarcity of buildable lots, have made it challenging for builders to price homes accurately and make informed business decisions.
National Association of Home Builders
In response to these pressures, builders are increasingly offering incentives to attract buyers. In April, 61% of builders reported using sales incentives, up from 59% in March, while 29% reduced home prices, maintaining an average reduction of 5%. These strategies aim to mitigate the impact of affordability challenges on potential homebuyers. Regionally, builder confidence varied, with the Northeast experiencing a seven-point decline to 47, the South dropping three points to 39, and the West decreasing two points to 35, reflecting the diverse conditions across different housing markets.
