Homebuilder sentiment drops to 7-month low on costs

Confidence among US homebuilders slid this month to the lowest level since August, dragged down by worry over tariffs, higher construction costs and economic uncertainty heading into the spring selling season.

An index of housing market conditions from the National Association of Home Builders and Wells Fargo fell 3 points to 39 in March. That was weaker than all estimates in a Bloomberg survey of economists.

Measures of current sales of single-family homes and prospective-buyer traffic, dropped to their lowest levels since the end of 2023. Meantime, a gauge of expectations for the next six months held at 47.

“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,” said NAHB Chairman Buddy Hughes, a builder and developer from Lexington, North Carolina.

The mood among the contractors has grown more guarded following some exuberance over President Donald Trump’s election, which had reflected his promises to cut regulations and support faster growth in the economy.

Instead, tariffs threaten to boost costs of building materials, particularly lumber, raising the risk that home prices will remain elevated. In one positive development, mortgage rates have declined six straight weeks and are now at the lowest level this year, according to the Mortgage Bankers Association.

The March survey revealed that builders see the tariffs potentially boosting prices by $9,200 per home, according to Robert Dietz, the group’s chief economist.

This month, 29% of builders reported cutting prices, up from 26% in February, the NAHB survey showed. The average price cut remained at 5%, and the share that reported using sales incentives also held at 59%.

Builder confidence fell in all four US regions, including in the West where it dropped to the lowest level since December 2023.