Homebuilders received no relief from consumer uncertainty this month, reporting increasingly negative confidence in the new home market, spurred by tariff unknowns.
Builder sentiment about current and future new single-family home sales decreased 6 points to 34 in May, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Thursday. Any reading below 50 is seen as negative. This is the lowest reading since November 2023.
“Policy uncertainty stemming in large part from the stop-and-start tariff issues has hurt builder confidence but the initial trade arrangements with the United Kingdom and China are a welcome development,” Robert Dietz, the NAHB's chief economist, said in a statement. “Still, the overall actions on tariffs in recent weeks have had a negative impact on builders, as 78% reported difficulties pricing their homes recently due to uncertainty around material prices.”
Homebuilders import vital building materials and fixtures from other countries such as Canada, Mexico and China. Fears and confusion over price increases have kept homebuyers at bay, said Melissa Cervin, vice president of marketing for Shelby Township, Michigan-based Lombardo Homes, which has seen a 30% decline in community home sales, the builder’s core product.
The NAHB noted that the May survey concluded before recent announcements of an additional 90-day pause on tariffs and a drastic decline in tariffs on Chinese imports. Still, it appeared to make no difference to hardened buyers.
“Everyone is so confused by the tariffs because day to day, it’s so different, so nobody knows what it means or what it’s going to equate to, that it doesn’t matter that there’s been communication that it’s lower. People don’t trust it,” Cervin said in an interview.
Lombardo also reported an impact from federal worker layoffs and noted that its proximity to Detroit and the auto industry has ripple effects on its buyers. The auto industry is predicted to be impacted heavily by tariffs, as most cars are manufactured in different countries.
Confusion over pricing
Builders, such as Bubba Jenkins of Jenkins Homes in Mandeville, Louisiana, noted receiving price increases or warnings of increases on products despite tariffs not taking effect, leaving confusion over pricing.
“Any time a tariff is announced, we receive letters and phone calls from our vendors and salespeople. We’re hearing from the top to expect price increases, then you find it gets stripped to a bare minimum, and you start wondering, ‘Is this price increase still happening?’” Jenkins said in an interview.
To manage the pullback from buyers, more builders cut home prices last month, according to the NAHB survey, with 34% of surveyed builders cutting home prices in May by an average of 5%.
“We’re looking at reducing deposit money, we’re looking to take contingent deals, which we didn’t do in the past, discounting and buydowns rates for our customers,” said Lombardo Division President Tim Stapleton, who noted discounts are not across the board, but decided based on the community. “Some of our competitors are being very, very aggressive with discounts.”
The level of May price cuts was nearly the same share of builders that cut prices in December 2023, when builders were coming off of mortgage highs. Builder confidence this month was just as low as in November 2023. At that time, mortgage rates were coming off a peak, nearly reaching 8%.
Last month, the index found builder confidence ticked up one point, supported by slight decreases in mortgage rates.
Confidence in current sales conditions declined 8 points in May to 37, while confidence in the next six months dropped to 42, and prospective buyer traffic decreased to 23.