U.S. homebuilders reported sinking confidence in the housing market and low buyer activity largely due to tariffs and consumer uncertainty.
Builder sentiment about current and future new single-family home sales dropped to a survey score of 39 this month, the lowest gauge since August and down three points from February, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Monday. Any score higher than 50 is seen as a positive read on single-family home sales.
The NAHB trade group estimated that homebuilders would pay $9,200 more per home due to tariffs on building materials.
President Donald Trump imposed 25% tariffs on imports from Canada and Mexico — two countries where builders import vital construction materials — to curb drug trafficking into the United States from both countries, according to the White House. But those tariffs have spurred fears of rising construction costs that could lead to increased home prices.
The ongoing tariff tug-of-war has also created an atmosphere of uncertainty among homebuyers and builders, negatively affecting buyer and development decisions.
“The biggest issue, I think, is the uncertainty,” Robert Carroll, owner of Carroll Construction, a small homebuilder in Clinton, Louisiana, said in an interview. “I can tell you, in my experience, uncertainty is a bad thing in our industry because our clients don’t purchase in the event that they’re not confident in the future because this is a 30-year commitment they’re going to make.”
The NAHB survey also indicated that homebuilders’ reported traffic of prospective homebuyers declined five points from last month, down to 24. Current sales conditions hit the lowest rating since December 2023, at 43. According to another NAHB report this month, nearly 75% of U.S. households cannot afford a median-priced new home at $459,826.
Mortgage rates have been a challenge for builders, though rates have brought some relief in recent weeks, resulting in double-digit growth for mortgage applications at the beginning of the month. The 30-year, fixed-rate mortgage average was 6.65% last week.
“With mortgage rates at least stabilizing, we are already seeing more life in the market. Many buyers who had been waiting on the sidelines are now re-engaging, and we remain optimistic about home sales in 2025,” Bryan Havel, division president of Austin, Texas, for Tri Pointe Homes, said in a statement.
Despite low confidence and tariffs, builders continue to drop home prices as a strategy to attract buyers. The survey suggested that 29% of builders cut home prices in March, up 3 percentage points from last month. On average, that price cut is 5%.
Permits issued in January for new single-family home construction were down by 3.7% compared to last year overall, but some regions experienced increases, specifically the Midwest and Northeast.
These persistent challenges have an unbalanced impact on homebuilders, noted Carroll. With more than 60% of homebuilders considered a small business, according to data from the NAHB, the rising costs and low buyer activity hit these companies harder than large national builders.
"Whether you're on either side of the argument, whether you're pro-tariff or anti-tariff, we can all agree it's disruptive. If it's disruptive long enough, the negative effects will be we're going to lose some of our smaller family builders who make up the majority of the suppliers of housing stock across the United States," said Carroll.