Builder sentiment dips amid cost concerns, regulatory relief in sight

Investing.com -- Builder confidence in the U.S. market for newly constructed single-family homes dropped to its lowest level in seven months, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. The index fell three points to 39 in March, influenced by economic uncertainty, potential tariffs, and rising construction costs.

NAHB Chairman Buddy Hughes noted that builders are grappling with increased building material costs, which are heightened by tariff issues, and other supply-side challenges such as labor and lot shortages. Despite these challenges, Hughes, a home builder and developer from Lexington, N.C., indicated that builders are starting to see some regulatory relief which could help manage the rising costs. This relief is highlighted by the Trump administration's recent pause on the 2021 IECC building code requirement and the move to implement the regulatory definition of ‘waters of the United States’ under the Clean Water Act in line with the U.S. Supreme Court’s Sackett decision.

NAHB Chief Economist Robert Dietz also pointed out that the added cost pressures from tariffs are impacting construction firms. Data from the HMI March survey reveals that builders estimate the typical cost effect from recent tariff actions at $9,200 per home. Dietz added that policy uncertainty is negatively affecting home buyers and development decisions.

The HMI survey for March also showed that 29% of builders reduced home prices, an increase from 26% in February. The average price reduction remained steady at 5% compared to the previous month. The use of sales incentives was unchanged at 59%.

The NAHB/Wells Fargo HMI, which has been conducted for over 35 years, measures builder perceptions of current single-family home sales and sales expectations for the next six months. The survey also rates traffic of prospective buyers. Scores are used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The component of the HMI index measuring current sales conditions fell three points to 43 in March, the lowest since December 2023. The gauge for traffic of prospective buyers dropped five points to 24, while the component measuring sales expectations in the next six months remained steady at 47.

Regional HMI scores for March showed declines across the board. The Northeast fell three points to 54, the Midwest dropped three points to 42, the South slid four points to 42, and the West saw a two-point decline to 37.