Tariffs Hit Both Home Builder and Buyer Confidence

Builder confidence, buyer traffic, and single-family housing starts have been negatively impacted by economic uncertainty, concerns over tariffs, high mortgage rates, and increasing costs of building materials.

Builder confidence in the market for newly built single-family homes was 34 in May, down six points from April, according to the NAHB/Wells Fargo Housing Market Index (HMI). The reading is the lowest since December 2022. However, the survey was conducted prior to the announcement that the United States and China agreed to slash tariffs for 90 days to allow trade talks to continue.

“The spring home buying season has gotten off to a slow start as persistent elevated interest rates, policy uncertainty, and building material costs factors hurt builder sentiment in May, says NAHB chairman Buddy Hughes. “Builders expect future trade negotiations and progress on tax policy will help stabilize the economic outlook and strengthen housing demand.”

Adobe Stock / Romolo Tavani

NAHB chief economist Robert Dietz says policy uncertainty stemming from the “stop-and-start tariff issues” is hurting builder confidence, with 78% of builders reporting difficulty pricing their homes due to uncertainty around material prices.

The results of the HMI mirror results from the April BTIG/HomeSphere Home Builder survey, in which the tariff and economic concerns impacted sales and traffic at the small and mid-sized builders polled. According to the BTIG survey, 25% of respondents reported higher negative year-over-year sales and 34% reported lower traffic year-over-year, both increases compared to the March survey.

The BTIG survey found 33% of builders said tariffs had a modest negative impact on demand and 51% projected a modest negative impact on costs to build. However, 32% of builders anticipate tariffs will have no impact on demand.

“At this point, some of the fears about immigration and tariff policy and their negative impacts on the industry are starting to feel a little overblown. That’s a positive,” Carl Reichardt, managing director of research and home building analyst for BTIG, tells BUILDER. “The cost structures, particularly related to tariffs and immigration, are starting to feel a little better than [Wall Street] worried about.”

The NAHB HMI survey revealed 34% of builders cut prices in May, the highest level since December 2023. The use of sales incentives was 61% in May, according to the HMI. Each of the HMI’s three composition indices—measuring current sales, sales expectations for the next six months, and traffic of prospective buyers—posted losses in May.

The BTIG survey indicated 31% of builders reported year-over-year increases in sales orders in April while 25% experienced year-over-year declines in orders. Twenty-nine percent of builders saw worse sales than expected in April, up nine percentage points from March; 33% of respondents saw sales perform better than expected in the month. A third of respondents to the BTIG survey reported raising either “most/all” or “some” incentives in April.

“There is some evidence that we are seeing [high rates and high costs] morph into a psychological problem for the consumer,” Reichardt says. “That’s not good for demand. Watching that unfold is something we are paying close attention to.”

At the same time traffic, sales, and sentiment are trending negatively, single-family housing starts also declined.

Overall housing starts—including single-family and multifamily—increased 1.6% in April to a seasonally adjusted annual rate of 1.36 million units, according to the U.S. Department of Housing and Urban Development and U.S. Census Bureau. Within this estimate, single-family starts decreased 2.1% to a seasonally adjusted annual rate of 927,000. On a year-over-year basis, single-family starts are down 12% compared to April 2024.

“The decline in single-family housing starts in April mirrors builder sentiment, as elevated interest rates, uncertainty on the tariff front, and rising construction costs are exacerbating housing affordability challenges,” Hughes of the NAHB says. “In turn, this is making it more difficult for builders to deliver entry-level housing at a price point that is accessible to home buyers.”