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Builder confidence took a sizable stumble this month amid concerns of tariffs, interest rates and an uncertain economic outlook. However, the National Association of Home Builders (NAHB) stressed that its Housing Market Index (HMI) data was culled prior to the May 12 announcement that the US and China would reduce tariffs for 90 days to enable continued trade talks.

NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, North Carolina, observed, “The spring home buying season has gotten off to a slow start as persistent elevated interest rates, policy uncertainty and building material cost factors hurt builder sentiment in May. However, the overwhelming majority of survey responses came before the tariff reduction announcement with China. Builders expect future trade negotiations and progress on tax policy will help stabilize the economic outlook and strengthen housing demand.”

Builder confidence in the market for newly built single-family homes was 34 in May, down six points from April. May’s reading ties the November 2023 reading and is the lowest since the index hit 31 in December 2022. Readings over 50 indicates that more builders view conditions as good than poor.

All three of the major HMI indices posted losses in May. The HMI index gauging current sales conditions fell eight points in May to a level of 37, the component measuring sales expectations in the next six months dipped one-point lower to 42 and the gauge charting traffic of prospective buyers dropped two points to 23.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points to 44, the Midwest moved one point lower to 40, the South dropped two points to 37 and the West posted a two-point decline to 33.

The survey also found 34% of builders cut home prices in May, up from 29% in April and the highest level since December 2023’s reading of 36%. Meanwhile, the average price reduction was 5% in May, unchanged from the previous month. The use of sales incentives was 61% in May, the same rate as the previous month.