Builder sentiment began 2025 with a mild upswing, despite concerns over how building material tariffs and costs and a larger government deficit could impact inflation and mortgage rates.
Builder confidence in the market for newly built single-family homes was 47 in January, up one point from December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
The HMI index gauging current sales conditions rose three points to 51 and the gauge charting traffic of prospective buyers posted a two-point gain to 33. The component measuring sales expectations in the next six months dropped by six points to 60 – the decline was attributed to high interest rates.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased five points to 60, the Midwest inched up by one point to 47, the South posted a one-point gain to 46 and the West dipped by one point to 40.
The latest HMI survey also found 30% of builders cut home prices in January, with an average price reduction of 5%. The use of sales incentives was 61% in January.
“Builders are facing continued challenges for housing demand in the near-term, with mortgage rates up from near 6.1% in late September to above 6.9% today,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas. “Land is expensive and financing for private builders remains costly. However, there is hope that policymakers are taking the impact of regulatory hurdles seriously and will make improvements in 2025.”
“NAHB is forecasting a slight gain for single-family housing starts in 2025, as the market faces offsetting upside and downside risks from an improving regulatory outlook and ongoing elevated interest rates,” added NAHB Chief Economist Robert Dietz. “And while ongoing, but slower easing from the Federal Reserve should help financing for private builders currently squeezed out of some local markets, builders report cancellations are climbing as a direct result of mortgage rates rising back up near 7%.”
