Builder confidence in the market for newly built single-family homes was up slightly this month, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The April HMI registered as 40, up one point from March; any number over 50 indicates that more builders view conditions as good than poor.
NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, North Carolina, warned the slight uptick should not be viewed as a sign of overwhelming satisfaction with market conditions.
“The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity,” Hughes said. “At the same time, builders have expressed growing uncertainty over market conditions as tariffs have increased price volatility for building materials at a time when the industry continues to grapple with labor shortages and a lack of buildable lots.”
The HMI index gauging current sales conditions rose two points in April to a level of 45 while the gauge charting traffic of prospective buyers inched up by one point to 25 and the component measuring sales expectations in the next six months dropped four points to 43.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell seven points in April to 47, the Midwest dipped by one point lower to 41, the South dropped three points to 39 and the West tumbled by two points decline to 35.
The latest HMI survey also revealed that 29% of builders cut home prices in April, unchanged from March. Meanwhile, the average price reduction was 5% in April, the same rate as the previous month. The use of sales incentives was 61% in April, up from 59% in March.
Looking ahead, 60% of builders reported their suppliers have already increased or announced increases of material prices due to tariffs. On average, suppliers have increased their prices by 6.3% in response to announced, enacted, or expected tariffs. This means builders estimate a typical cost effect from recent tariff actions at $10,900 per home.
“Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” said NAHB Chief Economist Robert Dietz. “The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariffs.”
