For the second month in a row, builder sentiment has dropped in the face of economic uncertainty, the threat of tariffs and elevated construction costs, according to the National Association of Home Builders (NAHB). The recently released NAHB/Wells Fargo Housing Market Index (HMI) shows builder sentiment was down in March, though the association reports that builders express hope that a better regulatory environment will lead to an improved business climate.
Builder confidence in the market for newly built single-family homes was 39 in March, down three points from February’s rating of 42—which was down five points from January 2025. The March reading is the lowest level in seven months, according to the HMI, released on Monday.
“Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages,” said NAHB chair Buddy Hughes, a home builder and developer from Lexington, N.C. “At the same time, builders are starting to see relief on the regulatory front to bend the rising cost curve, as demonstrated by the Trump administration’s pause of the 2021 IECC building code requirement and move to implement the regulatory definition of ‘waters of the United States’ under the Clean Water Act consistent with the U.S. Supreme Court’s Sackett decision.”
The latest HMI survey also revealed that 29% of builders cut home prices in March, up from 26% in February. Meanwhile, the average price reduction was 5% in March, the same rate as the previous month. The use of sales incentives was 59% in March, unchanged from February.
“Construction firms are facing added cost pressures from tariffs,” said NAHB chief economist Robert Dietz. “Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home. Uncertainty on policy is also having a negative impact on home buyers and development decisions.”
The HMI index gauging current sales conditions fell three points to 43 in March, its lowest point since December 2023. The gauge charting traffic of prospective buyers dropped five points to 24, while the component measuring sales expectations in the next six months held steady at 47.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points in March to 54, the Midwest moved three points lower to 42, the South dropped four points to 42 and the West posted a two-point decline to 37.