The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shows growing economic uncertainty stemming from concerns over tariffs and elevated costs for building materials. NAHB points to this as the reason that builder sentiment is in negative territory in April. Is it all doom and gloom? Maybe, maybe not.
Builder confidence in the market for newly built single-family homes was at 40 in April, edging up one point from March, but the association also reported a modest bump in confidence likely due to a slight retreat in mortgage interest rates in recent weeks.
“The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity,” said NAHB chairperson Buddy Hughes, a home builder and developer from Lexington, North Carolina. “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.”
When asked about the impact of tariffs on their businesses, 60% of builders reported their suppliers have already increased or announced increases of material prices. 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.”
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 at 61% in April, up from 59% in March.
The HMI index gauging current sales conditions rose two points in April to a level of 45. The gauge charting traffic of prospective buyers increased one point to 25 while the component measuring sales expectations in the next six months fell four points to 43.
Housing Starts Decline Amid Economic Uncertainty
All of this comes on the heels of constrained housing affordability conditions that led to a reduction in housing production in March, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The drop in affordability conditions is attributed to elevated interest rates, rising construction costs and labor shortages, the report indicated, noting that overall housing starts decreased 11.4% in March to a seasonally adjusted annual rate of 1.32 million units.
The March reading of 1.32 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 14.2% to a 940,000 seasonally adjusted annual rate and are down 9.7% compared to March 2024. The multifamily sector, which includes apartment buildings and condos, decreased 3.5% to an annualized 384,000 pace.
“The drop in March housing starts is a clear signal that affordability pressures are intensifying,” said Hughes. “Elevated mortgage rates and rising construction costs are making it increasingly difficult to deliver homes at price points accessible to entry-level buyers. We’re seeing demand soften as more potential homeowners are priced out of the market.”
Remodeling to the Rescue?
While the homebuilding sector is facing uncertainty at best, Harvard University’s Joint Center for Housing Studies (JCHS) reported via the Leading Indicator of Remodeling Activity (LIRA) that annual expenditures for improvements and maintenance to owner-occupied homes are expected to grow modestly through 2026. The most recent LIRA report, released last week by JCHS’s Remodeling Futures Program, projects that year-over-year spending for home renovations and repairs will increase by 2.5%, reaching a record $526 billion by the first quarter of 2026.
“A slight downturn after the pandemic’s record expenditures gave way to modest gains in the sector this year,” says Carlos Martín, director of the Remodeling Futures Program. “Recent increases in the sales of existing homes are expected to drive slow but steady growth in home remodeling and repair.”
LIRA provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. The indicator, measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters, and is intended to help identify future turning points in the business cycle of the home improvement and repair industry.
“So far, high home values and other strong economic indicators have supported an uptick in homeowner improvement spending,” says JCHS director Chris Herbert. “However, economic volatility due to the uncertainty surrounding foreign tariffs and falling consumer confidence could well dampen this expected growth.”