Builder sentiment in the United States saw a decline in June, dropping by 2 points from May to a reading of 32 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This figure remains below the pivotal threshold of 50, indicating a negative outlook. For comparison, the index was at 43 in June 2024.
Analysts had anticipated a modest improvement due to recent tariff negotiations and changes by the Trump administration.
Since 2012, the index has only recorded a lower reading than June’s figure on two occasions: once in December 2022, when rising mortgage rates reversed the lows seen during the pandemic, and again in April 2020, at the onset of the pandemic.
Among the three components of the index, current sales conditions fell 2 points to 35, sales expectations for the next six months decreased by 2 points to 40, and buyer traffic diminished by 2 points to 21, marking the lowest level since late 2023.
Buddy Hughes, NAHB chairman and a homebuilder from Lexington, North Carolina, commented, “Buyers are increasingly moving to the sidelines due to elevated mortgage rates and tariff and economic uncertainty. To help address affordability concerns and bring hesitant buyers off the fence, a growing number of builders are moving to cut prices.”
In the latest survey, 37% of builders indicated that they had reduced prices, which is the highest proportion since NAHB began tracking this metric three years ago. This figure is up from 34% in May and 29% in April, with an average price reduction of 5%, consistent since late last year.
Robert Dietz, the NAHB chief economist, noted, “Rising inventory levels and prospective home buyers who are on hold waiting for affordability conditions to improve are resulting in weakening price growth in most markets and generating price declines for resales in a growing number of markets. Given current market conditions, NAHB is forecasting a decline in single-family starts for 2025.”
This report comes on the heels of quarterly earnings released by Lennar, one of the largest homebuilders in the nation, which revealed that the average home price for the second quarter had decreased nearly 9% compared to the same quarter in 2024. Furthermore, guidance on new orders and deliveries fell short of analysts’ projections.
Lennar co-CEO Stuart Miller stated, “As mortgage interest rates remained higher and consumer confidence continued to weaken, we drove volume with starts while incentivizing sales to enable affordability and help consumers to purchase homes.”
Regionally, analysis of a three-month moving average indicated that builder sentiment was weakest in the South and West, the two regions where the majority of homes are constructed.