It’s official. Building confidence has dived to levels seen at the very start of the pandemic, with higher mortgage rates coupled with consumer uncertainty crunching the US housing market. That is according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which reports confidence in the single-family market has dropped from 34 points to 32 points from May to June (far below the 50-point neutral position), which, in turn, is forcing a record number of builders to cut prices.
“Buyers are increasingly moving to the sidelines due to elevated mortgage rates and tariff and economic uncertainty,” said Buddy Hughes, NAHB chairman and a homebuilder from Lexington, North Carolina. “To help address affordability concerns and bring hesitant buyers off the fence, a growing number of builders are moving to cut prices.”
Wood Central understands that the index has only seen a lower reading twice since 2012 – in December 2022, after mortgage rates shot up in direct response to the historic low pandemic rates, and in April 2020, at the start of the pandemic. Of the index’s three components, current sales conditions fell 2 points to 35, sales expectations in the next six months dropped 2 points to 40, and buyer traffic fell 2 points to 21, the lowest reading since the end of 2023.
According to the report, 37% of builders said they had cut prices, the highest share since NAHB started tracking the metric three years ago. That is up from 34% who cut prices in May and 29% in April. The average price reduction was 5%, which has been steady since last year.
“Rising inventory levels and prospective home buyers who are on hold waiting for affordability conditions to improve are weakening price growth in most markets and generating price declines for resales in a growing number of markets,” according to Robert Dietz, chief economist at the NAHB. “Given current market conditions, NAHB is forecasting a decline in single-family starts for 2025.”
Why a slowing housing market is weighing heavily on construction activity
Earlier this month, Wood Central reported that the spiralling costs of building a new home and uncertainty around on-again and off-again tariffs were dragging down the country’s building industry. This comes as data produced by the US Census Bureau reveals that spending on single-family homes and multifamily homes was down 1.1% (to $429 billion) and 0.1% (to $116 billion) in April—with private residential construction falling to $893 billion, 0.9% down on March and 5% lower than in April 2024.
Already, the housing supply is at a five-year high, with single-family homeowners struggling to move stock. “Housing demand is sluggish because the cost of buying a home is climbing, and economic uncertainty is making many Americans press pause on big purchases,” according to Redfin. “A lot of people are selling their homes and downsizing because they’re worried about the economy,” said Meme Loggins, a Redfin real estate agent in Portland. “During the pandemic, everybody wanted more space for a home office or their kids to run around, but now people are more focused on saving money. A lot of folks are getting rid of their investment properties, and I’m working with a couple of federal employees who are afraid of losing their jobs, so they’re selling their homes and thinking of moving into condos.”
- To find out why Donald Trump’s on again and off again tariffs on lumber are having a major impact on confidence in the US housing market, click here for Wood Central’s special feature.
