Builder confidence dropped sharply in May, falling to 34 on the National Association of Home Builders/Wells Fargo Housing Market Index released on Thursday, May 15. That's down six points from April, matching the low from November 2023 and marking the worst reading since December 2022.
In the Northeast, sentiment slipped three points to 44 on a three-month moving average. A score above 50 means more builders see conditions as good than poor.
NAHB chair and North Carolina developer Buddy Hughes said the ensuing economic chaos from Trump's tariffs has held back construction projects.
"The spring home buying season has gotten off to a slow start as persistent elevated interest rates, policy uncertainty and building material cost factors hurt builder sentiment in May," said Hughes.
The NAHB received about 90% of its responses before the US and China agreed to lower their extremely high retaliatory tariffs for 90 days on Monday, May 12. The US is still imposing a 30% combined tariff on Chinese imports, while China has a 10% duty on US goods.
Builders surveyed before that trade war truce expressed concern about ongoing instability.
"Policy uncertainty stemming in large part from the stop-and-start tariff issues has hurt builder confidence but the initial trade arrangements with the United Kingdom and China are a welcome development," NAHB chief economist Robert Dietz said. "Still, the overall actions on tariffs in recent weeks have had a negative impact on builders, as 78% reported difficulties pricing their homes recently due to uncertainty around material prices."
That pricing pressure is showing up in the housing market.
About 34% of builders cut home prices in May, up from 29% in April and the highest rate since December 2023. Sales incentives also stayed high, with 61% of builders using them to lure buyers.
The index's three major confidence measures declined in May. Current sales conditions fell to 37, sales expectations for the next six months slipped to 42, and buyer traffic dropped to 23.
Along with the Chinese duties, Trump has slapped a 25% tariff on aluminum, cars, light trucks, and steel, as well as Canadian and Mexican goods not covered by the US-Mexico-Canada Agreement.
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