A difficult period confronts single-family home builders as their confidence in a market plagued by economic uncertainty, the risk of rising tariffs and high costs plunged to its lowest level in seven months.
Builders estimated that the tariffs alone would force up prices by $9,200 for a typical home.
The National Association of Home Builders (NAHB) monthly Housing Market Index (HMI), based on a member survey, revealed a three-point dip in confidence in March to 39 compared to February’s reading. Both were well below the score of 50, which would indicate builders feel confident about the current and near-term outlook for housing.
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“Uncertainty on policy is also having a negative impact on home buyers and development decisions,” commented Robert Dietz, NAHB’s chief economist.
The long-standing concern about the rising costs of building materials has been exacerbated by the tariff threats, along with labor and lot shortages, stated NAHB chairman Buddy Hughes.
According to the trade association, more than 70% of the imports of two essential materials that home builders rely on — softwood lumber and gypsum (used for drywall) — come from Canada and Mexico, respectively. Each is expected to be subjected to a 25% tariff on April 2.
Experts say higher costs are aggravated because many builders have been stockpiling lumber, while Canadian mills have raised their prices.
The HMI index on current sales conditions fell three points to 43 in March, its lowest level since December 2023. The traffic by prospective buyers index fell five points to 24. However, the sales expectations index remained unchanged at 47 points. Regional HMI indexes also fell.
Three in 10 builders cut home prices in March – up from 26% in February. As in February, the average price reduction was 5% and the use of sales incentives was 59% — also unchanged.
An AP analysis of the effects of tariffs and lumber and appliances noted that they will come into effect at a time of year when homebuilders generally see the most sales, which could deter buyers. Builders may be forced to choose between passing costs on to consumers or using fewer materials by building smaller homes.
AP noted that appliance prices are also likely to rise since many components are manufactured in Mexico and China and will be subject to new tariffs.
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