Confidence among U.S. homebuilders took a significant hit in May 2025 as ongoing economic headwinds — including high interest rates, trade policy uncertainty, and volatile material costs — continue to dampen sentiment across the residential construction industry.
According to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today, builder sentiment for newly constructed single-family homes fell six points to a reading of 34. This marks the lowest level since December 2022 and ties the November 2023 figure, highlighting renewed pressure on an already fragile housing market.
NAHB officials attributed the steep drop in part to policy and market volatility, noting that 90% of builder survey responses were collected before a potentially market-shifting May 12 announcement. That day, the U.S. and China agreed to suspend certain tariffs for 90 days to allow ongoing trade talks to progress.
“The spring homebuying season has been off to a sluggish start,” said NAHB Chairman Buddy Hughes. “Persistent interest rate pressures, along with uncertainties in trade and tax policy, have clearly weighed on builder outlooks. That said, builders are hopeful that tariff reductions and future policy clarity will help stabilize market conditions and rekindle demand.”
NAHB Chief Economist Robert Dietz noted that 78% of builders reported difficulties in pricing homes this month due to unpredictable material costs–driven in part by stop-and-start tariff decisions. “The initial trade arrangements with China and the U.K. are a welcome step, but broader uncertainty around trade continues to negatively impact pricing and planning for many builders,” he said.
The HMI’s three key components all recorded declines in May. The index measuring current sales conditions dropped eight points to 37, the gauge of sales expectations over the next six months slipped one point to 42, and the index tracking prospective buyer traffic fell two points to 23.
The monthly survey, which has been tracking builder sentiment for over 35 years, considers a score above 50 to reflect more positive than negative sentiment. May’s reading of 34 suggests broad pessimism within the sector.
Price-cutting activity also increased in May, with 34% of builders reporting price reductions–up from 29% in April and the highest since December 2023. The average price cut remained at 5% for the second consecutive month. Sales incentives remained common, used by 61% of builders–unchanged from the prior month.
Regionally, builder sentiment declined across all major markets. The Northeast dropped three points to 44, the Midwest fell one point to 40, the South declined two points to 37, and the West slid two points to 33 based on three-month moving averages.
As the housing industry contends with a challenging mix of economic and policy pressures, industry leaders are closely watching whether recent diplomatic and fiscal developments will be enough to reverse the downward trend in builder confidence heading into the summer months.
