Home Builder Confidence Tumbles in March

Home builders lose optimism

The supply of for-sale housing, and lack thereof, is perhaps the biggest detriment to home buyers today.

Due to its cascading effect, the inventory scarcity drives up competition and then, prices. But could help be on the way?

For-sale properties are on the rise, but a leading indicator of housing inventory hit a seven-month low.

Home builder confidence dwindles

Home builder sentiment ebbs and flows based on consumer demand, market conditions, shifting costs and supply chain status.

Every month, the National Association of Home Builders (NAHB) and Wells Fargo survey NAHB members to measure this sentiment on a 0-100 scale in their Housing Market Index (HMI) report. The survey comprises three components for single-family housing: current home sales, home sales over the next six months, and traffic of prospective buyers.

In March, builder confidence fell to a score of 42, down from 42 in February and 51 in March 2024. The index reached its lowest point since August 2024. The table below shows the HMI scores from the last 12 months:

“Construction firms are facing added cost pressures from tariffs,” said Robert Dietz, chief economist at NAHB. “Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home. Uncertainty on policy is also having a negative impact on home buyers and development decisions.”

The three index components experienced mixed results month-over-month. Current sales decreased to 43 from 46, sales in the next six months held at 47, and prospective home buyer traffic dropped to 24 from 29.

Broken down regionally, home builders in the Northeast had the most optimism with a three-month moving average score of 54. Next came HMIs of 42 in the Midwest and South, and 37 in the West. All four regional scores decreased from February.

What other indicators of housing inventory say

In February, active home listings increased 27.5% annually, according to Realtor.com.

Among the 50 largest cities in the U.S., Denver saw a 64.4% yearly jump in active listing count, trailed by 61.3% in San Diego and 60.8% in Las Vegas. New York experienced the smallest annual gain, inching up 1%. Hartford, Conn., and Milwaukee followed with growths of 4.4% and 6.2%, respectively.

For a look ahead, the Census Bureau and Department of Housing and Urban Development put out a joint Monthly New Residential Construction Report, with three leading indicators of housing inventory.

First, building permits hit a seasonally adjusted annual rate (SAAR) of 1.483 million in January. That figure increased 0.1% month-over-month but dipped 1.7% year-over-year.

Next, housing starts reached a SAAR of 1.366 million, down 9.8% monthly and 0.7% annually. Lastly, a SAAR 1.651 million houses were completed in January, 7.6% higher than December and 9.8% above January 2024.

The bottom line for home buyers

Between low affordability and not enough listings, home buying has been challenging for prospective borrowers.

If you’re a house hunter, it’ll be helpful to grab every advantage you can. Always be prepared so you can move fast, negotiate your mortgage rate, and see if you qualify for down payment and/or closing cost assistance.

If you’re ready to take the next step to homeownership, reach out to a local mortgage professional.