Home Builder Confidence Tepid in April

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 held near a depressed level in April.

Home builder confidence inches up

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 April, builder confidence rose to a score of 40, up from 39 in March and 51 year-over-year.

“Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” said Robert Dietz, chief economist at NAHB. “The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariffs.”

The table below shows the HMI scores from the last 12 months:

The three index components experienced mixed results month-over-month. Current sales increased to 45 from 43, sales in the next six months dropped to 43 from 47, and prospective home buyer traffic rose to 25 from 24.

Broken down regionally, home builders in the Northeast had the most optimism with a three-month moving average score of 47. Next came HMIs of 41 in the Midwest, 39 in the South, and 35 in the West. All four rolling regional scores decreased from March.

“The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity,” said NAHB Chairman and home builder Buddy Hughes. “At the same time, builders have expressed growing uncertainty over market conditions as tariffs have increased price volatility for building materials at a time when the industry continues to grapple with labor shortages and a lack of buildable lots.”

What other indicators of housing inventory say

In March, active home listings increased 28.5% annually, according to Realtor.com.

Among the 50 largest cities in the U.S., San Jose, Calif., saw a 67.9% yearly jump in active listing count, trailed by 67.8% in Las Vegas and 67.3% in Denver. Buffalo, N.Y., experienced the smallest annual gain, falling 2.1%. New York and Milwaukee followed with growths of 3.3% and 7.7%, 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 1.482 million in March. That figure increased 1.6% month-over-month but dipped 0.2% year-over-year. 

Next, housing starts reached a SAAR of 1.324 million, down 11.4% monthly and up 1.9% annually. Lastly, a SAAR 1.549 million houses were completed in March, 2.1% lower than February and 3.9% above March 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.