Home Builder Confidence Drops in May

May 19, 2025 - 3 min read

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 depressed levels in April.

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Home builder confidence falls

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 May, builder confidence dropped to a score of 34, down from 40 in April and 45 year-over-year.

“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,” said Robert Dietz, chief economist at NAHB. “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.”

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

MonthHousing Market Index
May 202445
June 202443
July 202441
August 202439
September 202441
October 202443
November 202446
December 202446
January 202547
February 202542
March 202539
April 202540
May 202534

The three index components experienced mixed results month-over-month. Current sales decreased to 37 from 45, sales in the next six months dropped to 42 from 43, and prospective home buyer traffic dipped to 23 from 25.

Broken down regionally, home builders in the Northeast had the most optimism with a three-month moving average score of 44. Next came HMIs of 40 in the Midwest, 37 in the South, and 33 in the West. All four rolling regional scores decreased for the third straight month.

“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 NAHB Chairman Buddy Hughes. “However, the overwhelming majority of survey responses came before the tariff reduction announcement with China. Builders expect future trade negotiations and progress on tax policy will help stabilize the economic outlook and strengthen housing demand.”

What other indicators of housing inventory say

In April, active home listings increased 30.6% annually, according to Realtor.com.

Among the 50 largest cities in the U.S., San Diego saw a 70.1% yearly jump in active listing count, trailed by 69.3% in Washington, D.C., and 67.6% in San Jose, Calif. Milwaukee experienced the smallest annual gain of 2.3%. Buffalo and New York City followed with growths of 3.2%.

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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 1.412 million in April. That figure decreased 4.7% month-over-month and 3.2% year-over-year. 

Next, housing starts reached a SAAR of 1.361 million, up 1.6% monthly but down 1.7% annually. Lastly, a SAAR 1.458 million houses were completed in April, 5.9% lower than March and 12.3% below April 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.

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Paul Centopani
Authored By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.
Paul Centopani
Updated By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.
Aleksandra Kadzielawski
Reviewed By: Aleksandra Kadzielawski
The Mortgage Reports Editor
Aleksandra is endlessly curious about the housing market and loves turning what she learns into helpful content. She's a DePaul alum, licensed real estate agent, and NAR member who traded Chicago winters for Phoenix sunshine.