Rising construction costs, policy uncertainty, and the looming impact of tariffs took a toll on builder sentiment in March, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Confidence among builders of newly constructed single-family homes dropped three points to 39 — the lowest reading in seven months — as developers navigate an increasingly complex economic landscape.
“Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C. “At the same time, builders are starting to see relief on the regulatory front to bend the rising cost curve, as demonstrated by the Trump administration's pause of the 2021 IECC building code requirement and move to implement the regulatory definition of ‘waters of the United States’ under the Clean Water Act consistent with the U.S. Supreme Court’s Sackett decision.”
The pressure is mounting not only on builders but on potential buyers as well. According to NAHB Chief Economist Robert Dietz, tariffs are adding significant costs to home construction — roughly $9,200 per home, based on data from the March HMI survey.
“Construction firms are facing added cost pressures from tariffs,” Dietz said. “Uncertainty on policy is also having a negative impact on home buyers and development decisions.”
The survey also found that more builders are responding by cutting prices — 29% in March, up from 26% in February — though the average price cut held steady at 5%. The use of sales incentives remained unchanged from the previous month at 59%.
The NAHB/Wells Fargo HMI measures builder perceptions of current home sales, future expectations, and prospective buyer traffic. A score above 50 indicates that more builders view conditions as good than poor.
In March, the index component tracking current sales conditions fell to 43, its lowest since December 2023. The measure of prospective buyer traffic dropped five points to 24, while sales expectations for the next six months held steady at 47.
Regionally, builder sentiment weakened across the board. The Northeast dropped three points to 54, the Midwest and South both fell to 42 (each down three and four points, respectively), and the West declined two points to 37.
As builders eye potential regulatory relief, they remain cautious amid a landscape defined by cost volatility and policy headwinds. Whether that caution shifts in the coming months may depend on how those uncertainties unfold.
