Builder confidence wanes as material costs rise
NAHB’s April survey found that higher construction material costs — stemming from surging fuel prices — and the slow housing market are weighing on builders.
Rising material costs and economic uncertainty are leaving home builders very pessimistic heading into the peak construction season.
Builder confidence fell four points to 34 in April, according to the National Association of Home Builders. That's the lowest since September, and the index has remained under the 50 midpoint for two years amid ongoing concerns around tariffs and elevated interest rates.
Material costs a key factor: Nearly two-thirds (62%) of the survey respondents said building material costs have risen because of higher fuel prices stemming from the war with Iran. Another 70% of builders reported challenges pricing homes given the uncertainty around costs.
The most recent price index report for new residential construction showed a 1.2% increase from February and a year-over-year increase of 3.8%. Building materials were up 0.4% between February and March and up 3.1% year-over-year.
Builders could get a small reprieve later this year if the U.S. Department of Commerce decides to reduce duties on Canadian softwood lumber. In an April 14 notice, the Commerce Department indicated that it may lower tariffs from the current rate of 35.16% to 24.83%. A final decision is expected to be made in the next 120 days.
Slow housing market weighing on builders: The subdued spring homebuying market has also had an impact on confidence, with both new home sales and existing home sales down significantly.
"The year started with hopes for housing momentum growth, but risks with respect to the Iran war, energy costs, and declines for consumer confidence have slowed the market," said NAHB Chairman Bill Owens.
Buyer traffic down: The NAHB index is derived from three components: current single-family home sales, sales expectations for the next six months and prospective buyer traffic. The April survey found that the buyer traffic index was especially poor, coming in at 22 — the lowest since September. The last time it was above the midpoint was May 2022.
Confidence lowest in the West: Regionally, builders in the Northeast were the most confident in April with an overall index score of 42. The Midwest was at 41, the South at 35 and the West at 29. With all four regions scoring below 50, the findings suggest that builders across the country view conditions as more "poor" than "good."