Increasingly high mortgage rates and persistent economic uncertainty are placing significant pressure on consumers and, in turn, on homebuilders across the country.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) indicated that builder sentiment fell by 2 points in June, reaching a level of 32. A reading below 50 signifies negative sentiment, whereas the index registered at 43 in June 2024.
Expectations were for a modest uptick in sentiment, particularly in light of recent tariff negotiations and the Trump administration’s market adjustments.
This June rating is among the lowest recorded since 2012, surpassed only by two previous instances: December 2022, when mortgage rates surged from the historic lows set during the initial pandemic period, and April 2020, at the onset of the pandemic.
Breaking down the index’s components, current sales conditions saw a decline of 2 points to 35, while sales expectations for the next six months also fell by 2 points to 40. Additionally, buyer traffic dropped 2 points to 21, marking the lowest level since late 2023.
“Consumers are increasingly opting to wait on the sidelines due to high mortgage rates and ongoing tariff and economic uncertainties,” stated Buddy Hughes, NAHB chairman and homebuilder from Lexington, North Carolina. “To tackle the ongoing affordability issues and lure back hesitant buyers, many builders are opting to lower their prices.”
In June, 37% of builders reported price cuts—the highest percentage since the NAHB began tracking this metric three years ago. This figure increased from 34% in May and 29% in April. The average price reduction remained stable at 5% since late last year.
“An increase in inventory and potential home buyers holding off for better affordability conditions are leading to stalled price growth in many markets and price declines for resales in an increasing number of regions,” explained Robert Dietz, chief economist at the NAHB. “In light of current conditions, NAHB projects a reduction in single-family home starts for 2025.”
The sentiment report comes after quarterly earnings results from Lennar, one of the largest homebuilders in the U.S., revealing an almost 9% drop in average home prices during the second quarter compared to the same quarter in 2024. Their guidance for new orders and deliveries also fell short of analyst expectations.
“With mortgage rates holding steady at elevated levels and consumer confidence continuing to decline, we focused on increasing volume through new starts while offering incentives for sales to improve affordability and assist consumers in purchasing homes,” remarked Lennar co-CEO Stuart Miller in an earnings statement.
Regionally, builder sentiment showed the weakest performance in the South and West, areas that are known for the highest levels of home construction.
