US Builder Confidence for Newly Built Single-Family Homes Drops in May

On Thursday, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported that builder sentiment in the market for newly built single-family homes declined six points to a reading of 34 in May. This matches November 2023 and is the lowest reading since December 2022, when the index fell to 31.

Builder confidence dropped sharply in May amid growing uncertainty related to elevated interest rates, tariff concerns, building material costs, and a murky economic outlook, NAHB said. However, 90% of survey responses were collected before the May 12 announcement that the US and China had agreed to a 90-day tariff reduction to allow trade negotiations to continue.

The May HMI survey also showed that 34% of builders cut home prices during the month, up from 29% in April and the highest share since December 2023 (36%). The average price reduction remained steady at 5%, while the use of sales incentives also held constant at 61%.

All three major HMI components declined in May. The index measuring current sales conditions fell eight points to 37; the gauge of sales expectations over the next six months edged down one point to 42; and the measure of prospective buyer traffic dropped two points to 23.

Regionally, the three-month moving average for the Northeast fell three points to 44; the Midwest declined one point to 40; the South dropped two points to 37; and the West decreased two points to 33.