Worries Over Tariffs Mar Builder Confidence

Rising construction costs along with the increased tariffs have marred builder confidence about the affordability of new single-family homes, according to the August data of the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) that was released on Wednesday.

According to the HMI, the confidence of builders in the sale of newly built single-family homes edged down one point to 67. While it decreased compared to July, the index remained unchanged compared to the same period last year, the NAHB data indicated. The HMI index measuring current sales conditions inched one point lower to 73 while the component gauging expectations in the next six months all fell a single point to 72. Meanwhile, the metric charting buyer traffic dropped two points to 49.

Randy Noel, Chairman, NAHB attributed the decrease in builder confidence to growing concerns over affordability that stemmed from “rising construction costs, shortages of skilled labor and a dearth of buildable lots.”

On a more positive note, Noel said, “Builders continue to report strong demand for new housing, fueled by steady job and income growth along with rising household formations.”

Housing demand could also increase on the back of a “solid economic expansion and firm job market,” said Robert Dietz, Chief Economist, NAHB. “Meanwhile, builders continue to monitor how tariffs and the growing threat of a trade war are affecting key building material prices, including lumber. These cost increases, coupled with rising interest rates, are putting upward pressure on home prices and contributing to growing affordability challenges, as indicated by the latest quarterly reading of the NAHB/Wells Fargo Housing Opportunity Index.”

Regionally, while the South and West remained unchanged at 70 and 75, respectively over a three-month period, the Northeast fell three points to 54 and the Midwest posted a three-point decline to 62, the data indicated.

The index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor”  and also asks builders to rate traffic of prospective buyers during the period. The scores for each component are used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Recently, the NAHB reported that home affordability had fallen to a decade low. Read more about this report:

Housing Affordability at Its Lowest in a Decade