Tariff tensions shake builder confidence during critical spring housing season

The spring housing season is off to a shaky start as tariff concerns rattle builder sentiment.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index rose to 40 in April, a one-point increase from March and modestly above economists' expectations of 38, according to data polled by Bloomberg.

Still, a reading below 50 indicates that more builders view conditions as poor than good.

"Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions," NAHB chief economist Robert Dietz wrote in the press release.

Builders also reported rising costs for building materials due to tariffs. Data from the National Association of Home Builders found that 60% of builders said their suppliers have already hiked prices or are planning to increase them due to trade levies.

On average, suppliers have raised prices by 6.3% in response to current, enacted, or anticipated tariffs, adding an estimated $10,900 to the cost of a new home.

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Homebuilders continue to navigate a complex landscape made more uncertain by unresolved trade policies with Canada, Mexico, and China. That uncertainty has put downward pressure on a gauge of sales expectations in the next six months, which fell four points to 43 in April.

Still, there were some modest gains: The gauge tracking current sales conditions rose two points in April to 45, while the metric tracking prospective buyers' traffic edged up one point to 25.

"The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity,” NAHB chairman Buddy Hughes, a homebuilder and developer from Lexington, N.C., said in the release.

"At the same time, builders have expressed growing uncertainty over market conditions as tariffs have increased price volatility for building materials at a time when the industry continues to grapple with labor shortages and a lack of buildable lots," he added.

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Elevated mortgage rates remain another major hurdle, with some measures showing rates nearing 7%. This persistent volatility is delivering yet another blow to the housing market during the critical spring selling season.

In response, builders are actively offering incentives to help sustain sales. According to the NAHB survey, 29% of builders cut home prices in April, which was unchanged from March, with an average price reduction of 5%. Meanwhile, 61% of builders used sales incentives last month, up slightly from 59% last month