June 17, 2025

Homebuilder confidence dropped 2 points in June to 32 after having fallen 6 points in May.  This series has been falling steadily since January.  Builders are worried about the imposition of tariffs, still high mortgage rates, and the cost of materials.  Keep in mind that the breakeven point for this series is 50 so at 32 it is clear that builders are being very cautious.

NAHB Chairman Buddy Hughes, a home builder and developer from Lexington N.C.  said, “Buyers are increasingly moving to the sidelines due to elevated mortgage rates and tariff and economic uncertainty.  To help address affordability concerns and bring hesitant buyers off the fence, a growing number of builders are moving to cut prices.”  The average price reduction was 5% in June, and the use of sales incentives was 62%.

Chief Economist Robert Dietz said, “Rising inventory levels and prospective home buyers who are on hold waiting for affordability conditions to improve are resulting in weakening price growth in most markets and generating price declines for resales in a growing number of markets.  Given current market conditions, NAHB is forecasting a decline in single-family starts for 2025.”

Traffic through the model homes declined 2 points in June to 21 after falling 2 points in May.  Traffic through model homes remains low as still high mortgage rates are reducing the number of interested buyers and some buyers may be re-thinking their purchase intentions given the economic uncertainty that exists today with respect to tariffs in particular and their potential impact on inflation.

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The homebuilders expectations index fell 2 points in June to 40 after declining1 point in May.  The declines in recent months reflect builders concerns about both their cost of materials given the tariffs and the willingness of their potential buyers to buy given the uncertainty that exists today.

Mortgage rates seem steady at the 6.8% mark.   We expect mortgage rates to be relatively unchanged at 6.8% by the end of the year.

An acute shortage of homes available for sale has caused prices to climb slowly in recent months.  Anemic demand should push prices lower as the year progresses. But the shortfall of homes available for sale will prevent prices from falling very much.  We expect little change in prices for the remaining 6 months of this year.

If home prices and mortgage rates are relatively steady and the economy continues to crank out jobs, wages will rise and housing affordability should increase somewhat by the end of this year.

Following a 0.2% decline in the first quarter we expect GDP growth to be 3.9% in the second quarter and 2.2% in 2025.

Stephen Slifer

NumberNomics

Charleston, SC