March 17, 2025

This series declined 3 points in March to 39 after having fallen 5 points in February and rising 1 point in January.  This is the  lowest reading for this index since December 2023  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 39 it is clear that builders are still being cautious.

NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas said, “Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages.  At the same time, builders are starting to see relief on the regulatory front to bend the rising cost curve, as demonstrated by the Trump administration’s pause of the 2021 IECC building code requirement and move to implement the regulatory definition of ‘waters of the United States’ under the Clean Water Act consistent with the U.S. Supreme Court’s Sackett decision.”

Chief Economist Robert Dietz said, “Construction firms are facing added cost pressures from tariffs.  Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home. Uncertainty on policy is also having a negative impact on home buyers and development decisions.”

Traffic through the model homes fell 5 points in March to 24 after having declined 3 points in February and having risen 1 point in January.  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 was unchanged in March at 47 after having plunged 13 points in February and having fallen 7 points in January.  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 have recently declined to the 6.6% mark which is lower than it has been in other recent months.   Both potential home buyers and builders expect them to decline as 2025 progresses given the continuing slowdown in inflation and one rate cut likely by the Federal Reserve.

An acute shortage of homes available for sale has caused prices to climb slowly in recent months  Builders lack of enthusiasm is likely to translate into little change in home prices in the months ahead.

If home prices are relatively steady, the economy continues to crank out jobs, wages rise, and mortgage rates gradually decline to the 6.2% mark, housing affordability should increase considerably by the end of this year.

We expect GDP growth to be 1.5% in the first quarter and 2.5% growth in 2025.

Stephen Slifer

NumberNomics

Charleston, SC