Builder confidence fell for a second straight month in June as elevated rates, tariffs, and economic uncertainty dragged builder sentiment to its lowest level in 2.5 years. The National Association of Home Builders (NAHB) Housing Market Index (HMI) dropped to 32 this month, down 2 points from May. This marks the third lowest level for the index since 2012 with December 2022 (31) and April 2020 (30) being the only lower readings since then. The latest reading was below the forecast of 36.
The National Association of Home Builders Housing Market Index is a gauge of builder opinion on the relative level of current and future single-family home sales. The data is collected from a monthly survey of about 900 home builders asking respondents to, "rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes." It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook.
Here are a few quotes from the press release:
“Buyers are increasingly moving to the sidelines due to elevated mortgage rates and tariff and economic uncertainty,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C. “To help address affordability concerns and bring hesitant buyers off the fence, a growing number of builders are moving to cut prices.”
“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,” said NAHB Chief Economist Robert Dietz. “Given current market conditions, NAHB is forecasting a decline in single-family starts for 2025.”
Here is the historical series, which dates from 1985.
Components of the the NAHB Housing Market Index
The NAHB Housing Market Index is calculated based off of three components: current sales, expected sales in the next 6 months, and traffic of prospective buyers.
Housing Market Index: Regional Breakdown
The chart below gives a regional breakdown of the NAHB HMI in four regions of the country: Northeast, Midwest, South, and West.
