Sentiment among the nation's homebuilders has declined due to persistently high mortgage rates, concerns about tariffs, and economic uncertainty among consumers.

Higher mortgage rates and economic uncertainty continue to impact consumers, which in turn is affecting the sentiment of homebuilders across the country.

In June, builder sentiment dropped by 2 points from May to 32 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Any score below 50 is considered negative, with the index standing at 43 in June 2024.

Analysts were anticipating a slight improvement, considering recent tariff negotiations and adjustments made by the Trump administration.

This index has only seen a lower reading than June's level twice since 2012 – in December 2022, following a surge in mortgage rates after record lows during the early years of the pandemic, and in April 2020 at the onset of the pandemic.

Among the index's three components, current sales conditions decreased by 2 points to 35, sales expectations for the next six months dropped by 2 points to 40, and buyer traffic fell by 2 points to 21, marking the lowest reading on that metric since late 2023.

Buddy Hughes, NAHB chairman and a homebuilder from Lexington, North Carolina, noted, "Buyers are increasingly hesitant due to high mortgage rates, tariff concerns, and economic uncertainties. To address affordability issues and attract hesitant buyers, more builders are opting to reduce prices."

In the June survey, 37% of builders reported price cuts, the highest percentage since NAHB began tracking this metric three years ago. This is an increase from 34% in May and 29% in April, with the average price reduction remaining steady at 5% since late last year.

Robert Dietz, chief economist at the NAHB, mentioned, "Growing inventory levels and potential homebuyers waiting for improved affordability are leading to weakening price growth in most markets and price declines in a number of resale markets. Given the current market conditions, NAHB is projecting a decrease in single-family starts for 2025."

Following quarterly earnings from Lennar, one of the largest homebuilders in the nation, the average home price in the second quarter dropped by nearly 9% compared to the same quarter in 2024. Guidance on new orders and deliveries also fell below analysts' expectations.

Stuart Miller, Lennar co-CEO, stated, "With higher mortgage rates and weakening consumer confidence, we focused on increasing volume through starts and offering sales incentives to enhance affordability and assist consumers in purchasing homes."

Regionally, on a three-month moving average, the South and West exhibited the weakest builder sentiment, which are also the regions where the majority of homes are constructed.