Homebuilder Confidence Shows Modest Gain Despite Construction Challenges

A new survey reveals that U.S. homebuilder confidence improved slightly in March, though the industry continues to struggle with high construction costs and worker shortages. The housing market index remains below healthy levels for nearly two years straight.

WASHINGTON – A monthly survey released Monday shows homebuilder confidence experienced a modest boost in March, though concerns about rising construction expenses and labor shortages continue to weigh on the industry.

The National Association of Home Builders/Wells Fargo Housing Market index climbed one point to reach 38 this month, staying beneath the 50 threshold that indicates market health for the 23rd consecutive month.

Reuters-surveyed economists had predicted the index would hold steady at 37. The minor uptick in confidence appears connected to reduced mortgage rates earlier this year following President Donald Trump’s directive for government-sponsored mortgage companies Fannie Mae and Freddie Mac to increase their mortgage-backed securities purchases.

However, mortgage rates have shifted direction recently, climbing as the U.S.-Israeli conflict with Iran pushed oil prices higher and sparked inflation concerns, causing U.S. Treasury yields to rise. Mortgage rates typically follow the movement of the 10-year U.S. Treasury yield.

“Many buyers remain on the fence waiting for lower interest rates and due to economic uncertainty,” said NAHB Chairman Bill Owens. “Builders are facing elevated land, labor and construction costs and nearly two-thirds continue to offer sales incentives in a bid to firm up the market.”

Trump’s extensive tariff policies, implemented through emergency powers legislation, have increased costs for building supplies and appliances, while his immigration enforcement efforts, including workplace raids at construction sites, have reduced available workers. After the U.S. Supreme Court overturned the tariffs, Trump responded by establishing a 10% worldwide tariff, with plans to increase it to 15%.

Last week, the Trump administration initiated two trade investigations examining excess industrial capacity among 16 major trading partners and forced labor practices as part of efforts to restore tariff pressure on international partners.

The percentage of builders reporting price cuts rose slightly to 37% from February’s 36%. Average price reductions stayed at 6%. Sales incentive usage dropped to 64% from 65% the previous month, though this marks the 13th straight month above 60%. Builders are working to reduce surplus new home inventory.

The survey’s current sales conditions measurement increased to 42 from 41, while future sales expectations gained two points to reach 49. Prospective buyer traffic improved by three points to 25.

Trump signed executive orders last week aimed at removing regulatory obstacles to housing construction and easing mortgage-related regulations. Housing affordability has emerged as a significant political concern approaching November’s mid-term elections.

“Down-payment hurdles and uncertainty from the conflict with Iran and the price of oil will be headwinds going forward,” said NAHB Chief Economist Robert Dietz. “The administration’s executive orders issued last week to reduce regulatory burdens associated with home building are a positive step toward increasing attainable housing supply.”