US homebuilder sentiment fell unexpectedly in June, reaching one of its lowest points since the pandemic as economic uncertainty, persistent high mortgage rates, and tariff-related concerns continue to weigh on potential buyers.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) dropped two points to 32, down from 34 in May. Readings below 50 indicate negative sentiment. This is the weakest reading since December 2022, and only the third time since 2012 the index has fallen this low.
The drop surprised analysts, who had anticipated a modest improvement due to recent tariff de-escalation efforts by the Trump administration.
All three major components of the HMI showed declines:
Current sales conditions fell 2 points to 35.
Sales expectations over the next six months dropped to 40.
Buyer traffic slipped to 21 — its lowest since late 2023.
“Buyers are increasingly moving to the sidelines due to elevated mortgage rates and tariff and economic uncertainty,” said NAHB Chairman Buddy Hughes, a builder based in North Carolina. “To help address affordability concerns and bring hesitant buyers off the fence, a growing number of builders are moving to cut prices.”
According to the June survey, 37% of builders reported reducing prices, the highest share since NAHB began tracking this data monthly in 2022. That figure is up from 34% in May and 29% in April. The average price cut remained steady at 5%, and 62% of builders said they used some form of incentive to stimulate sales.
NAHB Chief Economist Robert Dietz noted that inventory is building up, while many buyers are waiting for better affordability. As a result, price growth is slowing in many markets, and home resale prices are beginning to decline in some areas. The association is now forecasting a decline in single-family housing starts for 2025.
Regionally, the South and West—areas with the highest homebuilding activity—showed the weakest sentiment. The Northeast posted a small improvement, while the Midwest also recorded a decline.
The sentiment report comes on the heels of disappointing earnings from Lennar, one of the country’s top homebuilders. Lennar reported a nearly 9% year-over-year drop in average home prices for the second quarter and issued softer-than-expected guidance for new orders and deliveries.
Lennar co-CEO Stuart Miller noted in the company’s earnings release that higher mortgage rates and waning consumer confidence forced the company to rely on volume growth and buyer incentives to maintain sales.
Mortgage rates have remained elevated in recent months. The average 30-year fixed mortgage rate stood at 6.84% last week, according to Freddie Mac, remaining within a tight range between 6.60% and 7.04% over the past six months.
With input from CNBC and US News & World Report.
