Home builders lose optimism
The supply of for-sale housing, and lack thereof, is perhaps the biggest detriment to home buyers today.
Due to its cascading effect, the inventory scarcity drives up competition and then, prices. But could help be on the way?
For-sale properties are on the rise, but a leading indicator of housing inventory held near depressed levels in June.
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Home builder confidence falls
Home builder sentiment ebbs and flows based on consumer demand, market conditions, shifting costs and supply chain status.
Every month, the National Association of Home Builders (NAHB) and Wells Fargo survey NAHB members to measure this sentiment on a 0-100 scale in their Housing Market Index (HMI) report. The survey comprises three components for single-family housing: current home sales, home sales over the next six months, and traffic of prospective buyers.
In June, builder confidence dropped to a score of 32, down from 34 in May and 43 year-over-year.
“Buyers are increasingly moving to the sidelines due to elevated mortgage rates and tariff and economic uncertainty,” said Buddy Hughes, NAHB Chairman. “To help address affordability concerns and bring hesitant buyers off the fence, a growing number of builders are moving to cut prices.”
The table below shows the HMI scores from the last 12 months:
| Month | Housing Market Index |
| June 2024 | 43 |
| July 2024 | 41 |
| August 2024 | 39 |
| September 2024 | 41 |
| October 2024 | 43 |
| November 2024 | 46 |
| December 2024 | 46 |
| January 2025 | 47 |
| February 2025 | 42 |
| March 2025 | 39 |
| April 2025 | 40 |
| May 2025 | 34 |
| June 2025 | 32 |
The three index components experienced mixed results month-over-month. Current sales decreased to 35 from 37, sales in the next six months dropped to 40 from 42, and prospective home buyer traffic dipped to 21 from 23.
Broken down regionally, home builders in the Northeast had the most optimism with a three-month moving average score of 43. Next came HMIs of 41 in the Midwest, 33 in the South, and 28 in the West. Excluding the Midwest’s 1-point increase, the other three rolling regional scores decreased for the fourth straight month.
“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 Robert Dietz, chief economist at NAHB. “Given current market conditions, NAHB is forecasting a decline in single-family starts for 2025.”
What other indicators of housing inventory say
In May, active home listings increased 31.5% annually, according to Realtor.com.
Among the 50 largest cities in the U.S., Washington, D.C., saw a 75.6% yearly jump in active listing count, trailed by 66.8% in Las Vegas and 66.4% in San Diego. Milwaukee experienced the smallest annual gain of 7.9%. New York City and Buffalo followed with growths of 10.7% and 11%, respectively.
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For a look ahead, the Census Bureau and Department of Housing and Urban Development put out a joint Monthly New Residential Construction Report, with three leading indicators of housing inventory.
First, building permits hit a seasonally adjusted annual rate (SAAR) of 1.412 million in April. That figure decreased 4.7% month-over-month and 3.2% year-over-year.
Next, housing starts reached a SAAR of 1.361 million, up 1.6% monthly but down 1.7% annually. Lastly, a SAAR 1.458 million houses were completed in April, 5.9% lower than March and 12.3% below April 2024.
The bottom line for home buyers
Between low affordability and not enough listings, home buying has been challenging for prospective borrowers.
If you’re a house hunter, it’ll be helpful to grab every advantage you can. Always be prepared so you can move fast, negotiate your mortgage rate, and see if you qualify for down payment and/or closing cost assistance.
If you’re ready to take the next step to homeownership, reach out to a local mortgage professional.
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Written by: Paul Centopani