U.S. homebuilder sentiment rose slightly in December, reaching an eight-month high, although construction activity continued to face pressure from higher building costs linked to import tariffs.
The National Association of Home Builders/Wells Fargo Housing Market Index increased by one point to 39, marking its strongest reading since April. Despite the improvement, the index remained below the 50 threshold that signals positive sentiment for the 20th straight month. The NAHB cited ongoing economic uncertainty and affordability challenges that continue to keep many potential buyers on the sidelines. The increase matched economists’ expectations.
“Market conditions remain difficult, with about two-thirds of builders offering incentives to encourage hesitant buyers,” said NAHB Chairman Buddy Hughes. “At the same time, builders are dealing with rising material and labor costs, as tariffs are having a significant impact on construction expenses.”
President Donald Trump has introduced tariffs on a variety of imported products, including lumber, timber, kitchen cabinets, and bathroom vanities. In addition, the administration’s immigration crackdown has weighed on labor availability. While mortgage rates have fallen notably from earlier highs this year, the benefit has been partly offset by a softer labor market.
Weak demand has left builders holding higher inventories of unsold homes, reducing motivation to start new construction projects. According to the NAHB, around 40% of builders reported cutting prices in December. This marked the second consecutive month in which price reductions were reported by 40% or more of builders, a level last seen in May 2020.
That figure stood at 41% in November. The average price cut declined to 5% in December from 6% the previous month.
The share of builders offering sales incentives climbed to 67%, the highest level recorded since the pandemic, after remaining at 65% from September through November.
The survey showed a modest improvement in current sales conditions, with the index rising to 42 from 41 in November. The measure of expected future sales edged up to 52 from 51, while prospective buyer traffic remained unchanged at 26.
