U.S. homebuilder sentiment climbs to 8-month high in December

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U.S. homebuilder sentiment edged up to an eight-month high in December, but activity remained constrained by rising construction costs because of tariffs on imports.

The National Association of Home Builders/Wells Fargo Housing Market index climbed one point to 39 this month, the highest reading since April. It, however, stayed below the 50 break-even point for the 20th consecutive month, with the NAHB also citing economic uncertainty and potential buyers sidelined by affordability concerns as drags. The rise in the index was in line with economists’ expectations.

“Market conditions remain challenging, with two-thirds of builders reporting they are offering incentives to move buyers off the fence,” said NAHB chairman Buddy Hughes. “Meanwhile, builders are contending with rising material and labor prices, as tariffs are having serious repercussions on construction costs.”

President Donald Trump has imposed tariffs on a range of products including imported timber and lumber as well as kitchen cabinets and bathroom vanities. Trump’s immigration crackdown had also undercut labor supply. Though mortgage rates have declined considerably from their lofty levels at the start of the year, that has been offset by a lackluster labor market.

The resulting weak demand has left builders saddled with rising inventory of unsold homes, reducing the incentive to break ground on new housing projects. About 40% of builders reported cutting prices in December, the second straight month the share was at 40% or higher since May 2020, the NAHB said.

The share was 41% in November. The average price reduction was 5%, down from 6% in November.

The share using incentives jumped to 67%, the highest percentage in the post-pandemic period, after holding steady at 65% since September.

The survey’s measure of current sales conditions ticked up to 42 from 41 in November, while its gauge of future sales climbed to 52 from 51 in the prior month. A measure of prospective buyer traffic was unchanged at 26.