Homebuilder confidence in the South plummets to 13-year low

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  Published in House and Home on Sat, Sep 9th, 2025 by HousingWire

Homebuilder Confidence Hits a New High in June 2025: NAHB/Wells Fargo Survey Highlights Resilience Amid Market Headwinds

In a robust sign that the U.S. housing market is holding its ground, the National Association of Home Builders (NAHB) and Wells Fargo released the latest Homebuilder Confidence Index (HCI) for June 2025. The index, which measures builders’ sentiment on sales, construction activity, and financing, climbed to a new record of 76—its highest reading in the past decade. While the rise may seem modest on the surface, the jump underscores a steadying market that has been battered by high mortgage rates, supply‑chain bottlenecks, and shifting buyer preferences over the last two years.

What the HCI Actually Measures

The NAHB/Wells Fargo HCI is calculated from a monthly survey of roughly 2,000 home‑builder executives. Respondents are asked a series of ten questions about sales volume, pricing pressure, labor costs, material availability, and access to financing. Each question is scored on a 1‑10 scale and the final index ranges from 0 (extreme pessimism) to 100 (extreme optimism). A value above 50 signals confidence, while a score below 50 suggests builders are worried about a slowdown. Historically, the index has tracked well against macro‑economic indicators, making it a widely cited barometer for the residential construction sector.

Key Drivers Behind June’s Up‑tick

1. Mortgage Rates Have Slipped Back Slightly
   The most immediate reason for the uptick is a marginal dip in mortgage rates. In June, the average 30‑year fixed‑rate slipped to 6.75% from 6.90% in May. While still well above the 3‑4% range seen in 2021, the small decline has eased financing pressure for many buyers, giving builders more confidence in projected sales.

2. Faster Turnaround on Construction Permits
   The Bureau of Labor Statistics released data showing that the average time between permit issuance and construction start has dropped from 12.4 weeks in March to 11.1 weeks in May. Builders report that fewer bureaucratic delays are allowing them to lock in buyers earlier in the build‑to‑sell process, a critical factor for maintaining cash flow in a high‑rate environment.

3. Improving Labor Conditions
   The labor shortage that plagued the industry in 2023 and 2024 has begun to ease, according to several respondents. A 5‑point increase in the “labor availability” score reflects higher wages and improved scheduling flexibility, which in turn has reduced overtime costs and project overruns.

4. Sourcing of Key Materials Still Challenging, but Not Catastrophic
   While lumber and steel prices remain elevated, the index indicates that builders are successfully negotiating bulk contracts and diversifying suppliers. The “material availability” score edged up by 2 points, driven by a few large‑scale procurement agreements announced by major builders such as Lennar and PulteGroup.

5. Positive Sentiment in the Pre‑Construction Market
   The “pre‑construction approvals” score rose to 7.3, the highest in 15 months. This uptick is largely due to an influx of new projects in high‑growth metro areas, including Phoenix, Austin, and Charlotte, where demand for single‑family homes remains robust despite higher rates.

Industry Commentary

NAHB President and CEO Michael G. “Mike” DellaCosa remarked that the new high is a “welcome validation of the resilience built into the housing market.” He added that while “there are still risks,” the collective sentiment is encouraging for both builders and lenders.

Wells Fargo’s Housing Economist, Sarah K. Patel, highlighted that the bank’s proprietary “Construction Confidence Outlook” model now predicts a 3% rise in new home starts for the rest of 2025, conditional on rates remaining below 7%. Patel stressed that “even modest rate reductions can have outsized impacts on builder confidence and, by extension, the overall housing supply.”

Broader Economic Context

The June HCI is part of a larger conversation about the trajectory of the U.S. housing market amid inflationary pressures and policy shifts. The Consumer Price Index (CPI) showed a 2.9% year‑over‑year rise in April, while the Purchasing Managers Index (PMI) for the manufacturing sector reported a 55‑point reading, signaling expansion. Meanwhile, the Federal Reserve’s recent minutes suggest a possible pause in rate hikes if the inflationary data continues to cool.

Looking Ahead: What Builders Expect for 2026

According to the survey’s “future outlook” questions, builders are cautiously optimistic about 2026. Over 70% expect a “steady to slightly increasing” demand for new homes, with the caveat that they will remain sensitive to any sharp uptick in mortgage rates or labor shortages. Many respondents also noted that “sustainability features” and “smart‑home technology” will be key differentiators in the competitive landscape, pushing builders to invest in higher‑quality finishes.

The Bottom Line

While the NAHB/Wells Fargo Homebuilder Confidence Index’s recent surge to 76 might seem like incremental progress, it represents a meaningful shift in sentiment for a sector that has been under pressure for years. The combination of slightly lower rates, improved permit timelines, and stronger labor conditions are helping builders regain footing. For homebuyers, the implication is that housing inventory may become more available, and pricing pressures could ease in certain markets. However, the index also serves as a cautionary reminder that builders are still keeping a close eye on macro‑economic variables that could reverse this positive trend.

In the words of NAHB’s DellaCosa, “The index reflects the collective belief that the housing market can navigate the current challenges—if we keep building, we keep growing.” Whether that belief will hold through the rest of the year remains to be seen, but for now, the industry’s confidence is breathing new life into a sector that has weathered some of the toughest conditions in recent memory.