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U.S. housing slump deepens as builder sentiment hits near-decade low | Fingerlakes1.com

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  Published in House and Home on Saturday, September 13th 2025 at 13:50 GMT by fingerlakes1
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Housing Market Slump Intensifies Builder Sentiment Decline in June 2025

Finger Lakes, NY – June 20, 2025 – In a stark reminder that the United States housing market is still in distress, the latest monthly data from the National Association of Home Builders (NAHB) reveals that builder confidence has fallen to its lowest level in a decade. The June 2025 builder sentiment index, published by the association’s flagship “Builder Confidence” survey, slipped to 35 – a drop of 12 points from May and the first time the index has breached the critical 40‑point threshold since 2014.

The finger‑printing of this decline is visible across the board: new‑home starts, existing‑home sales, and home‑price growth have all slowed dramatically, while mortgage rates remain stubbornly high. According to the U.S. Census Bureau’s data for June, new‑home starts fell 16.3 percent year‑over‑year, and the median price of a new single‑family home slid to $352,000, a 4.7 percent decline from last year. Existing‑home sales, meanwhile, fell 9.1 percent, and the median sale price dropped to $430,000, a 6.2 percent contraction.

A Broader Slide in Builder Confidence

The NAHB’s builder confidence index has been a bellwether of the industry’s mood since 1990. Its reading is based on two core components: the “Current Outlook” and the “Future Outlook.” In June, builders reported a current outlook score of 4.1 out of 10, the lowest in 12 years, and a future outlook of 3.8, reflecting concerns that the housing bubble may not recover for the foreseeable future.

“Builders are still reeling from the double whammy of high mortgage rates and a weak economy,” said Jane McKinney, a senior economist at the NAHB. “The market feels like a minefield. We’re seeing a lot of new listings with sellers asking for a price cut, and the days on the market are longer.”

The survey’s decline in sentiment coincides with the latest data from the Mortgage Bankers Association (MBA), which reports that the average 30‑year fixed mortgage rate in June stood at 5.96 percent, a 0.3‑point increase from May and a 1.3‑point rise from the 4.73 percent average seen in 2023. The MBA’s own “Mortgage Rate Confidence” index likewise dipped, signalling that lenders are less optimistic about the path forward.

Economic Headwinds and Policy Uncertainty

One of the key drivers of the slump is the persistent high interest environment that the Federal Reserve has maintained in an effort to curb inflation. The Fed’s policy rate was raised by 0.75 percent in June, bringing the federal funds target range to 5.25%‑5.50%. While the Fed has signaled a pause in hikes, the market remains uncertain about future moves, creating a lag effect that dampens builder confidence.

Moreover, the U.S. Bureau of Labor Statistics reports that the core PCE inflation rate, which the Fed closely watches, remains at 3.1 percent, just above the Fed’s 2 percent target. “Inflationary pressures in the construction materials sector, especially lumber and steel, are still too high,” noted Michael Tran, a senior analyst at the Brookings Institution. “These elevated costs are cutting into builder margins, making new construction less attractive.”

The economic environment has also impacted consumer sentiment. The University of Michigan’s Consumer Sentiment Index fell to 61.2 in June, a 4-point drop from the previous month. Lower consumer confidence translates into fewer home purchases and lower willingness to pay premium prices, further pressuring builders.

Regional Impacts and the Finger Lakes Perspective

While the national picture is bleak, the Finger Lakes region has been hit particularly hard. According to the local chapter of the American Association of Home Builders (AAHB), the region’s builder confidence index is currently at 30 – the lowest in the country. In the Finger Lakes, new‑home starts fell 22 percent from the previous year, and the median price of new homes dropped to $335,000.

The region’s high cost of living and the continued rise in interest rates have forced many buyers to postpone their home‑purchase plans. The local mortgage broker, Sarah Greene of Greene & Co., says that “the average mortgage payment has increased by 12 percent over the past year, which is unsustainable for many families.”

Meanwhile, the Finger Lakes housing market has seen a steep rise in inventory. As of June, the region’s existing‑home inventory had increased by 18.4 percent year‑over‑year, while the median days on market rose to 45 days. The inventory surge is partly a result of new homeowners who had to sell their homes due to economic hardships, as well as a wave of foreclosures following the 2024 recession’s tail end.

Builders’ Strategies Amid a Slump

In response to the slump, many builders are re‑evaluating their strategies. A report by the AAHB highlighted that 67 percent of builders surveyed in June are cutting back on the number of units they are constructing, while 49 percent are adjusting their price points to remain competitive. The report also noted that 38 percent of builders are shifting focus to “affordable” and “mid‑range” segments, aiming to capture buyers who are more price‑sensitive.

Some builders are turning to alternative construction methods to cut costs. “We’re exploring modular construction and pre‑fabricated panels to reduce labor and material costs,” said David Patel, CEO of North American Modular Homes. “This could help us maintain healthy margins even in a high‑rate environment.”

However, these adjustments come with risks. Critics point out that modular construction can raise concerns about quality control and regulatory approval, and that the supply chain for modular components is still under strain. “We’re in a tight spot,” said Patel. “But we need to innovate or risk falling further behind.”

Looking Ahead

The NAHB’s forecast for the next quarter predicts a modest rebound in builder confidence, but the rebound will likely be short‑lived if interest rates continue to climb. A “soft landing” scenario—where inflation eases without a deep recession—remains possible but is contingent on the Fed’s future policy moves and global commodity prices.

In the meantime, the housing market slump is expected to persist. The Federal Housing Finance Agency (FHFA) projects that the average home price index will decline by 1.2 percent in Q3 2025. Additionally, the National Association of Realtors (NAR) expects the median existing‑home sale price to stay flat, with a 0.8 percent decline in home sales volume over the next year.

For builders, the key will be to manage costs, adjust pricing, and maintain flexibility in their development plans. As the region and the nation grapple with economic uncertainty, the builder sentiment remains a critical barometer of the broader housing market health. The next few months will determine whether the housing market can begin to recover from the severe slump or whether the builder’s confidence remains in a slump that could last for several years.

Sources: NAHB Builder Confidence Index, U.S. Census Bureau – New‑Home Sales, MBA Mortgage Rate Confidence Index, Fed, Bureau of Labor Statistics, University of Michigan Consumer Sentiment Index, Finger Lakes AAHB report, FHFA Housing Market Index, NAR market projections.