Positive Inventory Developments

The current landscape for prospective homebuyers presents some favorable trends. The availability of new homes has surged, with inventory reaching a total of 500,000—a significant increase of 7.8% compared to last year. Moreover, the median sales price for these homes has been recorded at $414,500, representing a 3.1% decrease since January, while still reflecting a modest rise of 1.5% year over year.

Challenges in the Market

Despite these increases in inventory, the overall availability of homes remains restricted. Many buyers are still deterred by mortgage rates, which, while having dipped recently, pose a continuing hurdle to home purchases.

Current Trends in Home Sales

Overall, new home sales have stabilized early in 2025, significantly influenced by the persistent shortage of existing homes. Buddy Hughes, chairman of the National Association of Home Builders (NAHB), noted, “New home sales have been roughly flat thus far in 2025, as ongoing limited inventory of existing homes in many markets continues to support the need for new homes.”

Additionally, the latest report from the National Association of Realtors (NAR) reveals existing-home sales have reached a seasonally adjusted annual rate of 4.26 million—an increase of 4.2% from January, yet a decline of 1.2% from the previous year.

Impact of Tariffs on Homebuilding

The environment for homebuilders could be precarious, as fluctuations in tariffs have raised concerns. President Donald Trump’s proposed tariffs could directly affect the costs of essential building materials. Currently, a 25% tariff on steel and aluminum is in place, and there are discussions about potentially doubling it to 50%. Moreover, the threat of tariffs on Canadian lumber persists, with suggestions of a “reciprocal” tariff where U.S. tariffs would match Canadian rates.

April 2 marks a critical deadline for homebuilders, as it is when the current one-month pause on tariffs from Mexico and Canada is set to lapse. Should these tariffs resume, it would impose a 25% charge on goods not included under the United States-Mexico-Canada Agreement (USMCA). Furthermore, new global reciprocal tariffs are slated to take effect, potentially disrupting international economic relations.

Builder Confidence and Construction Trends

Amid these uncertainties, builder sentiment has reflected a downturn. According to the NAHB/Wells Fargo Housing Market Index (HMI), builder confidence has decreased by six points in recent months. Reports indicate that builders are preemptively factoring in additional costs ranging from $7,500 to $10,000 for construction projects due to impending tariffs.

“A factor that is worth watching is the pace of new home construction,” said Lisa Sturtevant, chief economist at Bright MLS. “Right now, new home inventory is rising because there are fewer buyers and homes that were started last year are sitting vacant. But some home builders are pulling back on starts and permits for new construction as they assess the potential impacts of tariffs and immigration policies.”