Homebuilder sentiment high despite tariffs and labor costs

The National Association of Homebuilders reported a highly positive outlook among homebuilders in July

Despite escalating tariffs on steel and aluminum, potential trade wars and rising land and labor costs, homebuilders remain hopeful the housing market will open up new opportunities, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index released Tuesday.

Homebuilder sentiment remained unchanged at 68 points in July, according to the monthly survey. The index, which peaked at 74 points in December and rose slightly from 64 points year-over-year, reflects a positive outlook during a period in which a housing shortage has pushed many to build instead of buy.

“Consumer demand for single-family homes is holding strong this summer, buoyed by steady job growth, income gains and low unemployment in many parts of the country,” NAHB Chairman Randy Noel told CNBC on Tuesday.

At 75 points, real estate developers operating in Western states reported high confidence while homebuilders in the Northeast and Midwest had slightly less positive outlook at 57 and 65 points, respectively. With scores over 50 points considered positive, such results indicate that most developers believe rising home prices will prompt buyers to build.

While confidence is high among real estate developers nationwide, several factors contributed to a modest drop in builder sentiment since December, including steep tariffs on foreign steel and aluminum and escalating lumber and labor costs.

“Builders are optimistic about housing market conditions, basing their confidence on continued solid demand for single-family homes,” the report reads. “However, the persistent increases in construction costs make it increasingly challenging to produce homes at competitive price points, especially for the entry-level market where inventory is most needed.”

Email Veronika Bondarenko