Category Archives: Finance & Economics

The Conference Board Consumer Confidence Index® increased by 12.3 points in May to 98.0 (1985=100), up from 85.7 in April. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—rose 4.8 points to 135.9. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—surged 17.4 points to 72.8, but remained below the threshold of 80, which typically signals a recession ahead. The cutoff date for preliminary results was May 19, 2025. About half of the responses were collected after the May 12 announcement of a pause on some tariffs on imports from China. …Stephanie Guichard, Senior Economist, said “The monthly improvement was largely driven by consumer expectations as all three components of the Expectations Index—business conditions, employment prospects, and future income—rose from their April lows. 

The Census estimate of new home sales posted an unexpected gain in April even as builders and consumers continue to deal with economic uncertainty, elevated interest rates and rising building material costs. Sales of newly built, single-family homes in April increased 10.9% to a 743,000 seasonally adjusted annual rate from a downwardly revised March number, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in April was up 3.3% compared to a year earlier. The April new home sales figure may be revised as it runs counter to market commentary and the fact that builder sentiment moved markedly lower in May. A less volatile look at the market would be the year-to-date figures, which show new home sales are down 1.2% thus far in 2025 on elevated interest rates, ongoing policy uncertainty and rising construction costs.

Despite the brief retreat in mortgage rates and increased supply, existing home sales dropped to 7-month low in April, according to the National Association of Realtors. …While existing home inventory improved, the market faces headwinds as mortgage rates are expected to stay above 6%. …Total existing home sales, including single-family homes, townhomes, condominiums, and co-ops, fell 0.5% to a seasonally adjusted annual rate of 4.00 million in April. On a year-over-year basis, sales were 2.0% lower than a year ago. The first-time buyer share was 34% in April, up from 32% in March and 33% from a year ago. The existing home inventory level was 1.45 million units in April, up 9.0% from March, and up 20.8% from a year ago. …Homes stayed on the market for an average of 29 days in April, down from 36 days in March but up from 26 days in April 2024.

Despite solid income gains and lower home prices, Americans still continue to face major housing affordability challenges, according to the latest data from the NAHB/Wells Fargo Cost of Housing Index (CHI). The CHI results from the first quarter of 2025 show that a family earning the nation’s median income of $104,200 needed 36% of its income to cover the mortgage payment on a median-priced new home. Low-income families, defined as those earning only 50% of median income, would have to spend 72% of their earnings. …“While affordability registered slight gains, the Cost of Housing Index clearly shows the need for policymakers to take action,” said NAHB Chairman Buddy Hughes. “Eliminating burdensome regulations, ending tariffs on Canadian lumber and other building materials, providing funding to promote careers in the skilled trades and expediting approvals for affordable projects will allow builders to construct more homes.”

WASHINGTON, DC – Total single-family home sales are expected to close 2025 at 4.92 million units, with existing home sales accounting for 4.24 million of those units, according to the May 2025 Economic and Housing Outlook from the Fannie Mae Economic and Strategic Research (ESR) Group. Revisions to the home sales forecast were driven in part by the ESR Group’s lower expectations for mortgage rates, which it now forecasts to end 2025 and 2026 at 6.1% and 5.8%, respectively. The latest outlook also projects real gross domestic product growing at 0.7% in 2025 and 2.0% in 2026 on a Q4/Q4 basis. …We now expect the Consumer Price Index (CPI) to rise 3.5 percent Q4/Q4 in 2025, unchanged from our April forecast. Core CPI is expected to rise 3.8 percent Q4/Q4 in 2025 (down from 3.9 percent previously) and 2.6 percent in 2026 (unchanged).

Volatile lumber prices are once again rattling the U.S. housing market, squeezing builders and threatening to exacerbate an already dire affordability crisis. Softwood lumber prices in April surged 23% year-over-year, while futures rose sharply in early 2025 amid fears of increased U.S. duties and widespread sawmill closures across North America, according to the National Association of Home Builders. This has weighed heavily on major homebuilders such as Lennar, D.R. Horton and Toll Brothers, which have all seen their stocks slump this spring. …“The unpredictability of lumber prices adds serious complexity to planning and budgeting,” said Steve Martinez, of Idaho-based Tradewinds General Contracting. …Beyond homebuilding, higher lumber costs are hitting renovations, fencing and interiors. The US Forest Products annual market review found that U.S. lumber production inched up… but demand continues to outpace supply. Environmental regulations, aging forests and labor constraints compound the challenge.

An expected impact of the virus crisis was a need for more residential space, as people used homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022 and 2023, and housing affordability worsened, the demand for home size has trended lower. According to first quarter 2025 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was 2,190 square feet, near the highest reading since mid-2023. Average (mean) square footage for new single-family homes registered at 2,408 square feet.

The Fastmarkets ‘Outlook for the US housing market 2025’ webinar unpacked the current challenges facing market participants. Key takeaways for the US housing market:

• Falling builder confidence and construction trends – High mortgage rates and material costs are driving builder pessimism, despite strong demand. 
• California wildfire rebuilding – The rebuilding process following California wildfires is anticipated to be exceptionally slow due to labor shortages, regulatory hurdles and insurance challenges.
• Demographic shifts and the immigration surge – Demographics remain a near-term support for the housing market, but questions remain about the full impact of the recent surge in immigration. 
• Mortgage rates and affordability challenges – A sharp rise in mortgage rates has contributed to affordability challenges and stasis in the existing market. 
• The future of construction – New construction is projected to struggle through 2025 before seeing gradual improvement in 2026. 

The United States has officially lost its perfect credit rating. On Friday, Moody’s, for the first time in its history, downgraded U.S. government bonds from the gold star rating of “AAA” to “AA1,” the silver medal equivalent. This wasn’t a total surprise. S&P and Fitch had already lowered the U.S. rating, so this was Moody’s catching up to the crowd. But make no mistake: Moody’s didn’t just pick a random Friday in May to make this move. Moody’s wanted to send a message to Republicans in Congress: Rethink the tax bill. Or, better yet, don’t do it. …The Republicans’ bill would add at least $3.3 trillion to the debt over the next decade. …Moody’s cited concern over how big the U.S. debt already is (more than $36 trillion) and how Congress has taken almost no action to stop the annual deficits that keep adding to that tab. [to access the full story a Washington Post subscription is required]

NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates flat year-over year growth for custom home builders. The custom building market is less sensitive to the interest rate cycle than other forms of home building but is more sensitive to changes in household wealth and stock prices. There were 34,000 total custom building starts during the first quarter of 2025. This was unchanged relative to the first quarter of 2024. Over the last four quarters, custom housing starts totaled 181,000 homes, just more than a 2% increase compared to the prior four quarter total (177,000). Currently, the market share of custom home building, based on a one-year moving average, is approximately 18% of total single-family starts. 

Consumer sentiment was essentially unchanged this month, inching down a scant 1.4 index points following four consecutive months of steep declines. Sentiment is now down almost 30% since January 2025. Slight increases in sentiment this month for independents were offset by a 7% decline among Republicans. While most index components were little changed, current assessments of personal finances sank nearly 10% on the basis of weakening incomes. Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April; uncertainty over trade policy continues to dominate consumers’ thinking about the economy. Note that interviews for this release were conducted between April 22 and May 13, closing two days after the announcement of a pause on some tariffs on imports from China. Many survey measures showed some signs of improvement following the temporary reduction of China tariffs, but these initial upticks were too small to alter the overall picture.

The Producer Price Index declined 0.5% in April, according to data released Thursday by the US Bureau of Labor Statistics. However, of the 10 key commodities in the hardware and building supply space tracked below, only two (millwork and plywood) index lower compared to a year ago. And only one (plywood) declined from March to April. The softwood lumber index increased 8.6% year-over-year. A month ago, the increase was 12.6%. …Construction input prices decreased 0.1% in April compared to the previous month. Nonresidential construction input prices increased 0.2% for the month. “Construction input prices declined in April, but that was largely due to falling energy prices,” said ABC Chief Economist Anirban Basu. “Materials directly affected by tariffs saw sharp price increases for the month. Steel mill product prices, for instance, rose 5.9%, while copper wire and cable prices increased 5.0%.

Economic uncertainty stemming from tariff issues, elevated mortgage rates and rising building material costs pushed single-family housing starts lower in April. Overall housing starts increased 1.6% in April to a seasonally adjusted annual rate of 1.36 million units, according to a report from the US Department of Housing and Urban Development and the US Census Bureau. The April reading of 1.36 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 2.1% to a 927,000 seasonally adjusted annual rate and are down 12% compared to April 2024. The multifamily sector, which includes apartment buildings and condos, increased 10.7% to an annualized 434,000 pace. “The decline in single-family housing starts in April mirrors builder sentiment, as elevated interest rates, uncertainty on the tariff front and rising construction costs are exacerbating housing affordability challenges,” said Buddy Hughes,  NAHB chairman.

Builder confidence fell sharply in May on growing uncertainties stemming from elevated interest rates, tariff concerns, building material cost uncertainty and the cloudy economic outlook. However, 90% of the responses received in May were tabulated prior to the May 12 announcement that the US and China agreed to slash tariffs for 90 days to allow trade talks to continue. Builder confidence in the market for newly built single-family homes was 34 in May, down six points from April, according to the NAHB/Wells Fargo Housing Market Index (HMI). This ties the November 2023 reading and is the lowest since the index hit 31 in December 2022. …All three of the major HMI indices posted losses in May. The HMI index gauging current sales conditions fell eight points in May to a level of 37, the component measuring sales expectations in the next six months edged one-point lower to 42 while the gauge charting traffic of prospective buyers dropped two points to 23.

While the Commerce Department released a report on Friday showing a rebound by new residential construction in the U.S. in the month of April, the report also showed a substantial pullback by building permits during the month. The Commerce Department said housing starts shot up by 1.6 percent to an annual rate of 1.361 million in April after plummeting by 10.1 percent to a revised rate of 1.339 million in March. However, economists had expected housing starts to surge by 3.5 percent to a rate of 1.370 million from the 1.324 million originally reported for the previous month. “Soft housing starts in April are another sign that builders are hitting the brakes this year in response to high uncertainty for costs and future demand,” writes Nationwide Senior Economist Ben Ayers. …The smaller than expected rebound by housing starts came as a sharp increase by multi-family starts was partly offset by a continued slump by single-family starts.

Inflation slowed to a 4-year low in April while shelter inflation remained elevated. Despite the easing, inflation may pick up in the coming months as possible inflationary pressure from enacted tariffs and other policy uncertainties continues to threaten economic growth and complicate the Fed’s path to its 2% target. Meanwhile, housing inflation remains elevated, but it continues to show signs of cooling – the year-over-year change in the shelter index remained below 5% for an eighth straight month, matching last month’s lowest level since November 2021. …Additional housing supply is the primary solution to tame housing inflation and with it, overall inflation. This emphasizes why the cost of construction, including the cost of building materials, matters not just for housing but also the inflation outlook and the path of future monetary policy. Consequently, the election result has put inflation back in the spotlight and added additional upside and downside risks to the economic outlook. 

Inflation was slightly lower than expected in April as President Trump’s tariffs just began hitting the slowing US economy, according to a Labor Department report Tuesday. The consumer price index, which measures the costs for a broad range of goods and services, rose a seasonally adjusted 0.2% for the month, putting the 12-month inflation rate at 2.3%, its lowest since February 2021. The monthly reading was in line with the Dow Jones consensus estimate while the 12-month was a bit below the forecast for 2.4%. Markets reacted little to the news, with stock futures pointing flat to slightly lower and Treasury yields mixed. ″“Good news on inflation, and we need it given inflation shocks from tariffs are on their way,” said Robert Frick, at Navy Federal Credit Union. …Shelter prices again were the main culprit in pushing up the inflation gauge. 

Valerie Hansen

Threatened tariffs, announced tariffs, rescinded tariffs, pending negotiations, countervailing duties, a falling bond market, rising mortgage rates—the threats, drama, and uncertainty have not been good for the lumber and building materials (LBM) industry. The uncertainty has led to risks of a different kind: slowing growth and rising inflation. Fortunately, the industry scored a win in March when Canadian lumber and panel products were deemed US-Mexico-Canada-Agreement-compliant. Up next, the countervailing and anti-dumping duties on Canadian lumber. …Yet to come, the Section 232 National Security Investigation. …As the industry braces for new tariffs, here’s what dealers can learn from the other extreme cycles of the 21st century —the 2006 boom cycle, 2009 bust cycle (Great Recession), and the 2021 COVID-19 cycle. …Risk management: To mitigate the risk of over-paying or experiencing a disruption in supply, expand your supply base. It pays to diversify.

Confidence in the market for new multifamily housing declined year-over-year in the first quarter, according to the Multifamily Market Survey (MMS) released by the NAHB. The MMS produces two separate indices. The Multifamily Production Index (MPI) had a reading of 44, down three points year-over-year, while the Multifamily Occupancy Index (MOI) had a reading of 82, down one point year-over-year. …The MPI is a weighted average of four key market segments: three in the built-for-rent market (garden/low-rise, mid/high-rise and subsidized) and one in the built-for-sale (or condominium) market. The component measuring garden/low-rise dipped one point to 54, the component measuring mid/high-rise units fell eight points to 28, the component measuring subsidized units held even at 50 and the component measuring built-for-sale units posted a one-point decline to 38.

Mortgage loan applications saw little change in April, as refinancing activity decreased. The Market Composite Index, which measures mortgage loan application volume based on the Mortgage Bankers Association (MBA) weekly survey, experienced a 0.4% month-over month increase on a seasonally adjusted (SA) basis. However, year-over-year, the index is up 29.3% compared to April 2024. The average rate for a 30-year fixed mortgage climbed 10 basis points in April, reaching 6.8%, according to the MBA survey. As rates edged higher, purchase activity posted a modest 1.9% month-over-month gain (SA), while the Refinance Index declined by 1.4% (SA). Compared to a year ago, mortgage rates are down 37 bps, and thus, purchase applications are higher by 11.2%, while refinance activity has jumped 62.0%.

In related news: US Prices for New Homes Continue to Drop as Existing Rises