CNBC’s Diana Olick joins ‘Squawk on the Street’ to report on new data on homebuilder sentiment.

Washington

Homebuilder sentiment has declined, according to the latest National Association of Home Builders (NAHB) index, which dropped two points to 32. This is one of the lowest readings since the Great Recession, with only two lower points recorded since 2012. The decline is attributed to high mortgage rates, tariffs, and economic uncertainty. All three components of the index—current sales, sales expectations, and buyer traffic—fell, with buyer traffic reaching its lowest level since the end of 2023.

In response to weaker demand, 37 percent of builders reported cutting prices, the highest share since tracking began three years ago. The average price reduction was five percent. NAHB forecasts a decline in single-family home starts for 2025, with the South and West regions being the weakest. Despite some builders like Lennar lowering prices, affordability remains a significant barrier, as many consumers are unable to qualify for mortgages even at reduced rates.

Homebuilder sentiment nears pandemic low

Well, Rick, homebuilder sentiment in June dropped two points from May to 32 on the NAHB index. The street was actually looking for a slight improvement. This index has only seen a lower reading twice since the Great Recession back in 2012. And that was in December of 2022, when mortgage rates first shot up from those pandemic record lows and in April 2020, at the very start of the pandemic. Now, the builders cite high mortgage rates, tariffs and overall economic uncertainty of the index's three components. Current sales conditions fell two points to 35. Sales expectations in the next six months dropped two points to 40. And buyer traffic fell two points to 21. That is the lowest reading on that since the end of 2023. As a result, builders are cutting prices 37 percent in the June survey said they did. That's the highest share since NAHB started tracking this three years ago. It's up from 34 percent in May and 29 percent in April. The average price reduction, five percent. NAHB's chief economist, Rob Dietz, said given current market conditions, NAHB is forecasting a decline in single family starts for 2025 regionally on a three month moving average. The South and West were the weakest. And of course, that is, Sarah, where we build the most homes usually. I wonder how you put that up against the what we got from Lennar today, the home builder, which, as I mentioned, has actually been a winner, even though some of it was soft and they talked about the challenges in the market like affordability. Yeah, exactly. But they also lowered prices. You saw the average home price on closings down nearly nine percent for Lennar. And that's what we're seeing from the builders as well as cutting prices and begs the questions. Are they even able to buy down those mortgage rates? Ivy Zellman said last Friday on our air that even when you buy down those rates, a lot of consumers still can't even qualify at the lower rates. So Lennar is seeing that weakness in demand because of affordability.

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