New tariffs are already raising the cost to build a new home. This could hurt margins for builders and may foreshadow trends in other industries. With housing affordability already strained, many builders are pragmatically focused on offering incentives to close sales and generate cash flow rather than on protecting margins. Last week, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index was little changed, rising by one point in April to 40. An index reading below 50 indicates that more builders see conditions as poor than good. As part of the monthly survey, which has been conducted for more than 35 years, the NAHB asked builders about the impact of tariffs on their business. Sixty percent of builders reported that their suppliers already have increased or announced increases of materials prices due to tariffs. On average, suppliers have increased their prices by 6.3% in response to announced, enacted, or expected tariffs, according to the trade organization. "Builders estimate a typical cost effect from recent tariff actions at $10,900 per home" the NAHB said. Builders use of incentives was 61% in April, up from 59% in March. This morning, the Census Bureau and Department of Housing and Urban Development will report New Home Sales for March. We expect sales to be flat compared with a year earlier at a seasonally adjusted annual rate of 680,000. Tomorrow, the National Association of Realtors will report Existing Home Sales for March. Our estimate is for a decrease to 4.1 million. On April 29, we expect the S&P/Case-Shiller National Home Price Index to show 3.5% growth in February, on a year-over-year basis. The index rose 4.1% in January. The Zillow Home Value Index rose by an annual 2.1% in March down from a 2.6% increase in February. We remain cautiously upbeat on large national home builders because demographics point to strong long-term demand amid a decades-long shortage of affordable homes.

With operations in 126 markets across 36 states D.R. Horton is the leading homebuilder in the United States. D.R. Horton mainly builds single-family detached homes (87% of home sales revenue) and offers products to entry-level, move-up, luxury buyers, and active adults. The company offers homebuyers mortgage financing and title agency services through its financial services segment. D.R. Horton's headquarters are in Arlington, Texas, and it manages six regional segments across the United States.

D.R. Horton, based in Fort Worth, Texas is one of the largest homebuilders in the U.S., with homebuilding revenue of $34 billion on 89,690 closings for the fiscal year ended September 30, 2024. To be sure, DHI may be number one based on deliveries while Lennar, whose average selling price is about $60,000 higher than DHI's, may have higher revenue in some years. The company offers homes in 125 markets in 36 states. The average home price was down about 1% to $378,000 in FY24. The company's financial services segment also provides mortgage financing and title agency services. DHI's Rental division generated $1.7 billion of revenue in 2024. The company's fiscal year ends on September 30. The business is seasonal with the highest revenues and operating income generally delivered in the third (ending in June) and fourth (September) quarters than in the first (December) and second (March) quarters.

The stock market is playing 'follow the leaders' at midday, with each of the Mag 7 stocks down 2%-5%. The move lower in stock prices is broad, as investors continue to voice their displeasure with tariff uncertainty and now worry about the possibility that Fed Chairman Powell will be targeted for removal by the Trump administration, thus creating further economic uncertainty. On the 'fear' front, the CBOE Volatility Index (VIX) is up 14% as of midday, at about 34.