Homebuilder stocks have underperformed the broader market in 2025, with the S&P Composite 1500 Homebuilding Index (S15HOME) down roughly 8% year-to-date, compared to a 4% gain in the S&P 500, according to Bank of America Securities.

The weakness comes as builder confidence for newly built single-family homes remains historically low. Earlier in June, the NAHB/Wells Fargo Housing Market Index showed a reading of 32—its third-lowest level since 2012. Only December 2022 (31) and April 2020 (30) posted worse readings.

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According to an NAHB analysis released on Wednesday, elevated interest rates and economic uncertainty sent more home buyers to the sidelines in May as housing affordability conditions remain challenging.

Sales of newly built single-family homes declined 13.7% in May, falling back to a seasonally adjusted annual rate of 623,000.

According to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, the pace was the slowest since October of last year, with mortgage rates averaging 6.83% in May.

Sales were particularly slow in the South, with the pace of sales down 21% in May.

BofA adds that the demand for new homes is still muted, and existing home listings are rising, but they are seeing a”frozen” resale market.

In its investor note on Friday, BofA added that in 2025, the prices of new homes have fallen. On average, new homes cost 0.3% less than existing (resale) homes. This is a big shift from the past when new homes were usually 15–20% more expensive than existing ones.

Housing inventory has gone up. The number of new homes for sale is at its highest point in over a decade. Existing home listings are up 20% compared to last year, though still not back to pre-pandemic (2019) levels. Vacancy rates have also risen after being very low for a while.

BofA also writes that homebuilders continue to use incentives (rate buydowns) and build smaller homes to address some of the affordability challenges.

NAHB said a sharp decline in multifamily production pushed overall housing starts down in May, while single-family output was flat due to economic and tariff uncertainty and elevated interest rates.

"Our latest builder survey shows that development and market conditions remain a major concern for builders, with consumer confidence lower and elevated interest rates for buyers and builders," said Buddy Hughes, chairman of NAHB.

Most recently, homebuilder KB Home ( KBH ) reported second-quarter revenue of $1.52 billion, beating analyst estimates of $1.51 billion. The company reported second-quarter earnings of $1.50 per share, beating analyst estimates of $1.47 per share.

KB Home ( KBH ) delivered 3,120 homes in the quarter, down 11% on a year-over-year basis. The average selling price "increased slightly" to $488,700, while net orders decreased 13% year-over-year to 3,460. Ending backlog value was down 27% to $2.29 billion and inventories increased 7% to $5.91 billion.

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