A report released by the National Association of Home Builders on Monday showed a continued deterioration by U.S. homebuilder confidence in the month of March.

The report said the NAHB/Wells Fargo Housing Market Index fell to 39 in March after slumping to 42 in February. Economists had expected the index to remain unchanged.

With the unexpected decrease, the housing market index dropped to its lowest level since hitting a matching reading last August.

"Construction firms are facing added cost pressures from tariffs," said NAHB Chief Economist Robert Dietz. "Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home."

He added, "Uncertainty on policy is also having a negative impact on home buyers and development decisions."

The decrease by the headline index came as the index gauging current sales conditions fell to 43 in March from 46 in February, hitting its lowest level since December 2023.

The gauge charting traffic of prospective buyers also slid to 24 in March from 29 in February, while the component measuring sales expectations in the next six months held steady at 47.

The NAHB said the latest HMI survey also revealed that 29 percent of builders cut home prices in March, up from 26 percent in February.

The average price reduction was 5 percent in March, the same rate as the previous month, the report said, while the use of sales incentives was also unchanged at 59 percent.

On Tuesday, the Commerce Department is scheduled to release its report on new residential construction in the month of February.

Economists currently expect housing starts to rise to an annual rate of 1.380 million in February after plunging to a rate of 1.366 million in January.

Meanwhile, building permits, an indicator of future housing demand, are expected to decrease to an annual rate of 1.450 million in February after inching up to a rate of 1.483 million in January.

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