U.S. homebuilder sentiment dropped to a five-month low in February due to concerns about tariffs on imports and rising mortgage rates impacting housing costs. The National Association of Home Builders/Wells Fargo Housing Market Index fell by five points to 42 this month, marking the lowest reading since September. This decline reversed the gains made after President Donald Trump's election victory as sentiment had risen in anticipation of a less-regulated environment.
In response to Trump's actions imposing tariffs, including a 10% tariff on goods from China and increased tariffs on steel and aluminum imports to 25%, homebuilders are apprehensive as new home construction heavily relies on imported materials. This uncertainty has not only affected homebuilder sentiment but also consumer confidence.
NAHB Chairman Carl Harris stated, "While builders are hopeful for pro-development policies and regulatory reforms, policy ambiguity and cost concerns have recalibrated expectations in the latest HMI." The survey indicated a drop in current sales conditions to a five-month low of 46 and a significant decline in future sales expectations in the next six months to 46, the lowest level since December 2023. Prospective buyers traffic also decreased to 29.
NAHB Chief Economist Robert Dietz highlighted the impact of tariffs on imported materials, stating, "With a significant portion of appliances and softwood lumber sourced through international trade, builders are increasingly worried about rising costs." Addressing the escalating shelter inflation requires curbing housing expenses to make affordable housing more accessible.
The housing shortage in the nation has led to increased rents and inflation. Mortgage rates are hovering below 7%, and residential spending in 2024 saw a rebound, driven by single-family home construction as builders sought to capitalize on the shortage of existing homes for sale.