Builder confidence in the housing market fell sharply in February over concerns on tariffs, elevated mortgage rates and high housing costs.
As a result, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell to a score of 42, down five points from January.
“While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for 2025 expectations in the most recent [index reading],” says Carl Harris, chairman of NAHB, in a statement. “Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023. Incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible home buyers.”
“With 32 percent of appliances and 30 percent of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs,” adds Robert Dietz, chief economist for NAHB. “Reflecting this outlook, builder responses collected prior to a pause for the proposed tariffs on goods from Canada and Mexico yielded a lower HMI reading of 38, while those collected after the announced one-month pause produced a score of 44. Addressing the elevated pace of shelter inflation requires bending the housing cost curve to enable adding more attainable housing.”
The latest survey reveals that 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024.
Meanwhile, the average price reduction was 5% in February, the same rate as the previous month. The use of sales incentives was 59% in February, down from 61% in January.
Regionally, the index was down three points in the Northeast, two points in the Midwest and one point in the West, while the South remained flat.
Last week, NAHB issued a statement expressing concern that President Trump’s executive order imposing 25% tariffs on all imported steel and aluminum products will raise residential construction costs.
This is in direct conflict with an earlier order Trump made to all housing-related federal agencies to reduce the cost of housing, NAHB says in a statement.
Photo: Avel Chuklanov