Homebuilders' Optimism Dives as Tariffs, Mortgage Rates, and Costs Bite
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index plummeted to 42 in February, a five-point decline from January and the lowest in five months. Economists had anticipated a reading of 46, according to Bloomberg.
"Builders remain hopeful for pro-development policies, especially regulatory reform, but policy uncertainty and cost factors have dampened expectations in the latest HMI," stated NAHB chair Carl Harris.
President Trump's 25% tariffs on steel and aluminum imports, effective March, are a major cost concern for builders. The National Association of Home Builders estimates this could elevate residential construction costs.
"Uncertainty over tariffs affects costs, as 32% of appliances and 30% of softwood lumber come from international trade," explained NAHB chief economist Robert Dietz.
Persistently high mortgage rates also challenge builders. Freddie Mac data indicates the 30-year fixed mortgage rate remains around 7%, suppressing demand.
According to the NAHB survey, 26% of builders reduced home prices in February, marking the lowest since May 2024. Sales incentives were utilized by 59% of builders, a slight decline from 61% in January. Dietz anticipates "incentive use may weaken as elevated interest rates reduce eligible home buyer pools."
The survey gauge for the six-month sales outlook plummeted 13 points to 46, the lowest since December 2023. Prospective buyer traffic declined three points to 29. The NAHB index for current sales conditions fell four points to 46.
By Yahoo Finance Reporter Dani Romero.