U.S. Homebuilder Sentiment Plunges to Five-Month Low Amid Tariff Concerns
WASHINGTON - U.S. homebuilder sentiment has dropped to its lowest level in five months, as concerns mount that import tariffs and rising mortgage rates will further escalate housing costs. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) fell by five points to 42 in February, marking the lowest reading since September.
This decline erases the gains made following President Donald Trump's election victory in November, when sentiment had surged in anticipation of a relaxed regulatory environment. However, Trump has since imposed a 10% tariff on Chinese imports, and a 25% levy on steel and aluminum. The latter has also been extended to imports from Mexico and Canada.
Home construction relies heavily on imported materials, including lumber and household appliances. The decline in homebuilder sentiment mirrors a decrease in consumer confidence, which has also been impacted by the tariffs.
"Builders still anticipate pro-development policies, especially regulatory reform. However, policy uncertainty and rising costs have tempered expectations in the latest HMI," said NAHB Chairman Carl Harris.
The survey's measures of current sales conditions and sales expectations in the next six months have also fallen significantly, reaching their lowest levels since December 2023.
"With a significant portion of appliances and softwood lumber imported, builders are concerned about the impact of tariffs on costs," said NAHB Chief Economist Robert Dietz. "Addressing the elevated pace of housing inflation requires finding ways to reduce costs and increase affordable housing."
The U.S. faces a housing shortage, which has contributed to rising rents and inflation. The average rate for a 30-year fixed-rate mortgage is currently around 7%. Residential spending increased in 2024 due to a surge in single-family home construction, as builders capitalized on the limited supply of existing homes on the market.