...
By Suzanne Blake
Reporter
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
There could be bad news ahead for the housing market as builder sentiment fell sharply in February.
Tariffs, mortgage rates and high housing costs all contributed to the lower confidence levels, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Tuesday.
Why It Matters
Many housing markets in the U.S. exploded during the pandemic as remote work allowed Americans to move out of state for cheaper housing and lower costs of living.
Read More on News
But the housing market nationwide has become increasingly unaffordable because of high mortgage rates and a mismatch between housing inventory and demand.
...
What To Know
For February, builder confidence for newly built single-family homes was 42, down 5 points from January. That marked the lowest level in five months, according to the National Association of Home Builders.
International trade accounts for 32 percent of appliances and 30 percent of softwood lumber, according to NAHB economists, so tariffs could be a major factor in builder sentiment.
President Donald Trump announced tariffs of up to 25 percent on goods from Mexico and Canada and a 10 percent tariff on Chinese imports, and he also issued a memorandum initiating a new reciprocal tariff system.
Home prices also declined for 26 percent of builders in the report, compared to 30 percent in January.
Some regions saw steadier confidence levels as well. While the Northeast fell 3 points to 57, the Midwest declined by 2 points to 45 and the West lost a point to 39, the South has maintained its 46-point confidence level.
What People Are Saying
NAHB Chairman Carl Harris, in a statement: "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 HMI. 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."
Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, told Newsweek: "Tariffs and economic uncertainty have caused builder confidence to drop. Businesses aren't enthusiastic when their variable costs become even more unpredictable and future material pricing remains uncertain. As a result, builders are pulling back on production until the market stabilizes, allowing them to make better long-term decisions."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "This has been a growing—and worrying—trend among new home builders over the last year. With home prices and interest rates both remaining stubbornly high, many potential buyers are staying renters. Subsequently, builders who had planned their inventory based on a rising marketplace are concerned a housing turnaround isn't coming any time soon to meet the demand needs they anticipated. For new homebuyers, this could actually present opportunity in the next year, as builders could be forced to slash prices and offer promotional rates to get people in the properties they've developed."
What Happens Next
Moving forward, Thompson said mortgage rates will be the biggest issue for builder confidence.
"Many homeowners are locked into sub-4 percent loans while earning over 4 percent on short-term savings," Thompson said. "There's little incentive to move when upgrading to a new home would mean nearly doubling their mortgage payment."
Lumber and labor costs could also foster a worse-off housing market, Thompson said.
"If labor costs increase as well, home prices will inevitably rise—unless there's a shift in rates or economic conditions," he said.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines