Builder Confidence Falls on Tariff, Housing Cost Concerns

Builder sentiment fell sharply in February over concerns on tariffs, elevated mortgage rates and high housing costs, the National Association of Home Builders/Wells Fargo Housing Market Index reported.

Builder confidence in the market for newly built single-family homes fell five points in February to 42, the lowest level in five months.

“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,” said Carl Harris, a custom home builder from Wichita, Kan. “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.”

NAHB Chief Economist Robert Dietz noted 32% of appliances and 30% of softwood lumber come from international trade, so uncertainty over the scale and scope of tariffs has builders further concerned about costs. “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,” he said.

The latest HMI survey also revealed 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.