The triple threat of potential tariffs, still-elevated mortgage rates and high housing costs pushed builder confidence in the single-family home market down in February.
The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) dropped five points this month to 42; any number over 50 indicates that more builders view conditions as good than poor. February’s reading is the lowest level for the HMI in five months.
“With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs,” said NAHB Chief Economist Robert Dietz. “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.”
All three of the major HMI indices posted losses in February. The HMI index gauging current sales conditions dropped four points to 46, the component measuring sales expectations in the next six months plummeted 13 points to 46, and the gauge charting traffic of prospective buyers tumbled three points to 29.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points in February to 57, the Midwest moved two points lower to 45, the West dipped one point lower to 39 and the South held steady at 46.
The latest HMI survey found 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024. 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.
“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 NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas. “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.”
There’s enough inventory in the south where they don’t have to build for another year to get caught up. So stop and the materials shouldn’t be that expensive anyway anyways because it’s going to stockpile. DROP THE PRICES
The cost of building a home has dramatically increased over the years as regulations have been added. As those regulations are pealed away, will that not offset any added expense of tarrifs? I’m related to the electrical industry and saw how one new electrical regulation
easily added 20K+ to the cost of each home. Start pealing those away please.
Everything that goes into building a house has gone up. Labor and materials. Now, without cheap building materials from China, the costs will go even higher.