Key Takeaways
- Homebuilder sentiment declined in February as tariff proposals added to cost concerns in a market already struggling with affordability concerns.
- The survey results showed a steep drop in sales expectations as cost concerns mounted.
- Homebuilder opinion changed in the monthly survey as tariff proposals were announced and later put on pause.
Tariff proposals lowered homebuilder optimism in February as worries about import taxes added pressure to a housing market already struggling with unaffordability.
A closely watched survey of the home building industry showed that sentiment declined five points to 42 in January, the lowest level in five months. The dip in the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) follows recent moves by President Donald Trump to propose tariffs on trading partners that could impact the price of building materials.
“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 home builder from Wichita, Kan.
Tariffs Worries Add to Builders’ Cost Concerns
Sales expectations for the next six months fell 13 points to their lowest levels since December 2023, while home builders also experienced declines in current sale conditions and prospective buyer traffic, the survey showed.
“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.
While Trump paused the blanket tariffs on the U.S.’s North American neighbors, he announced a 25% tariff on aluminum and steel, which housing officials have also said could elevate building costs. The tariffs threaten to add to rising costs in the housing market that have made it more unaffordable for home buyers, including elevated mortgage rates and rising home prices.