HousingWireHousingWire
As uncertainty over tariffs mounted in February, homebuilder confidence sank. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell five points month over month in February to a reading of 42.
Economists also attribute concerns over elevated mortgage rates and continued high housing costs to dampening builders’ moods.
“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,” Robert Dietz, the NAHB’s chief economist, said in a statement. “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.”
Despite their dour moods, just 26% of builders cut home prices in February, the lowest share since May 2024, and just 59% used sales incentives, down from 61% in January. For those who did slash prices, the average reduction was 5%, the same as in January.
In addition, the NAHB reported that homebuilders’ gauge of current sales conditions fell four points to 46. The gauge measuring traffic of prospective buyers dropped by three points to a reading of 29, while the component charting sales expectations over the next six months plunged 13 points to 46.
“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,” Carl Harris, the chairman of the NAHB, said in a statement. “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.”
Regionally, the three-month moving averages fell in three out of four regions, with the Northeast dropping three points to 57, the Midwest fell two points to 45 and the West dropped one point to 39. Meanwhile, the South stayed steady at a reading of 46.
