Construction workers install frames for windows and doors in a home being built in Bloomfield Hills, Michigan. Credit: Emily Elconin/Bloomberg.
Confidence among U.S. home builders has dropped to the lowest level since before President Donald Trump took office, as high mortgage rates and concern over tariffs sapped much of the initial optimism for the new presidential administration.
A gauge of housing market conditions from the National Association of Home Builders (NAHB) and Wells Fargo fell 5 points, to 42, the lowest since September. The figure was below all estimates in a Bloomberg survey of economists. Reflecting growing concerns, a component of the NAHB’s overall index that measures expectations for the next six months fell 13 points, to 46, this month, its biggest drop since the start of the pandemic. Meanwhile, components measuring present sales and traffic of prospective buyers also declined.
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“While builders hold out hope for pro-development policies—particularly for regulatory reform—policy uncertainty and cost factors created a reset for 2025 expectations,” NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas, said in a prepared statement.
Builder confidence had surged following Trump’s election win in November, as contractors looked forward to less regulation and the prospect of more economic growth. However, home financing costs, which have been stuck around 7 percent in recent months, have sapped demand and sent builder stocks tumbling.
At the same time, the administration’s plans for tariffs on Canada and Mexico, which are delayed at least until next month, and a 10 percent levy that has already taken effect on Chinese goods threaten to raise prices in an industry struggling to retain buyers. “With 32 percent of appliances and 30 percent of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs,” NAHB Chief Economist Robert Dietz said in a prepared statement.
Given that home prices are near record highs across the country and mortgage rates will probably stay elevated for the foreseeable future, incentives may be losing their power with such a limited pool of eligible buyers. The shares of builders that cut prices or used sales incentives both declined in February, NAHB said.
Builder confidence fell in all four U.S. regions, including the biggest drop in the Northeast since April 2020. Tomorrow, the federal government will release data on new residential construction in January.
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