Confidence among home builders in the United States fell in February to its lowest level since before President Donald Trump took office, due to high mortgage rates and concerns about tariffs. An indicator of housing market conditions from the National Association of Home Builders (NAHB) and Wells Fargo dropped 5 points to 42, the lowest level since September. This figure was below all estimates in a Bloomberg economist survey.
Reflecting growing concerns, a component of the NAHB's overall index that measures expectations for the next six months fell 13 points to 46, its largest drop since the pandemic began. Meanwhile, the components measuring current sales and traffic of potential buyers also decreased.
"Although builders remain hopeful for pro-development policies, particularly regarding regulatory reform, political uncertainty and cost factors have created a readjustment for expectations for 2025," said Carl Harris, NAHB president and custom home builder from Wichita, Kansas, in a prepared statement.
Builder confidence had increased in November but fell due to the threat of tariffs following Trump's election victory. Housing financing costs, which have remained near 7 percent in recent months, have decreased demand and caused builder stocks to fall. Meanwhile, the administration's plans for tariffs on Canada and Mexico, along with a 10 percent levy already in place on Chinese products, threaten to raise prices in an industry that is already struggling to retain buyers.
"With 32 percent of appliances and 30 percent of softwood coming from international trade, uncertainty about the magnitude and scope of tariffs has generated even more concern among builders about costs," said Robert Dietz, NAHB chief economist, in a prepared statement.
Given that home prices are still near record levels nationwide and mortgage rates are likely to remain high in the near future, incentives may be losing their effectiveness with so few eligible buyers. Builder stocks that lowered prices or used sales incentives also fell in February, the NAHB indicated. Builder confidence fell in all four regions of the United States, including the largest drop in the Northeast since April 2020.
The federal government will release January data on new residential construction on Wednesday.