Homebuilder Sentiment Down as Tariffs Loom

Tariff threats have dampened homebuilding confidence. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index dropped five points from January into February to a reading of 42, the lowest reading in five months.

Builders were initially hopeful that the Trump administration would remove some red tape regulations to streamline the process. However, these tariffs are guaranteed to cause the price of construction to soar, especially in relation to steel, aluminum, and lumber. “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,” NAHB chief economist Robert Dietz wrote in a statement.

Trump believes the US can simply produce everything domestically with little pushback. “We don’t need their lumber, because we have our own forests,” the US president famously said at Davos. Yet, the US relies on Canada for at least a quarter of its lumber. Spring building season is now coinciding with when these 25% tariffs may be implemented.

Builders are also concerned about mortgage rates, with Freddie Mac showing the average fixed 30-year at around 7% at the time of this writing. The low rates seen during COVID are not returning. Inventory across the US has increased but demand has waned. The NAHB reported that 26% of builders cut home prices this month after 30% of builders were forced to do so in January.

These tariff games have backfired as businesses across sectors cannot accurately gauge the cost of materials.