Proposed Trump administration tariffs and mortgage rates have pushed U.S. homebuilder confidence down to a five-month low.
Builder sentiment about current and future single-family home sales declined to a survey score of 42 this month, down five points from January, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Tuesday. Any score higher than 50 is seen as a positive read on single-family home sales.
The lower results overall underscored ongoing challenges homebuyers face that are keeping them on the sidelines. Builders, in the meantime, are worried about tariffs, according to the NAHB.
“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 trade group's chief economist, said in a statement.
President Donald Trump’s call to impose 25% tariffs on imports from Canada and Mexico has shaken the homebuilding industry as the two countries are prime suppliers of domestic construction materials. More than 70% of lumber and gypsum used for drywall in U.S. homebuilding are imported from Canada and Mexico, according to the NAHB.
The survey results indicate fear that tariffs will lead homebuilders to pass down higher home prices to buyers, according to the NAHB. The industry is waiting to see how the situation plays out as both Canada and Mexico came to an agreement with the Trump administration on Feb. 6 to pause tariffs for 30 days.
Homebuilders have said tariffs, if enacted, would impact the market more toward the end of 2025 as homes currently under construction would not be affected. National firm Taylor Morrison said on its fourth-quarter earnings call last week that home prices could increase between $1,200 and $5,000 due to tariffs.
High mortgage rates were another reason for the lower confidence, the survey showed. The rate as of last week for a 30-year fixed mortgage was 6.87%, according to the National Association of Realtors.
To compete with high rates, many builders offer buyers incentives such as mortgage buydowns. Fifty-nine percent of builders said they offer incentives in the latest NAHB survey, down slightly from 61% in January.
For national homebuilder Tri Pointe Homes, which sells primarily to premium entry-level buyers and move-up homebuyers, the impact of near-7% mortgage rates and tariffs is temporary.
“A year ago, there was all this anticipation of rates going down,” said CEO Doug F. Bauer on Tri Pointe’s fourth-quarter earnings call Tuesday. “It’s really confused the homebuyers. Now they’re getting a little bit of uncertainty with the current administration. My personal opinion is it’s a short-term demand issue, short-term news headline. Long-term, not only is the company, but the economy and the industry, going to be well positioned for growth. I’m very bullish going forward.”
The NAHB survey saw the lowest share of builders since May that chose to drop home prices, at an average of 5%.
The most confident builders were in the Northeast, whereas the least confident were in the West, reporting a 57 and 39 sentiment, respectively. Homebuilders in the South reported a sentiment rating of 46, and Midwest builder sentiment was 45.