Builder sentiment in the market for newly built single-family homes has declined significantly in February, driven by concerns over tariffs, high mortgage rates, and housing costs. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence dropped five points to 42, marking the lowest level in five months.
"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," stated NAHB Chairman Carl Harris. He noted that "uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023."
NAHB Chief Economist Robert Dietz highlighted further concerns: "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." He added that addressing shelter inflation requires bending the housing cost curve to enable more attainable housing.
The HMI survey also revealed a decrease in home price cuts by builders in February, with 26% reducing prices compared to 30% in January. The average price reduction remained at 5%. Sales incentives were used by 59% of builders in February, slightly down from January's 61%.
The NAHB/Wells Fargo HMI measures builder perceptions of current single-family home sales and future sales expectations. A score above 50 indicates more favorable conditions. However, all three major HMI indices showed declines this month: current sales conditions fell four points to 46; sales expectations for the next six months dropped by 13 points to 46; and traffic of prospective buyers decreased three points to 29.
Regionally, Northeast scores fell three points to 57; Midwest scores dropped two points to 45; West edged one point lower to 39; while the South remained steady at 46.
For detailed tables on HMI data, visit nahb.org/hmi. Additional housing statistics can be accessed through Housing Economics PLUS.
