The sentiment among the single -family national houses has dropped to the lowest level in February, mainly because of the fears of tariffs that will significantly raise their costs.
The National Association of Home Builders, i.e. HMI, dropped by 5 points from January to reading 42. All below 50 is considered negative moods. In February last year, the index was 48.
“While the builders hope for Pro Policy, especially in the field of regulatory reform, uncertainty of politics and cost factors that have created a reset of 2025 expectations in the latest HMI,” said the chairman of NaHB, Carl Harris, a house builder from Wichita, Kansas.
Of the three elements of the index, the current sales conditions dropped by 4 points to 46, the buyer's movement dropped by 3 points to 29, and the sale of sales over the next six months dropped by 13 points to 46. This last component reached the lowest level from December 2023.
Builders are already in the face of increased mortgage rates. The average on a 30-year fixed mortgage rate was above 7% in January and February after previous importance in the range of 6%. House prices are also higher than a year ago, even more weakening price accessibility.
While President Donald Trump's tariffs to Canada and Mexico, originally proposed at the beginning of February, were delayed about a month, builders still expect higher costs.
“With 32% of devices and 30% of coniferous wood from international trade, uncertainty as to the scale and range of tariffs, builders are additionally afraid of costs,” said NaHB chief economist Robert Dietz.
From August, buildings have been gained from August about the expectation of lower mortgage rates and, as the builders noted, potential Pro development policies. The beginnings of single -family housing are popular than a year ago, despite the slim supply of existing houses for sale.
The decrease in the mood of builders, approaching just before the most important spring market, signals potentially even lower supply on the market. Several houses noticed the withdrawal of the demand of buyers in recent earnings reports.
“Despite the federal reserve activities in order to reduce short-term interest rates, the mortgage interest remained increased in the fourth quarter, which was affected by the demand of buyers, because the buyers of the houses still face the challenges related to the affordability of the price,” said Ryan Marshall, general director of Pultegroup, in the fourth quarter, in the fourth quarter Earnings release.
The share of builders lowering prices dropped to 26% in February, compared to 30% in January and the lowest share since May 2024. Other sales incentives have also dropped.
This may be due to the fact that incentives become less effective in attracting buyers, because high prices and high rates reduced the pool of buyers, for which these benefits transfer the needle, according to NaHB.
When the buyer is thoroughly priced, no motivation helps, and when remaining a higher rate, the pool of marginal buyers can shrink. Offering incentives for buyers who would buy regardless of the price or rates, has a reduced value for builders.