Builder sentiment sinks in February
The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) shows builder confidence is retreating after a period of positivity. The index has dropped five points from January and now sits at its lowest level (42) in five months, amid talk of tariffs, heightened mortgage rates and soaring housing costs.
“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,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023. Incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible home buyers.”
The HMI survey also showed that 26 percent of builders dropped home prices in February, down from 30 percent in January. According to NAHB, that's the lowest share since May 2024. The average price reduction was 5 percent in February, and the use of sales incentives was 59 percent in February (down from 61 percent) in January.
“With 32 percent of appliances and 30 percent of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs,” said NAHB Chief Economist Robert Dietz. “Reflecting this outlook, builder responses collected prior to a pause for the proposed tariffs on goods from Canada and Mexico yielded a lower HMI reading of 38, while those collected after the announced one-month pause produced a score of 44. Addressing the elevated pace of shelter inflation requires bending the housing cost curve to enable adding more attainable housing.”
The HMI index gauging current sales conditions fell four points to 46, the component measuring sales expectations in the next six months plunged 13 points to 46, and the gauge charting traffic of prospective buyers posted a three-point decline to 29.
Regionally, the Northeast fell three points in February to 57, the Midwest dropped two points lower to 45, the West slipped to 39, and the South remained at 46.
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