Homebuilders’ Post-Election Confidence Wilts

Donald Trump’s election victory in November raised the spirits of homebuilders. Three months later, those spirits appear all but dashed.

Builder sentiment dropped to its lowest level in five months as mounting concerns over potential tariffs, persistently elevated mortgage rates and construction costs dampen the housing market’s outlook, according to an index by the National Association of Homebuilders.

The NAHB/Wells Fargo Housing Market Index fell five points to 42 in February amid worries about trade policies that could affect construction costs; any score below 50 indicates builders view conditions of the single-family housing market as more poor than good.

The impact of tariff uncertainty was clearly visible in the survey results. Responses collected before a pause in proposed tariffs on Canadian and Mexican goods showed a markedly lower confidence reading of 38, compared to 44 after the one-month pause was announced.

“Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023,” said NAHB chair Carl Harris. Chief economist Robert Dietz noted that 32 percent of appliances and 30 percent of softwood lumber used in U.S. home construction come from international sources.

The tariff threat extends beyond the country’s immediate neighbors. Trump announced last week a 25 percent tariff on foreign steel and aluminum imports that’s poised to hit the construction industry particularly hard.

The association’s survey showed declines across all major indices. The most dramatic drop applied to sales expectations for the next six months, which plunged 13 points to 46. Sentiment around current sales conditions decreased four points to 46, while prospective buyer traffic fell three points to 29.

Despite these challenges, fewer builders are resorting to price cuts to attract buyers.

In February, 26 percent of builders reduced home prices, the lowest percentage since May 2024 and down from 30 percent in January. Those who did cut prices maintained an average reduction of 5 percent, unchanged from the previous month. The use of sales incentives also declined slightly.