Builder sentiment fell this month due to higher-than-normal mortgage rates and housing costs along with tariffs, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
Builder confidence in the new single-family home market fell five points to a five-month low of 42. The index tracking current sales conditions dropped four points to 46, while the part measuring sales expectations over the next six months fell 13 points to 46. The gauge measuring traffic of prospective buyers fell three points to 29.
According to Bankrate, the average 30-year fixed mortgage rate is 6.92 percent, more than doubling its record low of 2.65 percent in January 2021. Earlier this month, Trump announced his plan to impose a 25 percent tariff on all imported aluminum and steel to help American producers. That plan has raised concerns that construction companies could face rising input prices.
Twenty-six percent of builders reduced home prices this month, down from 30 percent in January and its lowest share in nine months. The average price reduction in February was 5 percent, unchanged from the previous month.
“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 Chair Carl Harris.
Single-family authorizations were basically unchanged in January at 996,000, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Privately-owned housing units greenlighted by building permits increased last month to 1.483 million from 1.482 million in December 2024.
Other January report findings included:
- Privately-owned housing starts fell nearly 10 percent to 1.36 million from 1.51 million. Privately-owned housing completions increased 7.6 percent to 1.65 million from 1.53 million in December.
- Single-family housing starts fell 8.4 percent to 993,000 from 1.08 million. Single-family housing completions increased 7.1 percent to 982,000 from 917,000 in December.