The sentiment among U.S. single-family homebuilders has hit a 5-month low, with the National Association of Home Builders’ Housing Market Index (HMI) dropping 5 points to 42 in February. This decline is primarily attributed to concerns over tariffs that could significantly increase costs for builders. The HMI’s three components also saw declines: current sales conditions fell to 46, buyer traffic dropped to 29, and sales expectations for the next six months plummeted to 46, the lowest since December 2023. Builders are grappling with elevated mortgage rates, with the 30-year fixed rate above 7% in January and February, and home prices that are higher than last year, further straining affordability. Despite a delay in the implementation of tariffs on Canada and Mexico, the uncertainty surrounding these tariffs, which affect 32% of appliances and 30% of softwood lumber, continues to worry builders. The drop in sentiment signals a potential decrease in housing supply, especially concerning as the spring market approaches.
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