FOX Business correspondent Gerri Willis provided a report detailing the concerns among U.S. homebuilders following the announcement of new tariffs by President Donald Trump. These worries have emerged as the president has proposed numerous tariffs in recent weeks, including plans to reinstate a 25% tariff on steel imports and elevate the aluminum imports levy to 25%.
In addition to these tariffs, Trump had previously announced a 24% tariff on imports from Canada and Mexico and a 10% tariff on imports from China. However, the tariffs aimed at Canada and Mexico have been deferred until at least early March.
The National Association of Home Builders/Wells Fargo Housing Market Index, which gauges confidence among homebuilders, dropped by five points in February, reaching a level of 42, which is below the benchmark of 50 that indicates positive sentiment. This represents the lowest confidence level in five months. The index measuring current sales conditions also fell to 46, a four-point decrease from the previous month, while future sales expectations for the next six months also fell to 46.
According to NAHB Chairman Carl Harris, uncertainty surrounding tariffs has contributed to a “reset” of expectations for 2025. This uncertainty has led to the lowest levels of future sales expectations since December 2023. Additionally, the tariffs on steel and aluminum are set to become effective in mid-March, which the NAHB argues will increase home building costs and hinder housing affordability by deterring new development and complicating post-disaster rebuilding efforts.
The NAHB has expressed similar concerns regarding the impact of tariffs on Canadian and Mexican imports, highlighting potential increases in construction costs and discouragement of new developments. They have called for exemptions for construction materials from these tariffs, noting that costs for materials such as softwood lumber, gypsum, steel, and aluminum might rise, potentially affecting home appliance prices as well.
In terms of housing market activity, applications for new privately-owned housing construction saw a slight decline of 0.1% in January, reaching a seasonally adjusted rate of 1.48 million. Housing starts also experienced a 9.8% drop from December, settling at a seasonally adjusted annual rate of 1.37 million. Specifically, single-family housing starts stood at 993,000 in January, an 8.4% decrease from the previous month.
Despite these challenges, economists have noted signs of a more buyer-friendly market. Realtor.com data from January shows that 15.6% of home prices were reduced, reflecting increased seller flexibility in pricing compared to the previous year. The median listing price for homes nationwide was $400,500, representing a 2.2% decrease from the same month in the previous year but still 38.4% higher than prices in January 2019.
Mortgage rates, as reported by Freddie Mac, averaged 6.87% for a 30-year fixed-rate mortgage in the week of February 13, experiencing a slight decrease from the previous week. The Fannie Mae Economic and Strategic Research Group predicts that mortgage rates could reach 6.5% by the end of 2025 and potentially decrease to 6.3% by the end of 2026.
