Tariff threats took a toll on the U.S. housing market, reports Newsweek, with builder confidence in the U.S. housing market tumbling in May to its lowest level since November 2023.
The numbers from the National Association of Home Builders (NAHB) reveal developers and construction investors are having to deal with a sluggish selling season and rising economic pressures. The NAHB/Wells Fargo Housing Market Index (HMI) dropped six points to 34, mirroring the November 2023 reading—only slightly above December 2022's bottom of 31.
When asked to rate current sales conditions, sales expectations for the next six months, and prospective buyer traffic, NAHB reported sales dropping eight points to 37, future sales dipping to 42, and buyer traffic grinding down to 23, far below the reading of 50, indicating poor conditions for builders.
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Analysts say the numbers, collected when President Donald Trump was threatening world markets with 145 percent tariffs, undermines the president’s decision to use tariffs to give the U.S. market an alleged advantage.
"Builders face the usual challenges of volatile commodity prices, but add in the unpredictable impact of tariffs, and it gets even tougher,” said Kevin Thompson, CEO of 9i Capital Group. “Price swings on materials make it hard to maintain stable margins, adding pressure to an already tight market."
Similarly, Drew Powers, founder of Illinois-based Powers Financial Group, told Newsweek: "Uncertainty around tariffs and the unknown construction costs are certainly playing into homebuyer and builder sentiment.”
Further aggravating the issue, Powers said, are sky-high housing prices and interest rates.
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“A lot of people are choosing to stay on the sidelines, waiting for the housing market to soften and interest rates to tick down, with the hopes they can find a home and mortgage that is more affordable."
While builders await the effects of the temporary tariff suspension and potential tax reforms, confidence levels remain vulnerable to broader economic shifts.
"Builders buy in bulk and rely on stable margins. When input costs are unpredictable, it's nearly impossible to price homes accurately," Thompson said. "This affects both the affordability for buyers and the profitability for builders, creating a ripple effect throughout the market."
Any sustained progress in trade negotiations or monetary policy adjustments could help boost sentiment in the months ahead. Until then, developers are likely to continue leaning on price cuts and incentives to attract hesitant buyers.
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