Builders feel less optimistic about the housing market as they navigate concerns over tariffs, elevated mortgage rates and high housing costs.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index was 42 in February, a five-point drop from January and the lowest level in five months.
A reading under 50 indicates that more builders view conditions as poor than good.
“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 [Housing Market Index],” NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas, said in a press release.
The uncertainty comes as builders continue to grapple with elevated mortgage rates. Data from Freddie Mac shows that the 30-year fixed mortgage rate is hovering around 7%, further dampening demand.
The NAHB survey found 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024. Meanwhile, 59% of builders used sales incentives in February, a slight decrease from 61% in January.
NAHB’s chief economist Robert Dietz expects “incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible home buyers.”
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