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7 hours ago
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Homebuilders are taking a cautious approach to the economic headwinds that have developed this spring.
According to April’s new construction report from the U.S. Census Bureau, single-family homebuilding cratered as President Donald Trump’s trade war has zapped builder confidence and pushed up the cost to build a home.
ar-over-year declines occurred at every stage of construction, with single-family permits (-6.2%), starts (-12%), under construction (-7.1%) and completions (-16.6%) all showing substantial decreases.
“The April report was not a great one for single-family housing,” First American deputy chief economist Odeta Kushi said in a statement. “The slower pace of single-family permits suggests a reduced rate of single-family groundbreaking in the upcoming months, due to higher inventory levels in key markets and ongoing challenges with costs and affordability.”
The declines are largely driven by the South, which makes up the vast majority of single-family construction. Permits (-9.1%), starts (-14.8%), under construction units (-8.3%) and completions (-14.5%) all took a major dive.
The lack of production tracks with the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which measures homebuilder sentiment. The index for May dropped from 40 to 34, the lowest reading since December 2022. Readings above 50 indicate more positive views than negative ones.
New-home sales have been a relative bright spot in the housing market, but builders souring on macroeconomic conditions have the potential to end that. Trump’s ever-shifting tariffs have made life difficult for builders.
The president’s reduction of the tariff rate on China to 30% is a huge win, as builders source appliances from China. But the reduction is only in effect for 90 days. The pause on global tariffs announced April 2 that caused markets to crash is also temporary. A 25% tariff on all steel and aluminum imports remains in effect.
Mortgage rates also continue to be an obstacle for builders and the broader housing market, with 30-year fixed rates currently at 6.9%.
“Economic uncertainty, especially around interest rates and inflation, continues to impact both builder financing costs and buyers’ ability to qualify,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president.
“However, recent developments on the tariff front concerning the United Kingdom and China along with major tax legislation advancing in Congress should provide a boost to housing demand and positive momentum for the economy.”
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