US Builder Confidence Drops to Five-Month Low in February

Builder sentiment in the market for newly built single-family homes fell in February, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Tuesday. The index declined 5 points to a reading of 42, the lowest level in five months.

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 HMI, NAHB reported. Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023.

NAHB noted that incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible home buyers. The latest HMI survey also revealed that 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024. Meanwhile, the average price reduction was 5% in February, the same rate as the previous month. The use of sales incentives was 59% in February, down from 61% in January.

In February, all three of the major HMI indices posted losses. The HMI index gauging current sales conditions fell four points to a reading of 46, the component measuring sales expectations in the next six months plunged 13 points to a reading of 46, and the gauge charting traffic of prospective buyers posted a three-point decline to a reading of 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points in February to a reading of 57; the Midwest moved two points lower to 45; the West edged one-point lower to 39; and the South held steady at 46.