Builder sentiment fell in February due to concerns over tariffs, elevated mortgage rates and high housing costs, according to the housing market index (HMI) from the National Association of Home Builders (NAHB) and Wells Fargo.

The HMI survey found that 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024. The average price reduction was 5%, unchanged from January. About 59% of builders used sales incentives in February, down from January’s 61%.

The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months. The survey also asks builders to rate traffic of prospective buyers from “very high” to “very poor.” The scores are then used to calculate the seasonally adjusted indices. Numbers above 50 indicate that more builders view conditions as favorable.

Builder confidence in the market for newly built single-family homes was 42 in February, down five points from January and hitting the lowest level in five months, stated a press release from the NAHB. All three of the major HMI indices were down in February.

The index gauging current sales conditions fell four points to 46; the component measuring sales expectations in the next six months took a 13-point dive to 46; and the traffic gauge of prospective buyers posted a three-point decline to 29.

NAHB Chairman Carl Harris said in a statement that uncertainty on tariffs helped push expectations for future sales volume down to the lowest level since December 2023.

“With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs,” said NAHB Chief Economist Robert Dietz.