Builders
are
aware
of
the
challenges.
The
April
reading
of
the

National
Association
of
Home
Builders
(NAHB)/Wells
Fargo
Housing
Market
Index
was
40.
While
that’s
a
point
higher
than
March,
anything
below
50
is
considered
pessimistic.

More
alarming
is
that
60%
of
builders
say
their
material
costs
have
gone
up
by
an
average
of
6.3%
this
year,
adding
$10,900
to
the
cost
to
build
a
single-family
home.

There’s
no
secret
as
to
why
that’s
happening.
President
Donald
Trump’s

tariff
roller
coaster
has
shocked
and
confused
business
leaders
across
all
industries
—
and
construction
is
no
different.
Trump
has
twice
let
a
25%
tariff
on

Mexico
and

Canada
take
effect,
only
to
pause
it
shortly
afterward.

The

new
global
tariff
regime
announced
by
the
president
on
April
2
—
or
“Liberation
Day”
—
caused
the
stock
and
bond
markets
to
tank.
The
damage
compelled
Trump
to

pause
many
of
these
tariffs
not
long
after
they
began.

This
would
have
been
welcome
news
for
homebuilders
if
not
for
the
one
country
not
included
in
the
pause
—

China.
Instead,
the
two
countries
are
engaged
in
a
tit-for-tat
that’s
pushed
the
effective
tariff
rate
for
Chinese
imports
into
the
U.S.
to
an
astronomical
figure
of
147.5%.

According
to
NAHB,
27%
of
imports
used
in
residential
construction

come
from
China,
more
than
double
that
of
the
next
largest
trade
partner,
which
is
Mexico
at
11%.
Trump
has
also
imposed
a
25%
tariff
on
all

steel
and
aluminum
imports.

While
the
pause
on
global
tariffs
gave
equities
in
some
industries
room
to
recover,
it
wasn’t
so
helpful
to
homebuilders,
whose

stocks
are
down
precipitously
since
Trump
was
inaugurated
on
Jan.
20.

And
this
is
just
on
the
supply
side.
A
problem
for
the
broader
housing
market
is
that
consumers
aren’t
in
a
mood
to
dish
out
cash.
A
recent

Redfin-commissioned
survey

revealed
that
55%
of
Americans
are
less
likely
to
make
a
major
purchase
this
year
because
of
Trump’s
tariff
policies.

The
University
of
Michigan’s
Consumer
Sentiment
Index
for
April

dropped
by
more
than
six
points.
The
plunge
is
tied
to
higher
expectations
for

inflation
over
the
next
year.

On
the
KB
Homes
earnings
call,
executives
acknowledged
that
as
the
year
has
progressed,
“it
became
apparent
that
demand
was
softer
than
we
expected.”

According
to
the

Mortgage
Bankers
Association
(MBA)’s
weekly
applications
survey,

mortgage
demand
dropped
8.5%
for
the
week
ending
April
11,
although
the
index
remains
up
year
over
year.

There
is
a
bright
spot.
While
new
construction
sags
and
demand
shrinks,
home
sellers
have
an
optimistic
view.
A

Realtor.com
survey

shows
that
70%
of
potential
sellers
believe
it’s
a
good
time
to
sell.

Altos
data
also
shows
new
listings
spiking
on
both
a
weekly
and
yearly
basis.
In

some
markets,
these
spikes
are

pronounced.

While
this
isn’t
unusual
in
the
spring
and
might
be
a
signal
that
the
market
is
operating
as
usual,
there’s
also
reason
to
think
that
anyone
looking
to
buy
or
sell
a
home
is
rushing
into
the
market
to
get
ahead
of
any
forthcoming
volatility
or
major
policy
changes.

There’s
also
the
matter
of

mortgage
rates.
While
a
stock
market
sell-off
usually
pushes
interest
rates
down,
the
opposite
happened
after
April
2,
as
the
rate
on
a
30-year
fixed
mortgage
jumped
from
6.69%
to
6.83%
in
less
than
a
week.

The
storm
clouds
related
to
tariffs
and
other
federal
policy
changes
could
part
with
a
little
more
certainty.
But
the
data
from
an
increasing
number
of
sources
point
to
April
showers,
dampening
what
was
previously
expected
to
be
a
strong
year
for
the
housing
market.