New home sales are rising, but builders are tapping the brakes as the trade war and broader economic uncertainty grip the industry.<\/p>\n\n\n\n
Sales of new homes rose 7.4% from February to March<\/a>, according to federal data released Wednesday, as buyers took advantage of somewhat lower mortgage rates and a wider supply of properties to choose from. But rates have already begun inching back up, and homebuilders are bracing for a slowdown ahead.<\/p>\n\n\n\n Federal figures showed housing starts plunged more than 11%<\/a> from February to March. Developers\u2019 six-month sales expectations slipped 4 percentage points<\/a> from March to April, the National Association of Home Builders reported separately last week.<\/p>\n\n\n\n \u201cYou\u2019re being very selective of what you\u2019re working on right now with all the uncertainty in the marketplace,\u201d said John Kirk, founder of the Lightpath Company, a multifamily home developer in New Braunfels, Texas.<\/p>\n\n\n\n Waiting and seeing is very bad for construction.<\/p>\n\n\n\n Anirban Basu, chief economist, Associated Builders and Contractors<\/p>\n\n\n\n The homebuilding industry isn\u2019t particularly vulnerable to President Donald Trump\u2019s tariffs, but his mercurial trade policies<\/a> are affecting its business nonetheless.<\/p>\n\n\n\n Only 7%<\/a> of materials used in new residential construction are imported, the NAHB estimates. Yet contractors and developers are already seeing higher materials costs and supply chain disruptions. With many vendors unable to guarantee price levels for the months ahead, some builders fear they can\u2019t rely on current cost estimates, making it harder to move projects beyond the planning phase. Consumers\u2019 growing reluctance to pounce on properties is adding to the strain, leaving more homes to pile up on the market.<\/p>\n\n\n\n \u201cThe financial rationale to move forward with projects is no longer penciling out,\u201d said Anirban Basu, chief economist of the Associated Builders and Contractors trade group. \u201cWaiting and seeing is very bad for construction,\u201d he said, adding that he expects construction data to reveal a deeper slowdown by summer.<\/p>\n\n\n\n D.R. Horton, a major national homebuilder, lowered its outlook for the year last week but reassured investors<\/a> that it\u2019s \u201cwell-positioned\u201d to handle cost impacts from the trade war. Some smaller developers, meanwhile, warn they don\u2019t have much wiggle room.<\/p>\n\n\n\n \u201cSince January, it seems like every month I\u2019ve been getting letters from suppliers making me aware that material costs are going up,\u201d said Joshua Correa, owner of Divinio Homes, a residential building firm in Dallas.<\/p>\n\n\n\n Correa said he recently asked his lender for extended financing in case project costs rise unexpectedly or his properties sit on the market longer than usual, adding that some newly built homes already do. He also said he has been fielding unusually pointed questions lately about trade impacts on the housing market, like \u201cWhere does the wood flooring come from \u2014 which country? Will it be affected by tariffs?\u201d<\/p>\n\n\n\n Every month I\u2019ve been getting letters from suppliers making me aware that material costs are going up.<\/p>\n\n\n\n Joshua Correa, owner of Divinio Homes, Dallas<\/p>\n\n\n\n \u201cIt\u2019s a psychological impact on our buyers, our investors,\u201d Correa said. \u201cIt\u2019s just too much decision-making.\u201d<\/p>\n\n\n\n Some housing market pressures are easing. The NBC News Home Buyer Index<\/a> \u2014 which measures the relative ease of finding and purchasing a home in more than 1,000 counties nationwide \u2014 shows difficulty levels declining in March, as competition and supply constraints cool off in many parts of the country.<\/p>\n\n\n\n But some of those improvements reflect buyers\u2019 retreat from the market. The index\u2019s measure of economic instability, which shapes consumers\u2019 decisions around when and whether to spring for a home, rose to a two-year high last month. There are especially clear signs of a pullback in the South, with competition falling across broad swaths of central Texas and eastern Florida.<\/p>\n\n\n\n By the end of January, Florida had more homes for sale than at any point since 2012, Redfin reported<\/a> in late February, after a 23% surge in inventory from the year before. Newly built properties hit the market while buyers stayed away, turned off by steep prices and mortgage rates, intensifying weather threats and a related surge in insurance costs, Redfin said.<\/p>\n\n\n\n Nationwide, weekly demand for 30-year fixed-rate mortgages plunged nearly 13%<\/a>, the Mortgage Bankers Association reported Wednesday, as average interest rates for the popular home loans rose to 6.90% from 6.81%.<\/p>\n\n\n\n Not every builder is being affected in the same ways. Some are already grappling with major operational problems, while others are holding steady and signaling readiness to deal with some turbulence.<\/p>\n\n\n\n Tommy Carter, a shop manager at Sexson Mechanical Co., a contracting firm in Greenwood, Indiana, said manufacturers are already flagging \u201ctariff surcharges on equipment we ordered before the tariff but [was] delivered after.\u201d<\/p>\n\n\n\n He shared with NBC News several notices from suppliers, dated last week, alerting Sexson to price hikes from 2% to as much as 91% on parts like valves and other common components, citing 145% levies on China and Trump\u2019s 10% universal duty on foreign goods.<\/p>\n\n\n\n Carter said contractors are \u201cscrambling\u201d to make purchases \u201cbefore the hammer comes down,\u201d adding that he expects some builds already underway to be halted in coming months because of prohibitive cost increases.<\/p>\n\n\n\n For many industry players, even steep price hikes for certain materials can be manageable, as long as there aren\u2019t too many of them, said Tim Martin, who owns Oklahoma Royal Homes in Claremore, Oklahoma. An HVAC system might go up by $300, he said, but that\u2019s negligible in a million-dollar residential build.<\/p>\n\n\n\n Denny Van Moorleghem, president of Regency Homes in the Omaha, Nebraska, area, voiced concerns about tariffs on Canadian lumber, but so far he isn\u2019t taking drastic action. Lumber remains temporarily exempted from Trump\u2019s tariffs<\/a> on Canada until the Commerce Department concludes its review of those imports.<\/p>\n\n\n\n \u201cWe\u2019re looking at fall, maybe, to be a problem for lumber,\u201d Van Moorleghem said. He\u2019s keeping home prices steady for now but said higher lumber tariffs could eventually add $10,000 to the price of a $500,000 property.<\/p>\n\n\n\n Kirk, in Texas, said he\u2019s looking into sourcing more materials locally but waiting to see which tariffs stick. \u201cLong bells are ringing, but it\u2019s not this bottle on fire yet,\u201d he said.<\/p>\n\n\n\n As some builders stockpile supplies, warehouse operators serving the industry stand to benefit, said Tim Negris, executive vice president of MOCA Systems, a construction services company. Higher warehousing demand could also spur construction of more storage space, even as builders pull back from putting up new homes.<\/p>\n\n\n\n \u201cA lot of those builders are saying, \u2018Whoa, OK, let\u2019s just sell and fill in what we got and stockpile materials as is possible,\u2019\u201d Negris said. Apartment builders, who have already been facing tough market conditions, are especially eager to sock away supplies, he added.<\/p>\n\n\n\n Basu also said the outlook for multifamily construction looks tough. \u201cIf the cost of building these products becomes more expensive, it makes it even less likely these projects move forward, at least in the near term,\u201d he said.<\/p>\n\n\n\n