U.S. homebuilders drop on worries about rising interest rates, Trump tariffs
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Shares of U.S. homebuilders fell sharply on concerns that interest rates will remain higher for longer and that President-elect Donald Trump’s potential tariffs and mass deportations will raise construction costs.
Since Trump won the election in November, the S&P 500 homebuilding index has fallen 17.3% to its lowest level since July. U.S. steelmakers and home furnishings groups also suffered a sell-off after two years of post-pandemic boom.
Shares of DR Horton, the largest U.S. homebuilder, have fallen 17% in the two months since Trump’s victory. Homebuilding giants Lennar and PulteGroup fell 21% and 15%, respectively, during the same period. The three largest homebuilders lost a combined $76 billion in market value.
The decline marks a sharp reversal from the first three quarters of last year, when homebuilder shares soared as new sales rebounded even as interest rates remained at their highest levels since 2001.
Although the average 30-year mortgage rate remained above 6% at the end of last year, the Federal Reserve’s consecutive interest rate cuts since September have provided a further boost to the residential construction industry.
But a post-pandemic buildup in the inventory of new and completed homes has begun to weigh on supply, with data from the St. Louis Reserve Bank showing that the number of homes under construction has slowed over the past year.
Investor sentiment has particularly deteriorated over the past two months. “It is [Trump’s] Policy, interest rate outlook, rising inventories. . . Things have definitely changed on the ground compared to a year ago.
Forecasts released by the Federal Reserve in mid-December showed that interest rates would fall less than previously expected in 2025. Analysts and companies are concerned that Trump’s “America First” policies could increase costs for everything from construction materials to access to labor.
Trump promises to deport millions of immigrants. According to the U.S. Census Bureau, more than a quarter of construction workers are immigrants and 13 percent are unlicensed, the highest rate of any industry.
In December, Barclays downgraded DR Horton, PulteGroup and KB Home, writing in a note to clients that tariffs on key building materials including steel, as well as immigration restrictions and rising housing inventories, meant A “low-rate utopia” for homebuilders. . . Full of obstacles”.
Barclays analyst Matthew Bowley said the construction market “has now hit its ceiling”.
