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Report from
North America
Builder earnings signal soft new home market
Housing starts, a measure of home construction, dropped
to an annual rate of 1.324 million units in March, a 11.4%
decline from February according to new Census Bureau
data. That marked the steepest plunge in a year.
Home-building giant D.R. Horton signaled that the market
for new homes is shaping up worse than anticipated. The
company has missed earnings expectations and cut its full-
year guidance, citing a slower selling season than it had
hoped for.
Stubbornly high home prices and high mortgage rates have
kept home buyers on the sidelines for months forcing
many builders to offer incentives and discounts to close
their contracts.
Threats of tariffs threaten to hobble the market for new
homes further. Economists say that the trade war is
increasing the likelihood of an economic recession.
Americans tend to postpone big purchases when they are
concerned about a slumping economy, fearing that their
jobs may be at risk, or worry about stock-market losses.
Home builders are also vulnerable to higher costs for steel,
glass and other imported materials. About 7% of the oods
used in residential construction are imported, primarily
from Canada, Mexico and China, which are among the
countries targeted by tariff actions. The administration’s
deportation of workers without permanent legal status is
another blow to an industry that relies, to some extent, on
these labourers.
Single-family-home construction led the housing-starts
slowdown with a 14.2% decline from February and a 9.7%
drop from the year before. The price of new homes has
eased from the peak as builders offer mortgage-rate
buydowns and other incentives to clear inventory but
inventory levels of newly built homes remain at their
highest in 16 years.
There were some bright spots. Housing starts in the
Midwest were 76% higher than in February and permits
for new housing units, a metric of future construction,
ticked up slightly with a 2% increase from February.
Canadian housing starts fell in March to their lowest level
in seven months missing market expectations by a wide
margin. Housing starts across Canada came in at a
seasonally adjusted annualised rate of 214,155 units, a 3%
drop from the month before, Canada Mortgage and
Housing Corp. said.
The drop in March was the second straight month that
housing starts weakened and comes at a time of
heightened economic uncertainty due to US trade policy.
Builder confidence indicate slow start for spring
housing season
Growing economic uncertainty stemming from tariff
concerns and elevated building material costs kept builder
sentiment in negative territory in April, despite a modest
bump in confidence likely due to a slight retreat in
mortgage interest rates in recent weeks.
Builder confidence in the market for newly built single-
family homes was at 40 in April, edging up one point from
March, according to the National Association of Home
Builders (NAHB)/Wells Fargo Housing Market Index
(HMI).
“The recent dip in mortgage rates may have encouraged
some buyers in March helping builders with sales
activity,” said NAHB Chairman Buddy Hughes. “At the
same time, builders have expressed growing uncertainty
over market conditions as tariffs have increased price
volatility for building materials at a time when the industry
continues to grapple with labor shortages and a lack of
buildable lots.”
“Policy uncertainty is having a negative impact on home
builders, making it difficult for them to accurately price
homes and make critical business decisions,” said NAHB
Chief Economist Robert Dietz.
When asked about the impact of tariffs on their business,
60% of builders reported their suppliers have already
increased or announced increases of material prices due to
tariffs. On average, suppliers have increased their prices
by 6.3% in response to announced, enacted, or expected
tariffs. This means builders estimate a typical cost effect
from recent tariff actions at $10,900 per home.
The latest HMI survey also revealed that 29% of builders
cut home prices in April, unchanged from March.
Meanwhile, the average price reduction was 5% in April,
the same rate as the previous month. The use of sales
incentives was 61% in April, up from 59% in March.
April jobs report shows healthy economy despite tariff
concerns
Hiring in the US surged in March blowing past
economists' expectations and accelerating job growth from
the previous month according to the latest report from the
Labor Department. The US added 228,000 jobs in March.
That figure amounted to robust hiring and marked a major
increase from the 151,000 jobs added in the previous
month. The unemployment rate ticked up slightly to 4.2%,
but it remains historically low.
The uptick in hiring last month came despite staff cuts
imposed by the federal government amid cost-cutting
efforts undertaken by the Department of Government
Efficiency. Federal government employment declined by
4,000 jobs in March, following a drop of 11,000 jobs the
previous month.
Despite escalating trade tensions and market turbulence
since the new administration took over in January the
economy remains in solid shape by several key measures.
The unemployment rate stands at a historically low level.
Meanwhile, inflation sits well below a peak seen in 2022
though price increases registered nearly a percentage point
higher than the Fed's goal of 2%.
Job gains came primarily in health care, transportation and
warehousing. Employment showed little change over the
month in other major industries, including construction
and manufacturing.
See: https://www.bls.gov/news.release/empsit.nr0.htm
Consumer confidence continues to slide
Consumer sentiment soured even worse than expected in
April as the expected inflation level hit its highest since
1981 according to the University of Michigan survey. The
survey's mid-month reading on consumer sentiment fell to
50.8, down from 57.0 in March and below the Dow Jones
consensus estimate for 54.6.
The move represented a 11% monthly change and was
34% lower than a year ago. It was the lowest reading since
June 2022 and the second lowest in the survey's history
going back to 1952.
Respondents' expectations for inflation a year from now
leaped to 6.7%, the highest level since November 1981
and up from 5% in March.
Sentiment declines came across all demographics,
including age, income and political affiliation, according
to Joanne Hsu, the survey's director. "Consumers report
multiple warning signs that raise the risk of recession:
expectations for business conditions, personal finances,
incomes, inflation and labour markets all continued to
deteriorate this month," Hsu said.
See: http://www.sca.isr.umich.edu/
March contraction in manufacturing
US manufacturing activity declined in March reversing
two months of modest growth as new orders, production,
and employment all contracted according to the Institute
for Supply Management (ISM).
The ISM Manufacturing Purchasing Managers’ Index
(PMI) fell to 49%, down from 50.3% in February. A PMI
below 50 indicates contraction in the manufacturing
sector. While overall economic activity continued to
expand for the 59th straight month the manufacturing
downturn signals growing strain from tariffs, supply chain
uncertainty and global tensions.
Seven of the 16 industries surveyed by ISM reported
contraction in March with the Wood Products industry
reporting the largest decline. The Furniture & Related
Products industry also reported a decline in March.
See: https://www.ismworld.org/supply-management-news-and-
reports/reports/ism-report-on-business/
Tariffs on Canadian lumber could double
Tariffs on Canadian lumber entering the US are
anticipated to more than double by September, according
to the US National Association of Home Builders
(NAHB).
The US Department of Commerce has made a preliminary
determination to significantly increase tariffs on Canadian
lumber imports. The current combined countervailing and
anti-dumping duties of 14.5% may rise to 34.5% following
the annual review. The higher tariffs, resulting from a
longstanding trade dispute, are expected to come into
effect after a final review in August or September.
This move is separate from the global reciprocal tariffs
announced by the US governmrnt which has maintained
exemptions for Canadian lumber under the new tariffs.
NAHB has expressed concern that tariffs could exceed
34.5% later in the year.
The association has filed a comment letter with the
Department of Commerce arguing that housing is a critical
component of national security and opposing further
tariffs. The worst-case scenario would be an additional
tariff on top of the proposed increase.
See: https://www.msn.com/en-us/money/markets/tariffs-on-
canadian-lumber-expected-to-double-by-september/ar-
AA1CCSqJ?ocid=HPCDHP
While other tariffs are delayed, US/China face-off
escalates
The US government has paused additional tariffs for most
counties in the world, keeping the minimum 10% across
the board reciprocal tariffs announced earlier in April.
However tariffs on goods from China were increased
sharply.
The HFA, a North American trade association dedicated to
supporting and advancing the interests of home
furnishings retailers, warned its members that these tariffs
would mean higher sourcing costs, potential inventory
shortages and a 15% drop in furniture imports for 2025.
The association urged its members to reevaluate supply
chains, communicate pricing adjustments and why and
prepare for possible freight and logistics delays.
According to the National Hardwood Lumber Association
exports to China have virtually stopped and the existing
ban on US logs remains in place. Even higher tariffs are
unlikely but access to the Chinese market will stay
severely restricted. This applies to shipments after April
10 arriving in China after May 13.
See:
https://www.woodworkingnetwork.com/news/woodworking-
industry-news/tit-tat-tariff-spat-continues-between-us-and-china
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