The news: Several US housing-related reports this week show the industry still faces major constraints as a new tariff on critical home products is set to take effect.

• Housing starts plunged about 10% in May from April to 1.26 million and are down 4.6% YoY, per the US Census Bureau.
• May building permits fell 2% to 1.39 million from 1.42 million in April and were 1% lower YoY.
• New home completions fell 5.4% in May from April and are off 2.2% YoY.

The reports mark another setback for the housing market, which shows little sign of rebounding as building costs rise and elevated mortgage rates lock many buyers out of homeownership. Inflation and concerns about the potential effects of tariffs are leading many consumers to pull back discretionary purchases, which is hurting retailers like At Home, which filed for Chapter 11 bankruptcy protection this week.

Price cuts: The uncertain economic landscape is weighing on homebuilders as well as consumers. The National Association of Home Builders/Wells Fargo Housing Index, a measure of builder confidence, fell 2 points to 32, its lowest level since December 2022. That report indicated 37% of builders were paring prices.

The homebuilder Lennar said earlier this year it had cut prices, offered mortgage-rate buydowns, and assisted buyers with closing costs to complete sales. “Even in our strongest performing markets, buyers needed the assistance of incentives,” co-CEO and president Jon Jaffe said during a Tuesday earnings call.

Another tariff: Compounding the housing sector’s challenges, a 50% tariff on imported steel derivative goods is set to start on June 23, per the Commerce Department. That fee will be levied on the steel and aluminum content of products like washing machines, dishwashers, refrigerators, dryers, and stoves.

Those costs will likely be passed on, adding new pressure for consumers just as the government’s latest retail sales report showed signs of weakening, with appliance and electronics sales falling 0.6% in May from April and down 1.9% YoY.

Our take: The declining housing market, falling builder confidence, and a fresh tariff on essential goods present additional hurdles for the US home sector. As affordability challenges continue to grow in the absence of any policy changes, the road to recovery may become cloudier for home builders, buyers, and retailers in the near term.

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