US homebuilder shares slide on fears of higher rates and Trump tariffs

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Shares of U.S. homebuilders fell as interest rates remain high for a longer period of time, fueling concerns that President-elect Donald Trump’s potential tariffs and mass deportations will drive up construction costs.

The S&P 500 homebuilding index fell 17.3 percent to its lowest level since July since Trump won the election in November. US steelmakers and home furnishings groups also suffered a sell-off after a two-year post-pandemic boom.

Shares of DR Horton, America’s largest homebuilder, have fallen 17 percent in the two months since Trump’s victory. Residential construction giants Lennar and Pult Group lost 21 percent and 15 percent over the same period. The three homebuilders combined spent $76bn in market value.

The decline marked a sharp reversal from the first three-quarters of last year, when homebuilders’ shares rose as new sales rebounded despite interest rates standing at their highest level since 2001.

While the average 30-year mortgage rate was above 6 percent at the end of last year, a series of rate cuts by the Federal Reserve since September has given the homebuilding sector a boost.

But a growing inventory of new and completed homes built after the pandemic is starting to weigh on supply, data from the Reserve Bank of St. Louis shows. A recession over the past year Number of housing units under construction.

The mood among investors has soured especially in the last two months. it is [Trump’s] Policy, outlook for rates, growing list. . . The situation on the ground has definitely changed compared to a year ago,” said Jonathan Woloshin, analyst at UBS Wealth Management.

Interest rates will fall less than previously expected in 2025, according to a forecast released by the Fed in mid-December. Both analysts and companies worry that Trump’s “America First” policies could raise costs ranging from building materials to access to labor.

Trump has promised to deport millions of immigrants. Only a quarter of construction workers are immigrants and 13 percent of workers are unauthorizedThe largest share of any sector, according to US Census Bureau data.

In December, Barclays downgraded DR Horton, Pultegroup and KB Home, writing in a note to clients that a mix of tariffs on essential construction materials including steel — as well as curbs on immigration and rising home inventories — meant a “low interest rate utopia” for homebuilders. . . Full of obstacles.”

Matthew Boley, an analyst at Barclays, said the construction market “has now reached a ceiling”.