Shares of US homebuilders fell on concerns about higher interest rates and Trump’s tariffs

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U.S. homebuilder stocks fell as concerns that interest rates will remain high for longer heighten concerns that President-elect Donald Trump’s potential tariffs and mass deportations will push up construction costs.

Since Trump won the election in November, the S&P 500 homebuilding index has fallen 17.3 percent to its lowest level since July. Steel manufacturers and home furnishing groups in the United States also suffered selling after a two-year boom following the pandemic.

Shares of D.R. Horton, America’s largest homebuilder, fell 17 percent in the two months after Trump’s victory. Residential construction giants Lennar and PulteGroup lost 21 percent and 15 percent over the same period. The three homebuilders collectively lost $76 billion in market value.

The declines represent a sharp reversal from the first three quarters of last year, when homebuilder stocks rose as new sales rebounded even as interest rates remained at their highest level since 2001.

Although the average 30-year mortgage interest rate remained above 6 percent at the end of last year, successive interest rate cuts by the Federal Reserve since September have given the homebuilding sector another boost.

But rising inventories of new and completed homes built after the pandemic are starting to impact supply, Reserve Bank of St. Louis data shows. Slowdown over the past year In the number of housing units under construction.

The mood among investors has particularly deteriorated in the past two months. “It’s (Trump’s) policy, future interest rate expectations, rising inventories… The situation on the ground has definitely changed compared to last year,” said Jonathan Woloshin, an analyst at UBS Wealth Management in the US.

Projections released by the Federal Reserve in mid-December indicate that interest rates will fall less in 2025 than previously hoped. Both analysts and companies worry that Trump’s “America First” policies could raise a range of costs, from building materials to access to labor.

Trump has pledged to deport millions of immigrants. Just over a quarter of construction workers are immigrants 13% of workers are unlicensedthe largest share of any sector, according to US Census Bureau data.

In December, Barclays downgraded DR Horton, Bolte Group and KB Home, writing in a note to clients that a combination of tariffs on vital building materials including steel – as well as restrictions on immigration and rising housing inventories – meant “Homebuilders’ utopia of low interest rates.” . . . “fraught with obstacles.”

Matthew Pooley, an analyst at Barclays, said the construction market had “now hit the ceiling”.