U.S. Homebuilder Sentiment Falls Amid Tariffs and Rising Rates, Homebuyers Shift to Remodeled Homes; Compass Earnings Report

1 Credits

US Homebuilder Sentiment Falls Amid Tariffs and Rising Rates

U.S. homebuilder sentiment has fallen to a five-month low in February, reflecting growing concerns over the impact of tariffs and higher mortgage rates on housing costs. The National Association of Home Builders/Wells Fargo Housing Market Index dropped five points to 42, marking the lowest level since September. This decline has erased the gains seen in late 2016, when sentiment had improved following President Donald Trump’s election, fueled by expectations of a more business-friendly regulatory environment.

A key factor contributing to the drop in sentiment is the rising cost of materials due to tariffs. In early 2017, the administration imposed a 10% tariff on goods imported from China and increased tariffs on steel and aluminum imports to 25% in February 2025. Additionally, a 25% tariff on imports from Mexico and Canada remains suspended until March. These tariffs are particularly concerning for homebuilders, who rely heavily on imported materials like softwood lumber and appliances. According to NAHB Chief Economist Robert Dietz, 32% of appliances and 30% of softwood lumber used in homebuilding come from international trade, making builders particularly vulnerable to rising material costs.

The sentiment drop mirrors a broader decline in consumer sentiment, with concerns over the housing market contributing to uncertainty. Builders are holding out hope for regulatory reforms and pro-development policies, but NAHB Chairman Carl Harris noted that policy uncertainty and rising costs have caused a reset in expectations for 2025.

Source: Link

Homebuyers Shift to Remodeled Homes

In the latest Zillow report, homebuyers are increasingly turning away from fixer-uppers, opting instead for remodeled homes, which now sell for a 3.7% premium, or about $13,000 more than expected. This marks the highest premium for remodeled homes in recent years. Zillow found that remodeled listings get 26% more daily saves and are shared 30% more often, indicating higher buyer interest.

On the flip side, fixer-uppers are now selling at a 7.3% discount compared to similar homes, the biggest drop in three years. Despite the lower price, the rising costs of renovations, combined with high interest rates, mean buyers may not be saving as much as they think. This shift marks the end of the “fixer-upper” era, which was once a popular option for budget-conscious buyers. As the market adjusts, newly renovated homes are now becoming the go-to choice for many.

Source: Link

Compass Earnings Report

Compass, Inc. has reported strong growth in its Q4 and full-year results for 2024, despite a challenging real estate market. In the fourth quarter, the tech-enabled real estate company saw a 25.9% year-over-year revenue increase, reaching $1.4 billion. Organic revenue growth was up 20.9%, and transactions grew by 24.1%, outpacing the industry’s 6.8% growth.

Market share for the quarter climbed 65 basis points to 5.06%, with organic market share also up. The company delivered a positive operating cash flow of $30.5 million for Q4 and $122 million for the full year.

CEO Robert Reffkin is optimistic for 2025, highlighting Compass’ structural advantages, including its national scale and tech platform. Compass also generated over $150 million in cash flow, excluding the NAR-related settlement, and ended the year with a solid cash position of $223.8 million.

Source: Link

About “3 Things You Need to Know” on OnTrack Agent.

3 Things You Need to Know” delivers concise, no-nonsense real estate news, ensuring that agents stay informed and ahead of the curve.

Stripping away editorial commentary, the show focuses on the key developments shaping the real estate industry and the broader U.S. economy.

Whether it’s market trends, legislative changes, or economic shifts, each episode distills the most important information into easily digestible segments.

Designed specifically for real estate professionals, “3 Things You Need to Know” equips agents with the insights they need to make informed decisions and thrive in a competitive landscape.

Stay connected to the pulse of the industry with timely updates that matter each weekday, Monday through Friday.

 

3 Things You Need to Know – Copyright 2025 – OnTrack Agent

Buy Now

---