Potential Cost Increase for New Homes

According to the National Association of Home Builders (NAHB), tariffs proposed by President Donald Trump could raise material costs for an average new single-family home by as much as $10,000. The NAHB has received preliminary reports indicating an expected increase in materials costs ranging from $7,500 to $10,000 should these tariffs be enacted.

“For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability,” the organization stated in a recent blog post. They argue that these tariffs essentially act as a tax burden, impacting American builders and homebuyers alike.

Details on Tariff Implementation

Recently, President Trump delayed the implementation of a 25% tariff on certain goods imported from Canada and Mexico, amid financial market uncertainty. While the tariffs on these imports may be postponed, the increase to tariffs on Chinese goods, now at 20%, remains in effect.

The NAHB has highlighted that key materials affected by these tariffs include softwood lumber sourced from Canada, drywall gypsum primarily imported from Mexico, and various steel products along with home appliances from China. Collectively, implementing the tariffs could increase costs of imported construction materials by over $3 billion.

Reactions From Homebuilders

In light of these developments, homebuilding companies are assessing the potential impact on their financial performance. The SPDR S&P Homebuilders ETF (XHB) has seen a decline of more than 22% from highs noted in late November, indicating growing investor uncertainty.

Jessica Hansen, head of investor relations at D.R. Horton, noted that approximately 20% of their lumber supply comes from Canada. Although the company has taken steps to reduce dependence on Chinese products post-COVID-19, uncertainties surrounding taxes on imports from Mexico remain a concern. Hansen expressed, “If we’ve got a cost category that’s inflating and we’re in a gross margin compressing environment, we’re going to renegotiate anything and everything that we can.”

Meanwhile, K.B. Home’s Chief Operating Officer, Robert McGibney, emphasized that tariffs could inadvertently elevate prices for domestically sourced materials as companies strive to localize supply chains.

Insights on Market Outlook

During their first investor day presentation, Taylor Morrison Home invited Ali Wolf, chief economist at housing data firm Zonda, to discuss the market trends. Wolf predicted that, should Trump’s tariffs go into effect, material costs for builders could rise between 6% and 14%. She noted that builders operating near the Mexican border might experience additional workforce challenges due to immigration policy changes under the Trump administration.

Looking ahead to 2025, Wolf remarked that while the deregulation push under Trump’s administration has beneficial implications for economic growth, concerns regarding tariffs and immigration policies continue to loom over the homebuilding industry.