The National Association of Home Builders (NAHB) has raised alarms about the potential impact of President Donald Trump's tariffs on the housing industry. The organization estimates that these tariffs could increase material costs for the average new home by as much as $10,000. This development stems from Trump's proposed 25% tariff on imports from Canada and Mexico, which could raise total costs for construction materials by more than $3 billion.
Softwood lumber, gypsum, steel, and aluminum are among the key materials affected by these tariffs. The NAHB reports that softwood lumber is predominantly sourced from Canada, while gypsum, a vital component of drywall, comes primarily from Mexico. Furthermore, steel and aluminum imports, along with completed home appliances, often come from China. Despite a temporary pause on tariffs for some Canadian and Mexican imports, the administration has moved forward with an additional hike on levies from China, increasing duties to 20%.
Taylor Morrison Home recently held its first-ever investor day, highlighting concerns within the industry. Ali Wolf, chief economist at housing data provider Zonda, emphasized the potential workforce challenges that builders in border states may face if Trump's mass deportation promises lead to a reduced workforce.
"With that being said, when you look at some of the policies — tariffs, immigration, interest rates — all of these disproportionately negatively impact our industry," said Wolf.
Builders such as K.B. Home and D.R. Horton have been assessing the situation closely. Earlier this year, K.B. Home's Chief Operating Officer Robert McGibney stated that the company sources a "majority" of its products domestically, potentially mitigating some of the impacts. Meanwhile, D.R. Horton estimates that around 20% of its lumber comes from Canada.
The impact of these tariffs is also reflected in the performance of the SPDR S&P Homebuilders ETF (XHB), which has plunged more than 22% from highs seen in late November due to growing investor uncertainty. Zonda anticipates that Trump's tariffs could raise material costs for homebuilders between 6% and 14%.
In response to these financial pressures, Jessica Hansen, head of investor relations, outlined her firm's strategy to address rising costs.
"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," Hansen remarked.
The NAHB has received anecdotal reports from its members suggesting that Trump's planned levies could raise material prices by between $7,500 and $10,000 for the average new single-family home.