Economics
Tariffs to add as much as $10,000 to cost of average new home, trade group says
A home is constructed at a housing development on June 21, 2023 in Lemont, Illinois.
Scott Olson | Getty Images
President Donald Trump‘s tariffs could increase material costs for the average new home by as much as $10,000, according to the National Association of Home Builders.
The trade group said it has received anecdotal reports from members that Trump’s plan for levies would raise material prices by between $7,500 and $10,000 for the average new single-family home. While the association is planning a formal survey in the future, this figure offers an early glimpse of what businesses and consumers can expect if Trump’s controversial taxes on Canadian and Mexican imports go forward as planned.
“For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability,” the association wrote in a blog post published last week. “In effect, the tariffs act as a tax on American builders, home buyers and consumers.”
Trump last week delayed 25% tariffs for some Canadian and Mexican imports by a month after implementing them just days earlier, a stunning reversal amid financial market turmoil. His additional hike to levies on China, which lifted duties on that nation’s goods to 20%, went forward.
The NAHB said softwood lumber is mainly sourced from Canada, while gypsum, a component of drywall, comes primarily from Mexico. Other materials like steel and aluminum — in addition to completed home appliances — are imported to the U.S. from China, the group said.
An implementation of the 25% tariff on Canada and Mexico as previously laid out by Trump would raise total costs for imported construction materials by more than $3 billion, according to the NAHB.
Homebuilders react
Homebuilders have had to respond to analysts and investors wondering what these taxes could mean for their bottom lines. The SPDR S&P Homebuilders ETF (XHB) has tumbled more than 22% from highs seen in late November as uncertainty rattled investors.
The SPDR S&P Homebuilders ETF over the last 6 months
For D.R. Horton, around 20% of lumber is estimated to come from Canada. The Texas-based firm, like others, has made strides in recent years to shift supply chains away from China coming out of the Covid pandemic. But it still has to contend with the possibility of new taxes on components coming from Mexico, said Jessica Hansen, head of investor relations.
Tallying a total impact is difficult given the potential for Trump’s policy to change and a lack of clarity about how much of certain products are imported, Hansen said at a Barclays conference last month.
There’s “really no way to proxy what that could ultimately cost, but we’ll navigate it like we do anything,” Hansen said. “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.”
There can also be a knock-on effect for builders that don’t rely as much on imports, like K.B. Home, whose Chief Operating Officer Robert McGibney said earlier this year sources a “majority” of products domestically. Tariffs can drive up prices for those American-made materials, he said, as competitors increase demand by localizing their supply chains.
Just last week, as international focus narrowed in on U.S. tariff policy, Taylor Morrison Home held its first-ever investor day. As part of the presentation, the homebuilder brought in Ali Wolf, chief economist at housing data provider Zonda, to explain the state of the market following years defined by high interest rates and little inventory.
Wolf said Zonda expects Trump’s tariffs to raise costs on materials for homebuilders between 6% and 14%. She also said builders in border states could also take a hit if Trump’s promise for mass deportations shrinks the workforce.
As Wolf evaluates where the market is heading in 2025, she said Trump is top of mind. The positive impact for homebuilders stemming from the administration’s posture for deregulation, she said, needs to be weighed against the concerns tied to immigration and trade policies.
“The first thing we’re paying attention to is the new administration: pro-growth, less regulation. We’re here for it. We love it,” Wolf said. “We want to see removing a lot of the red tape in particular that takes it particularly long to get new homes built.”
“With that being said, when you look at some of the policies — tariffs, immigration, interest rates — all of these disproportionately negatively impact our industry.”
Consumer optimism got a much-needed boost in May on hopes for trade pace between the U.S. and China, according to a survey Tuesday.
The Conference Board’s Consumer Confidence Index leaped to 98.0, a 12.3-point increase from April and much better than the Dow Jones consensus estimate for 86.0.
Much of the positive sentiment, according to board officials, came from developments in the U.S.-China trade impasse, most notably President Donald Trump’s halting of the most severe tariffs on May 12.
“The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards,” said Stephanie Guichard, the Conference Board’s senior economist for global indicators.
May’s rebound followed five straight months of declines. Consumers and investors had grown sour on economic prospects amid the intensifying trade war that Trump has launched against U.S. global trading partners, with China a particular target.
However, the two sides reached a truce in early May, marking the second major walk-back of Trump’s so-called reciprocal tariffs since he levied them in his April 2 “liberation day” announcement.
Other board sentiment indicators also increased.
The present situation index increased to 135.9, up 4.8 points, and the expectations index posted a major surge to 72.8, a 17.4 point gain. Investors also showed more optimism, with 44% now expecting stocks to be higher over the next 12 months, up 6.4 percentage points from April.
Views on the labor market also improved, with 19.2% of respondents expecting more jobs to be available in the next six months, compared to 13.9% in April. At the same time, 26.6% expect fewer jobs, down from 32.4%.
Survey officials said sentiment improved across age, income and political affiliation, though noting that the “strongest improvements” came from Republicans.
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