Residential Building Contractors NAICS 2361

Apr 17, 2025 - Home Builders Already Impacted by Tariffs

• Despite pauses and exemptions for some products, home builders have started to feel the effects of Trump administration tariff policies, according to recent surveys by the National Association of Home Builders (NAHB). On April 9, the Trump administration paused its reciprocal tariff agenda for 90 days for most countries but left in place a baseline 10% import duty on all countries except China, which faces total tariffs of 145%. Canada and Mexico are not subject to the new 10% baseline tariffs, and goods trading under the US-Mexico-Canada Agreement will remain duty-free. However, on March 12, Trump imposed a 20% tariff against all steel and aluminum imports. Builder NAHB members recently reported that building materials suppliers have increased their prices by 5.5%, and remodelers report an increase of 6.9%. Uncertainty about how tariff policy unfolds could undermine consumer confidence and cause potential home buyers to postpone their plans.
• Construction spending for single-family homes is forecast to rise 3% in 2025, down from 7% growth in 2024, according to FMI’s second-quarter 2025 North American Engineering and Construction Outlook. Tariffs and tight immigration enforcement are expected to increase construction costs when housing affordability is low. FMI projects 30-year mortgage rates will remain between 6% and 7% at least through 2026. Meanwhile, inventories of unsold new homes are building to levels above historical norms. Multifamily construction spending is forecast to drop 12% in 2025 after falling 4% in 2024 amid a recent flood of new supply. However, cyclical market conditions are expected to improve starting in mid-2026, which should support steadier rent growth and multifamily housing starts.

• Prices for construction inputs rose 0.5% in March, marking the third consecutive month of increases, according to Associated Builders and Contractors (ABC) analysis of US Bureau of Labor Statistics data. Primarily driven by sharply high lumber, steel, copper, and natural gas prices, construction input costs in March increased 0.8% year-over-year. Suppliers increased their prices even before the tariffs took effect, which complicated builders' purchasing and pricing decisions, according to Associated General Contractors of America (AGC). Ken Simonson, AGC chief economist said, “Lumber and metals prices shot up in March, while contractors’ inboxes are bulging with ‘Dear valued customer’ letters announcing further increases for many products, Rapid-fire changes in tariffs threaten to drive prices higher for many essential construction goods.”
• Home builder confidence in the single-family market remained in negative territory in April 2025 amid mounting concerns about tariff threats, higher input costs, and economic uncertainty, according to the National Association of Home Builders (NAHB). As measured by the NAHB/Wells Fargo Housing Market Index (HMI), home builder sentiment rose one point to 40 in March from 39 the previous month. Any HMI reading over 50 indicates that more builders see conditions as good than poor. Builders face headwinds, including high materials costs being made worse by trade strife and labor and lot shortages. Trade policy uncertainty makes it difficult for builders to price homes accurately and engage in basic business planning.