Tariffs and homes

Tariffs on lumber and appliances set stage for higher costs on new homes and remodeling projects

Shopping for a new home? Ready to renovate your kitchen or install a new deck? You’ll be paying more to do so.

The Trump administration’s tariffs on imported goods from Canada, Mexico and China — some already in place, others set to take effect in a few weeks — are already driving up the cost of building materials used in new residential construction and home remodeling projects.

The tariffs are projected to raise the costs that go into building a single-family home in the U.S. by $7,500 to $10,000, according to the National Association of Home Builders. Such costs are typically passed along to the homebuyer in the form of higher prices, which could hurt demand at a time when the U.S. housing market remains in a slump and many builders are having to offer buyers costly incentives to drum up sales.

We Buy Houses in San Francisco, which purchases foreclosed homes and then typically renovates and sells them, is increasing prices on its refurbished properties between 7% and 12%. That’s even after saving $52,000 in costs by stockpiling 62% more Canadian lumber than usual.

“The uncertainty of how long these tariffs will continue has been the most challenging aspect of our planning,” said CEO Mamta Saini.

Bad timing for builders

The timing of the tariffs couldn’t be worse for homebuilders and the home remodeling industry, as this is typically the busiest time of year for home sales. The prospect of a trade war has roiled the stock market and stoked worries about the economy, which could lead many would-be homebuyers to remain on the sidelines.

“Rising costs due to tariffs on imports will leave builders with few options,” said Danielle Hale, chief economist at Realtor.com. “They can choose to pass higher costs along to consumers, which will mean higher home prices, or try to use less of these materials, which will mean smaller homes.”

Prices for building materials, including lumber, have been rising, even though the White House has delayed its tariffs rollout on some products. Lumber futures jumped to $658.71 per thousand board feet on March 4, reaching their highest level in more than two years.

The increase is already inflating costs for construction projects.

Dana Schnipper, a partner at building materials supplier JC Ryan in Farmingdale, New York, sourced wooden doors and frames for an apartment complex in Nassau County from a company in Canada that cost less than the American equivalent.

Half the job has already been supplied. But once the tariff goes into effect it will be applied to the remaining $75,000, adding $19,000 to the at-cost total. Once JC Ryan applies its mark up, that means the customer will owe $30,000 more than originally planned, Schnipper said.

He also expects the tariffs will give American manufacturers cover to raise prices on steel components.

“These prices will never come down,” Schnipper said. “Whatever is going to happen, these things will be sticky and hopefully we’re good enough as a small business, that we can absorb some of that. We can’t certainly absorb all of it, so I don’t know. It’s going to be an interesting couple of months.”

Sidestepping the tariffs by using an alternative to imported building materials isn’t always an option.

Bar Zakheim, owner of Better Place Design & Build, a contracting business in San Diego that specializes in building accessible dwelling units, or ADUs, said Canada remains the best source for lumber.

By sticking with imported lumber, Zakheim had to raise his prices about 15% compared with a year ago. He also has 8% fewer jobs lined up compared with last year.

“I’m not about to go out of business, but it’s looking to be a slow, expensive year for us,” he said.

Tariffs rollercoaster

On March 6, the Trump administration announced a one-month delay on its 25% tariffs on certain imports from Mexico and Canada, including softwood lumber. Tariffs of 20% on imports from China are already in effect. A 25% tariff on steel and aluminum imports — 50% on those from Canada — kicked in on March 12.

Tariffs on Mexican and Canadian goods slated to go into effect next month will raise the cost of imported construction materials by more than $3 billion, according to the NAHB. Those price hikes would be in addition to a 14.5% tariff on Canadian lumber previously imposed by the U.S., ratcheting up tariffs on Canadian lumber to 39.5%.

Building materials costs overall are already up 34% since December 2020, according to the NAHB.

Builders depend on raw materials, appliances and many other components produced abroad. About 7.3% of all products used in single-family home and apartment building construction are imported. Of those, nearly a quarter come from Canada and Mexico, according to the NAHB.

Both nations also account for 70% of the imports of two key home construction materials: lumber and gypsum. Canadian lumber is used in everything from framing to cabinetry and furniture. Mexican gypsum is used to make drywall.

Beyond raw materials, refrigerators, washing machines, air conditioners and an array of other home components are manufactured in Mexico and China, which is also a key source of steel and aluminum.

The tariffs will mean higher prices for home improvement shoppers, said Dent Johnson, president of True Value Hardware, which operates more than 4,000 independently owned hardware stores.

“The reality is that many products on the shelves of your local hardware store will eventually be affected,” he said in a statement emailed to The Associated Press.

Chilling effect

Confusion over the timing and scope of the tariffs, and their impact on the economy, could have a bigger chilling effect on the new-home market than higher prices.

“If consumers can’t plan, if builders can’t plan, it gets very difficult to know how to price product because you don’t know what price you need to move it,” said Carl Reichardt, a homebuilding analyst at BTIG. “If people are worried about their jobs, worried about the future, it’s very difficult to make the decision to buy a new home, whatever the price.”

The uncertainty created by the Trump administration’s tariffs policy will probably result in increased volatility for home sales and new home construction this year, said Robert Dietz, the NAHB’s chief economist.

Still, because it can take several months for a home to be built, the larger impact of from building materials costs are going to happen “down the road,” Dietz said.

The impact tariffs are having on consumers is already evident at Slutsky Lumber in Ellenville, N.Y.

“There are not as many people getting ready for spring like they usually are,” said co-owner Jonathan Falcon. “It seems like people are just cutting back on spending.”

Falcon also worries that smaller businesses like his will have a tough time absorbing the impact of the tariffs.

“This is just like another thing that’s going to be harder for small lumber yards to handle than the big guys and just sort of keep driving businesses like us to not make it,” he said. ALEX VEIGA & MAE ANDERSON, MDT/AP