Impact on home prices
Builders may now be forced to adjust their budgets, and extra costs passed directly onto consumers. This can be a serious blow to potential homeowners, especially those in the first-time buyer segment, where affordability is already a major issue.
The NAHB estimates about 7% of all goods used in new residential construction in the U.S. come from other countries. Two essential materials, however, are largely sourced from America's neighbors to the north and south. Of $8.2 billion worth of sawmill and wood products imported in 2024, nearly 72% came from Canada. In addition, $481 million worth of lime and gypsum products were imported, with 74% coming from Mexico. Gypsum is used for drywall.
"Tariffs on lumber and other building materials increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices," NAHB chairman Carl Harris said in a news release reacting to Trump's proposed tariffs against Canada and Mexico back in February.
An uptick in construction costs may contribute to the ongoing trend of high home prices across the U.S. The median sale price of a house in the fourth quarter of 2024 was $419,200, according to the Federal Reserve Bank of St. Louis. Add to that elevated mortgage rates, which remain close to 7%, and buying a home continues to be a hard financial pill to swallow.
Beyond that, even the price of tackling renovations or home repairs may go up if there's an increase in the cost of drywall, wood, steel and household appliances.
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Learn MoreDomestic production
One of Trump's stated goals of issuing tariffs is to increase dependency on products made within the U.S. To that end, the president signed an executive order March 1 to streamline domestic lumber production.
But while this might help in the long term, ramping up domestic production right away is easier said than done. Paul Jannke, principal at Forest Economic Advisors, told CNBC it could take years to build up new mills. He explained there are few companies that can manufacture sawmill machinery, and even fewer able to construct a mill in full.
On top of that, skilled laborers are needed to operate mills, which are often located in rural areas. This means more time could be needed to find workers before a mill can operate at full capacity. And the number of loggers and haulers is already lean and decreasing, according to the broadcaster.
"In the short term it is going to be very volatile from a pricing perspective," Kyle Little, chief operating officer at Sherwood Lumber, told CNBC.
As for the challenge of increasing production, he added: "That won't be a flip of a switch. You're taking a 40-year supply chain and trying to switch overnight — that's hard."
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