Tariffs will increase the cost of building a home by $10,900
Tariffs have continued to drive up material costs for US homebuilders, complicating their pricing strategies and adding further pressure to an already challenged housing market.
In April, a report from the National Association of Home Builders (NAHB) and Wells Fargo revealed a one-point increase in their builder confidence index, reaching 40.
While this marks a modest improvement from previous months, the index remains near some of its lowest levels since late 2023. The rise in construction material costs, largely due to tariffs imposed during the Trump administration, has been a significant concern.
NAHB estimates these tariffs will increase the cost of building a home by $10,900. Around 60% of builders surveyed reported that their suppliers have already raised prices or announced upcoming price hikes. These additional costs are making it more difficult for builders to adjust prices and plan for the future.
Despite this, the report also showed that some builders are seeing slight gains in current market conditions. Both sales of single-family homes and traffic from prospective buyers saw minor improvements in April.
However, expectations for future sales remained low, with builder sentiment for the next six months dropping 4 points to 43, the lowest level since November 2023.
Bloomberg reported that the challenges facing builders are not only due to increased material costs but also high home prices and mortgage rates, which recently rose to 6.81%. These factors are deterring potential buyers, and while home prices remain near record highs, many builders are turning to sales incentives to attract customers.
According to the NAHB survey, 61% of builders offered incentives in April, while 29% reported reducing home prices—figures that have remained steady in recent months.
Regionally, builder sentiment showed varied trends.
Confidence in the South, the largest home-selling region, declined by 1 point to its lowest level since November 2023. The Northeast saw a sharper drop, reaching its lowest level in more than two years, while the Midwest and West experienced slight increases.
As the housing market navigates these challenges, the federal government is set to release housing starts data for March today, providing further insights into the state of new residential construction.
How do you think the rising cost of materials and tariffs will affect the housing market in the coming months? Share your thoughts in the comments.
