U.S. homebuilders have warned that President Donald Trump‘s sweeping global tariffs have driven up the average cost of building a new home by nearly $11,000 — more than was originally feared.
Why It Matters
Trump campaigned on the promise of lowering housing costs and boosting inventory through deregulation and the mass deportation of migrants. However, experts have warned that his tariffs are likely to raise prices for Americans.
With the country still facing a housing affordability crisis, rising construction costs due to tariffs could discourage builders from embarking on new developments or force them to pass on price rises to buyers.
Builders working on a rooftop in New York in March. Homebuilders have warned that President Donald Trump’s global tariffs have driven up the average cost of building a new home by nearly $11,000.
Robert Nickelsberg/Getty Images)
What To Know
A total of 60 percent of builders reported that their suppliers had already increased the cost of materials or intended to raise prices due to Trump’s tariffs, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) survey released on Wednesday.
On average, homebuilders said their suppliers had increased prices by 6.3 percent, equating to increased construction costs of $10,900 per home. This was up from an estimated increase of $9,200, as reported in March.
Separately, the NAHB/HMI report showed that homebuilders’ sentiment remains low at an HMI score of 40 in April, although it had inched up by one point since March. Any reading below 50 indicates a negative sentiment.
The report also revealed that builders are also being forced to slash selling prices to entice reluctant buyers, as high mortgage rates and soaring prices force many aspiring homeowners to the sidelines of the market.
A total of 29 percent of builders cut prices in April, the same as in March, according to the report. Meanwhile, the average price reduction was five percent in April, the same rate as in March.
What People Are Saying
NAHB chief economist Robert Dietz said in a statement: “Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions. The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariffs.”
NAHB chairman Buddy Hughes said: “The recent dip in mortgage rates might have pushed some buyers off the fence in March, helping builders with sales activity. At the same time, builders have expressed growing uncertainty over market conditions as tariffs have increased price volatility for building materials at a time when the industry continues to grapple with labor shortages and a lack of buildable lots.”
Anirban Basu, the Associated Builders and Contractors’ chief economist, told Newsweek previously:”Tariffs have boosted materials prices directly by raising the cost of importing certain materials. This allows domestic producers to raise their prices, which is reflected in the April 11 Producer Price Index increases observed for certain construction inputs. There has also been a rush to order materials prior to tariff implementation, and that short-term surge in demand has also put upward pressure on materials prices.”
What Happens Next
Homebuilders may decide to pass on higher building costs following Trump’s tariffs to buyers, making it even more challenging to get onto the property ladder.