Tariffs Drive Up Homebuilding Costs as Small Businesses and Buyers Struggle With Soaring Prices

Homebuyers and renovators are facing higher costs due to the Trump administration’s tariffs on imported goods from Canada, Mexico, and China. These tariffs, some already in effect and others forthcoming, are significantly raising the cost of building materials. The National Association of Home Builders (NAHB) estimates that the tariffs could add between $7,500 to $10,000 to the cost of constructing a single-family home, potentially pushing prices higher for buyers during an already sluggish housing market.

Companies like We Buy Houses in San Francisco are increasing prices by 7% to 12% on renovated properties despite preemptive stockpiling of Canadian lumber. CEO Mamta Saini cited the unpredictability of the tariff timeline as a major planning challenge. The surge in material costs is forcing builders to either raise home prices or reduce the size of new homes, both of which could discourage prospective buyers during the peak homebuying season.

Lumber Prices Surge as Builders Struggle With Tariff Costs and Limited Alternatives

Building material costs, particularly for lumber, have soared even before the full impact of tariffs. For example, lumber futures peaked at $658.71 per thousand board feet. Suppliers like JC Ryan in New York are seeing substantial increases, with one project’s costs expected to jump by $30,000 due to new tariffs. Smaller businesses are struggling to absorb these costs, and American manufacturers are also raising prices, adding long-term financial pressure on the construction industry.

Builders have few alternatives to avoid tariff impacts, especially for materials like Canadian lumber, which remains the preferred choice for quality and price. San Diego contractor Bar Zakheim reports raising his prices by about 15% and experiencing an 8% decline in job orders. Despite the cost pressures, switching to American alternatives isn’t always feasible, suggesting that builders and contractors are largely stuck with higher costs for the foreseeable future.

Tariffs Inflate Material Costs, Disrupt Markets, and Threaten Small Businesses in Construction Industry

Newly imposed and proposed tariffs on Canadian, Mexican, and Chinese goods are expected to raise the cost of imported construction materials by over $3 billion. The overall cost of building materials has already climbed 34% since late 2020. Many critical home construction components, like lumber, gypsum, steel, and aluminum, come from these countries. Appliances such as refrigerators and washing machines, largely manufactured in Mexico and China, are also becoming more expensive, impacting both builders and consumers.

The uncertainty around tariff implementation is affecting consumer confidence and builder planning. Analysts note that unpredictable pricing and economic concerns are likely to deter people from buying new homes. Homebuilding analyst Carl Reichardt warned that confusion over future costs makes it difficult for both consumers and builders to make informed decisions, potentially slowing down the housing market even more.

Small businesses, especially independent lumberyards like Slutsky Lumber in New York, are feeling the financial pressure from rising costs. Co-owner Jonathan Falcon observed a decline in consumer spending as people become cautious amid tariff-induced price hikes. Small operations are finding it harder to compete with larger companies that can better absorb the impact, threatening the survival of many small, local businesses in the construction supply chain.