US builders are now stockpiling lumber, windows and other essential building materials to avoid price increases triggered by tariffs on Canadian, Mexican and Chinese imports. It comes as the Wall Street Journal reports that contractors like Idaho-based Steve Martinez are expanding their inventory by one-third, spending hundreds of thousands of dollars out of pocket after lenders refused to finance their purchases.
“I can’t keep ping-ponging back and forth,” Martinez said, one of several panicked builders left flat-footed after Trump backtracked on a threat to slap Canadian lumber with tariffs last week. On Sunday, Wood Central reported that the National Association of House Builders reported that tariffs on building materials could add between $7500 and $10000 to the cost of a single-family house.
“For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability. In effect, the tariffs act as a tax on American builders, home buyers and consumers.”
The National Association of House Builders has taken credit for Donald Trump delaying tariffs on Canadian lumber.
And to navigate costs, builders are looking for alternatives – including Cleveland developer Andrew Gotlieb, who is switching out Candian-grown Douglas fir for locally grown Southern Yellow Pine – a more cost-effective solution that nonetheless requires additional treatment for structural use. Then there is Rene Bello, the CEO of Flordia-based development firm BLDG Ventures, who is shifting to prefab to build high-rise condos in Miami at speed.
The problem is that at a time when demand has never been higher – with the shortage of house units estimated to be 7 million right now – confidence amongst builders is on the slide, with the S&P 1500 Homebuilding Sub-Industy Index down 17% over the past three months.
Investor confidence in publicly traded builders is “decidedly negative,” said UBS Research Managing Director John Lovallo, with tariff-led concerns “starting as soon as the November election,” according to Robert Dietz, the chief economist for the National Association of House Builders.
And with high home prices and mortgage rates, builders plan to lean harder into incentives like mortgage buydowns and all-cash discounts to prevent buyers from walking away. “Buydowns are essential to keeping people in these markets,” said Dan Dunmoyer, president of the California Building Industry Association. “If anything, tariffs will make them a greater necessity.”
- To read more about the impact of tariffs on lumber prices, click here for Wood Central’s article from Monday.
