U.S. tariffs on imported goods are changing how one major home construction player advises customers. It’s begun working with builders to swap out products for more inexpensive ones and reconsidering home designs.
National supplier Builders FirstSource said it’s working with its customers to find lower-cost “compromises” on materials and design to help keep home prices steady amid tariffs, which range from 25% on products from Mexico and Canada to 125% on imports from China. The Irving, Texas-based firm sells products to developers and contractors, such as lumber, cabinets, roofing, drywall, siding, windows and doors, in 43 states.
“One of the common areas of focus is whether or not there’s just a substitute that beats the job, but does it in a more efficient way or take it out entirely,” CEO Peter Jackson said Thursday on the company’s first-quarter earnings call. “Those are the areas we’ve been partnering with our customers on. ... Where can the design help take cost out, where can individual product categories be adapted to the dynamics of what they’re trying to meet in order to be the most efficient possible?”
It’s estimated that tariffs will increase U.S. home prices by up to $10,900, according to the National Association of Home Builders. Last week, several major builders noted much smaller hikes in the single-digit-percentage range. Pulte Homes projected prices will rise by $5,000 in the fourth quarter, while Taylor Morrison expects a low-single-digit percentage price increase by the same time.
Even before tariffs ramped up last month, affordability was a major concern for builders. They see homebuyers pulling back due to rising prices, and 61% of builders recently said they offer incentives to attract buyers, according to the NAHB’s April builder survey. The median price of a new home in the United States is $403,600, Census Bureau data shows.
Builders FirstSource plans to pass on tariff costs to its customers, according to Chief Financial Officer Pete Beckman.
“Our intent is to pass it through, but we will work with our customer partners. We’re going to continue to figure out the right approach and dealing with affordability challenges as the tariffs are coming through, but the expectation is that the cost that’s increased will need to go through,” he said.
Tariffs are expected to cost Builders FirstSource between $175 million and $250 million for the year, Beckman said on the call, but he conceded that’s just a guess given the uncertainty of the true impact. The company still plans to turn a profit in 2025 but adjusted its full-year guidance slightly for net sales to $16.05 billion to $17.05 billion, down from $16.5 billion to $17.5 billion.
A quarter of Builders FirstSource’s sales come from lumber, and 25% of the softwood lumber in the U.S. comes from Canada, according to the NAHB. With the United States-Mexico-Canada Agreement — which gives tariff exemption on some products wholly sourced in North America — the supplier anticipates lumber being protected, but upcoming “substantial” adjustments to an existing duty pose another threat. Currently, the tax on softwood lumber imported from Canada is 14.54%, but it’s set to rise to 34.45%.
Builders FirstSource’s overall net sales decreased 6% during the first quarter on an annual basis and dropped 5.9% specifically for single-family sales, which the company attributed to fewer construction starts, a lower value per house, and weather.
The company has previously said new homes are getting smaller and more “simple,” requiring fewer materials. As a result, that has led to a decrease in customer orders. Housing starts dropped to the lowest level in eight months in March amid tariff concerns, according to data from the Census Bureau. March single-family starts were down 14.2% from February and down 9.6% from a year prior. Builders FirstSource anticipates single-family starts to decline modestly this year by mid-single-digit percentages.