Kevin Reed of Bluestone Construction in Asheville, North Carolina, began building houses 25 years ago, when lumber prices were about $350 per thousand board foot, and these days those prices are closer to $580. He said the cost could be driven up another 20% in the not-too-distant future.
With new 25% tariffs on goods imported from Mexico and Canada and a 10% charge on Chinese products set to be imposed by the Trump administration, costs could reach $700 per thousand board foot, Reed speculates. He added that the steep increase would pass directly on to his clients.
Beginning late last week, homebuilders called on President Donald Trump to exclude building materials from the tariffs, noting that more expensive material costs result in higher home prices and slower construction. They say it’s a hike too steep for businesses to absorb.
After rounds of talks with the U.S. government, Canada and Mexico on Monday both reached an agreement for a one-month delay on the tariffs taking effect while those countries discuss stepping up ways to fight the flow of fentanyl across the U.S. border. At the same time, difficult conversations have begun among American homebuilders and remodelers.
“Projects are double what they were 10 years ago, and how much more can the market handle? And I don’t think much,” said Minneapolis-based builder and remodeler Michael Anschel of OA Design+Build+Architecture. “Consumer confidence is really important, and when we don’t have that and we’re not confident of pricing, it’s bad business for everybody.”
The increased prices are making one client of Anschel’s consider pushing their project out another five years. For builders that sell houses, the rising prices won’t affect anything currently under construction. Still, it could mean future price increases of up to 10% if tariffs affect lumber, metal and drywall at once, said Jeff Benach of Lexington Homes, who is watching the situation unfold.
“There’s nothing we can do but wait and see and react,” he said, noting that the next 30 to 60 days will be telling.
Part of that reaction for builders and lumber suppliers is finding other ways to obtain materials. For instance, importing them from countries such as Germany, Sweden, Austria and Romania.
When lumber demand was high but supply was low during the pandemic in 2020 and 2021, 16% of U.S. imported softwood lumber came from European Union countries, up from 3%, according to the U.S. International Trade Commission.
More than 70% of two vital materials — lumber and gypsum used for drywall — in domestic building come from Canada and Mexico, according to the National Association of Home Builders. The tariffs also come amid record-high building material prices, which have increased about 30% since 2021 and account partly for rising home costs, the trade group said.
Lumber prices were already on the rise before the tariffs, up 12.9% in December from a year earlier, according to the U.S. Bureau of Labor Statistics. The government data covers domestic spending, excluding imports, but paints an important perspective on changes in prices over time.
“Imposing additional tariffs on these imports will lead to higher material costs, which will ultimately be passed on to homebuyers in the form of increased housing prices,” Carl L. Harris, NAHB chairman, wrote in a letter to Trump.
Harris also noted the counterintuitive nature of the tariffs, citing Trump's recent executive order to ease housing costs.
Essential materials
Most U.S. homes are framed with softwood lumber, and builders also import other wood materials from Canada, such as cabinetry and plywood. A typical new single-family home uses about 15,000 board feet of framing lumber and 2,200 square feet of plywood, according to the NAHB. The 25% tariff is on top of a 14.5% duty rate on Canadian imports.
“Further supply chain disruptions from increased tariffs coupled with increased demand for materials could also hinder rebuilding efforts in areas affected by natural disasters, which you have pledged to help rebuild as quickly as possible," Harris said.
That adds to the U.S. housing shortage, which the National Association of Realtors says is about 5.5 million units.
The NAHB also noted that despite an increase in domestic softwood lumber production, American mills still cannot meet the demand alone.
The U.S. Lumber Coalition applauded the idea of a higher demand for domestic lumber.
“U.S. sawmill investment and capacity expansion to supply our own market has been robust in no small part thanks to the duties first imposed in 2017 by President Trump against Canadian lumber,” Andrew Miller, U.S. Lumber Coalition Chairman and the CEO of Stimson Lumber, said in a statement. “The domestic industry has retaken share of the U.S. market to reach levels not seen since the mid-1970s.”
But with rebuilding efforts needed in Southern California communities affected by recent wildfires, the demand for lumber and other building materials could be higher than normal. A Homes.com report found that the Palisades and Eaton fires destroyed 11,000 single-family homes, about $29.7 billion of housing.