Trump’s Tariffs Create Uncertainty for Homebuilders Who Project Little Growth in New Construction in 2025

Uncertainty over President Donald Trump‘s tariff agenda could weigh on new home construction this year, says the top trade group representing the nation’s homebuilders.

The National Association of Home Builders forecasts single-family starts to grow just 0.2% this year, to an annual rate of 1.01 million units, and rise an additional 4% in 2026, to a 1.05 million pace.

That would mark an anemic pace of growth and is likely not enough to adequately address the nation’s housing shortage, which Freddie Mac recently estimated at a shortfall of 3.7 million units.

Homebuilders say they are encouraged by Trump’s push to cut regulations and extend tax cuts. However, they fear new tariffs on building materials could raise the cost of building new homes.

Earlier this month, Trump announced and then quickly suspended massive new tariffs on Canada and Mexico, the respective sources of most of the dimensional lumber and drywall gypsum used in residential construction.

A new 10% tariff on Chinese goods did take effect on Feb. 1. Trump has also announced plans for reciprocal tariffs on nations that tax U.S. exports, and hinted at expanding tariffs to additional sectors and countries, leaving the final impact of his policies on construction material costs unclear. 

“The uncertain policy environment in terms of a better regulatory climate and impending tariffs offers both upside and downside risks in the near term,” says NAHB Chair Carl Harris.

Trump has argued that his plans for mass deportations will lower housing costs by reducing demand for homes. But homebuilders also fear the policy could drain the labor pool for construction, which is unusually reliant on workers living in the U.S. without authorization.

“Home builders and remodelers are dealing with positive and negative risks in the months ahead,” says
NAHB Chief Economist Rob Dietz.

“With shelter inflation still rising at a 4.4% annual clip and a housing shortage of roughly 1.5 million units, the best way to bend the rising housing cost curve is for the Trump administration and Congress to enact policies that will allow builders to construct more attainable, affordable housing,” he adds.

Builders face growing competition from existing homes

Speaking at the NAHB’s International Builders’ Show in Las Vegas on Tuesday, Realtor.com® Chief Economist Danielle Hale highlighted how the housing market is gradually shifting toward a more neutral stance.

With a seller’s market often defined as less than a four-month supply of homes on the market, the market has slowly edged out of seller’s territory, rising to a 4.1-month level this year from a 2.3-month supply in 2021.

“Inventory is recovering faster than sales, and this is leading to a more balanced market,” said Hale. “Inventory growth is being fueled by newly listed homes, which were up 10.8% year over year in January 2025.”

For several years, the supply of new homes has vastly outpaced that of existing homes on a months-supply basis. Many homeowners with ultralow mortgage rates have been reluctant to sell in a higher-rate environment, leaving new construction to fill the supply gap.

New-home sales represented 14.5% of the market in 2024, the highest percentage since 2005. New-home sales historically have averaged 10% to 12% of all home sales.

“New-home sales are expected to outperform again in 2025, but competition will be growing from
existing sellers,” said Hale.

As time goes on, the impact of higher mortgage rates on supply will likely weaken, as life and career changes push more homeowners to sell, even if they have to take on a new, higher mortgage rate when they buy a different home.

Hale noted that currently, 83% of outstanding mortgages have a sub-6% rate and 55% are below 4%. By the end of 2025, she said 75% of outstanding mortgages are projected to be below 6%.

“The mortgage rate lock-in effect is gradually fading, but affordability remains a challenge for home
buyers,” said Hale.