How Canadian lumber tariff exemptions help U.S. homebuilders and homebuyer affordability

Tariffs increase builder costs by $9200 per home. At today's newly-built home price of $414,500 with 5% down, a household must make $119k/yr to qualify.

The National Association of Homebuilders (NAHB) has been working hard to minimize tariff impacts on U.S. housing. They noted that “tariff exceptions for Canada and Mexico amount to a major win for NAHB.”

The stakes are high because Canada accounts for about 85% of all U.S. softwood lumber imports, and accounts for nearly a quarter of the available supply in the U.S.

Here’s what NAHB chairman Buddy Hughes said about their progress (I’ve bolded a key point):

While the complexity of these reciprocal tariffs makes it hard to estimate the overall impact on housing, they will undoubtedly raise some construction costs. However, NAHB is pleased President Trump recognized the importance of critical construction inputs for housing and chose to continue current exemptions for Canadian and Mexican products, with a specific exemption for lumber from any new tariffs at this time.

The NAHB also said exempting Mexican products is a big win because it’ll help control costs of things like gypsum (used in drywall), concrete, and appliances.

Here are some other key tariff-related stats from NAHB:

– Recent tariff actions could increase the average cost to build a home by $9200.

– On average, a single-family home requires $174,155 of building materials to construct.

– Imports account for $12,713 of this building materials cost.

– This means 7.3% of goods used in homebuilding originated outside the U.S.

– Before this tariff impact, building materials costs were already up 34% since December 2020.

And here’s a chart of newly-built home prices and building costs since 2021:

These Canada and Mexico tariff exemptions will be helpful in controlling building materials costs, but the supply chain impacts are still unknown. And NAHB thinks supply chain disruptions will drive prices higher.

For now, here’s what homebuyer affordability looks like:

With a 6.5% mortgage rate and a 5% down payment on today’s newly-built home price of $414,500, a household needs to make $119k per year to qualify.

This calculation includes 1.25% property taxes, $3600/yr homeowners insurance, and $1000/mo in non-housing obligations like student loan, car loan, and credit card payments.

At today’s home prices and rates, the MBA estimates 3.5 million people will finance home purchases this year.

Hit me with any questions or comments.

And hit the NAHB link below for more nuances on how they’re fighting for builders and homebuyers.

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Reference:

– In Win for NAHB, Canadian Lumber Exempt from Trump’s Global Reciprocal Tariffs (NAHB)

– Homebuilders push Trump for tariff exemptions to stem affordability crisis (The Basis Point)