Homebuilder stocks were struggling on Thursday alongside the broader market as President Trump’s tariff plans threw a wrench into the sector, fueling investor fears that higher construction costs could slow the housing recovery.
D.R. Horton (DHI), the biggest US homebuilder, was down more than 2% Thursday, while Lennar (LEN) and PulteGroup (PHM) fell nearly 5%, respectively. The SPDR S&P Homebuilders ETF (XHB) also declined nearly 6%.
Trump unveiled the details of his tariff plan on Wednesday, offering exemptions for Canada and Mexico and providing relief to the two biggest trading partners. However, China remains in the crosshairs, still facing the full brunt of the new tariffs, with rates now well above 50% on many goods.
Read more: What Trump’s tariffs mean for the economy and your wallet
Steel, aluminum, and other metals are exempt, and lumber is also spared from the new measures.
“While the complexity of these reciprocal tariffs makes it hard to estimate the overall impact on housing, they will undoubtedly raise some construction costs,” National Association of Home Builders (NAHB) chair Buddy Hughes said in a statement following President Trump’s tariff announcement.
“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,” Hughes added.
Prior to the announcement, at least one builder had said it was taking proactive steps to lessen potential cost increases ahead.
During KB Home’s (KBH) fiscal first quarter earnings call in late March, COO Robert McGibney reassured analysts and investors that the company locked in prices for nearly all of its second quarter supply contracts, including lumber, and has transitioned to longer contract locks.
“Our national purchasing team, working closely with our divisions, has been able to mitigate the anticipated tariff-driven cost increases to date,” McGibney said.
According to the NAHB, it costs on average $174,155 in building materials to construct a new single-family home, with imports making up $12,713 of that cost.
Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
