By Shaina Mishkin

Investors are once again focused on tariffs, which economists fear could drive up the price of buying a home.

But house prices can only rise so much if there's no one in line to buy them. The cost of mortgage financing and economic and job worries are more immediate concerns for builders and the housing market than changes to tariff policy, analysts say.

President Donald Trump on Thursday said in a letter that the U.S. would implement 35% tariffs on Canadian goods, following the 50% copper tariff announced Tuesday.

Builder stocks on Friday were down on the news. The iShares U.S. Home Construction ETF, which tracks companies related to home building, was about 1.3% lower in intraday trading, breaking a three-day streak of increases, according to Dow Jones Market Data.

The fear is that higher tariffs on imported goods used in home construction, like the copper that provides plumbing or the lumber used to frame houses, could increase the cost of building. Companies surveyed by the National Association of Home Builders, a trade group, in April estimated that costs associated with building a home could climb nearly $11,000 a house because of changes to tariff policy.

But lumber, which has yet to be subject to a levy increase, would likely remain exempt from the latest round of tariffs targeting Canadian goods. The White House didn't immediately respond to Barron's request for clarification.

It will take time to see how the rise in copper prices spurred by tariffs affects home-building. But builders so far have succeeded in tamping down materials costs. "There is no real tariff inflation pressure rolling through the market right now for home builders," says Rick Palacios, Jr., the director of research at John Burns Research and Consulting.

Because the housing market is so slow, builders both public and private are successfully negotiating costs with suppliers vying for their business, notes Ivy Zelman, executive vice president at Walker & Dunlop research firm Zelman & Associates. "The market is soft enough that they can push back," she says.

Even as tariff fears shake investors, home building costs have grown more slowly than normal, notes John Burns' Palacios. The firm's survey of new home sales shows labor and material costs up 2% from the year prior in the second quarter, which Palacios characterizes as a slower-than-usual increase.

It's one pro in a housing market full of cons. Even as listings for both new and previously owned homes have grown, cost-stretched home-buyers remain on the sidelines. "Plain and simple, demand stinks in a lot of markets right now," Palacios says. The dearth of buyers relative to supply means builders have had to cut their prices, he notes -- a negative for the companies' margins.

Concerns about the broader economy and job market don't help. About seven in 10 respondents to Fannie Mae's June housing market sentiment survey said it was a bad time to buy, while the share of respondents who said they were concerned about losing their jobs increased to 29%, the highest since March.

Palacios expects interest rates -- and, by extent, mortgage rates -- to remain around recent levels for the next six months to a year. In that circumstance, "you have to have a pretty negative outlook on construction volumes, on sales, on prices," he says.

But lower mortgage rates would change that. "If you could eventually get mortgage rates to finally start with a five instead of a six, I think we would be quickly revising our forecast and getting more optimistic."

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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July 11, 2025 14:56 ET (18:56 GMT)

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