Opinion: Tariffs aren’t the whole story
Since the beginning of the year, tariffs being imposed by the United States on imported goods have created questions, confusion, uncertainty and shifts in the home building industry. As a result, import costs on nearly every building material are expected to increase, with the cost of steel, aluminum and lumber being most affected because they typically arrive from Mexico, Canada and China.
There is no doubt tariffs will bring about project delays from supply chain disruptions and impact prices, but it is shortsighted to think they are the sole driver of higher prices. There are several factors contributing to economic concern within the building materials industry and threatening the health of the housing market. Of most consequence are interest rates and affordability. Every building supply company should take these into consideration, alongside the effects of tariffs, as they assess how to respond - in the short and long term - to these threats to the housing market.
Interest rates
High interest rates are the single most impactful variable making housing unaffordable. Without bringing long-term rates down, mortgage rates won’t decrease, and thus housing will remain an unapproachable prospect for homebuyers. Tariffs are taking a lot of credit for increasing prices, but it’s also important to consider the possibility of the long-term benefit tariff negotiations may have in bringing interest rates back down.
Affordability
Don’t forget, the housing market was stagnant before this year’s tariffs came into play. New construction growth has been facing strong headwinds because of challenges related to affordability for more than a decade. Several components factor into affordability and the cost of materials is generally the least of a builder’s concerns. One such component is regulatory requirements, which are putting affordability out of reach by way of lengthy and costly processes.
Building Advantages
There are several things building material companies can be doing now to manage market uncertainty and stay on track with a strategic plan for the year ahead. Tariffs, interest rates and affordability are all important factors to consider when competing for market share.
Stay focused on the variables you can control. Strong leadership, curating local market insights and a nimble business model are among the best ways to position your business to respond quickly to regulatory pressures, and shifts in product demand and supply chain dynamics - especially as the ripple effect of tariffs expands. Market conditions will continue to ebb and flow, and you need to pay attention to these nuances, but you can also improve your odds for success by bringing a mindset of continuous improvement to your operation. This ensures you won't overlook opportunities for growth, even in a down market.
You can also strengthen your position by pairing these local tactics with the power of scale. This is where data, technology and collaborative enterprise solutions provide tremendous advantage. Blending deep local knowledge with the analytical capabilities of a larger organization gives teams visibility and insight to make smarter, faster decisions, which is invaluable during periods of uncertainty. Whether controlling cost escalation, driving affordability or engaging the workforce, this model doesn’t just react to the market, but actively shapes it.
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Steve Swinney is CEO of Englewood, Colorado-based Kodiak Building Partners, which was recognized in 2023 as the ProDealer of the Year by HBSDealer and the National Lumber and Building Material Dealers Association.
