The cost of building a new home is rising fast, and homebuilders are feeling the pressure.
According to a new report from the National Association of Home Builders, builder confidence dropped sharply in April. The main reasons? The ongoing war with Iran and new trade tariffs are making homes much more expensive to build.
Why Are Costs Going Up?
The conflict in the Middle East has pushed oil prices higher. This makes it more expensive to transport materials and produce key building products like foam insulation, roofing, windows, doors, and pipes.
Many building suppliers raised their prices in April. At the same time, mortgage rates have gone up, making it harder for families to afford a home.
Builders Say It’s a “Challenging Year”
Big homebuilding companies like Lennar and KB Home say they are struggling with higher material and labor costs.
Lennar’s CEO, Stuart Miller, explained that tariffs and immigration issues are adding to the problem. “The cost structure in the industry is pushing higher and is difficult to manage,” he said.
KB Home’s CEO, Robert McGibney, added that higher oil prices affect “land development and vertical construction” because oil is used in so many home products.
How Are Builders Coping?
To keep selling homes, builders are offering deals like buying down mortgage rates for buyers. They are also cutting costs by using cheaper materials.
For example, instead of expensive finishes, builders are now using:
– Vinyl flooring instead of wood
– Thinner countertops
– Fewer windows
– Particleboard cabinets
Some are even removing extras like crown molding, gutters, towel racks, and automatic garage-door openers. The average size of new single-family homes has also shrunk—from 2,466 square feet in 2015 to just 2,153 square feet in 2025.
Good News: Tariff Refunds Available
There is some relief on the way. The government has opened a new portal where businesses can request refunds for certain tariffs that were ruled unconstitutional by the Supreme Court. An estimated $166 billion could be returned to importers. The review process takes about 45 days, and refunds should arrive within 60 to 90 days after approval.
What About Homebuyers?
Higher building costs mean higher home prices. A brief drop in 30-year mortgage rates below 6% in late February didn’t last long. By early April, rates climbed back to around 6.5%, squeezing buyers’ budgets even more.
Analysts at Barclays warn that builders will have a hard time passing on these higher costs to buyers. That could lead to lower profits or even fewer homes being built.
Other Housing News
– New York’s “Pied-à-Terre” Tax: Governor Kathy Hochul has proposed a new tax on second homes in New York City valued at $5 million or more. It would target wealthy part-time residents. The plan could raise $500 million a year but has drawn criticism from real estate groups.
– Art World Merger: Artnet and Artsy, two major art platforms, are merging. Unfortunately, the deal has led to dozens of layoffs and the shutdown of Artnet’s German office.