Homebuilder stocks edged lower on Wednesday as concerns over President Trump’s big tariff announcement raised fears that higher construction costs could slow the housing recovery.
D.R. Horton, Inc. (DHI), the biggest US homebuilder, slid nearly 1% Wednesday morning, while Lennar (LEN) and PulteGroup (PHM) fell 0.7% and 0.4%, respectively.
Trump is scheduled to unveil his major tariff plan details at a Rose Garden address this afternoon.
Builders have been growing concerned about the impact of these tariffs, especially on materials from China, Canada, and Mexico. Morgan Stanley warns that tariffs could drive up the cost of fabricated metal products by as much as 49%. And other materials like electrical equipment and wood products could see significant price hikes too.
As a result, higher costs could mean expensive homes, smaller homes, and fewer homes being built. Economists at Morgan Stanley point out that this is significant because more buyers will start looking at existing homes if new homes get pricier or harder to find. With supply already tight, that could drive up prices in the resale market.
Morgan Stanley originally projected a 2% decline in home price appreciation for 2025, but with these new factors at play, they now expect it could be closer to a 5% increase.