The current tariff policy of US President Donald Trump raises many questions. Financial markets are in turmoil, keeping investors and analysts unnerved. Experts at UBS unveiled a gloomy forecast about the US housing sector. According to the bank's experts, the latest announcement by Trump’s administration regarding tariffs will increase the cost of building new homes. Preliminary calculations suggest that the cost of constructing new houses will rise by $6,400.
UBS analysts warn that the impact of US tariffs will be felt "throughout the value chain in the housing sector," including component manufacturers, distributors, and homebuilders. "If we assume that homebuilders will face the overall increase in costs of $6,400, without the possibility of passing on any costs to the consumer (a price increase of +1.5%), the impact on gross margin will be approximately -155 basis points for an average new home priced at $415,000," UBS concluded.
The bank believes that raising home prices to offset inflated costs could be difficult. In addition, UBS predicts a 5% increase in the cost of domestic construction materials. Builders surveyed in March assessed the potential impact of tariffs even higher: on average, around $9,200 for building one home.
According to UBS's statement, the new tariffs apply to 7% of building materials for housing, with an average additional tariff of 22%. This will affect homebuilders like D.R. Horton, PulteGroup, and KB Home. As a result, the end consumer in the US will face a significant increase in housing costs.
Despite the heavy pressure, the bank believes that the US housing sector is in a better position than during previous tariff cycles. During the COVID-19 pandemic, component manufacturers, distributors, and homebuilders were in much worse conditions. They had to account for numerous risks and diversify their material sources due to supply shocks coinciding with the pandemic and tariffs on Chinese goods imposed during Trump’s first term, UBS notes.
The situation is further exacerbated by a sharp decline in homebuilder stock ratings. According to experts, the US housing sector has fallen by 27% since September 2024. "Currently, we view the risk-reward ratio as definitely favorable and believe the market presents an attractive entry point for investors," the bank concludes.
Citing the historical trend of homebuilders predicting downturns and quickly recovering from them, UBS highlights the growth potential in the housing sector.
