President Donald Trump’s planned tariff on imports from Canada could lead to pricier lumber, impacting homebuilders’ margins.
Lumber futures (LBR=F) are currently trading at $583 per thousand board feet. As the National Association of Home Builders notes, a 25% tariff on softwood lumber products from Canada, in addition to the existing 14.5% duty rate, would increase the overall effective rate for the Canadian tariff to nearly 40%.
Canada, the biggest foreign supplier of lumber to the US, has already encountered tariffs after claims of unfair pricing. That has raised lumber costs, created market uncertainty, and prompted builders to diversify their sources. Still, logging in the US has declined over the past few years amid a mismatch between on-the-job risk and wages.
“Rising framing lumber costs, should tariffs roll out on March 4, 2025, will likely reduce housing starts, worsen affordability challenges for buyers, and increase margin headwinds for homebuilders,” Ana Garcia, equity research analyst at CFRA Research, wrote in a note to clients.
According to Garcia’s analysis, the builders able to scale and mitigate the pressure shock include DR Horton (DHI), Lennar (LEN), PulteGroup (PHM), and NVR (NVR). Even with primarily domestic lumber sourcing, price pressures are expected to impact the market, especially smaller homebuilders. For instance, Meritage Homes (MTH) could face additional pressure.
