CLEVELAND — To one day move into a newly built home is part of the American dream, but homebuilders will tell you it's a dream that is increasingly out of reach.
"The average cost of a new home is in excess of $460,000. The top 20% of the market are the only ones who can afford this," said Richard Bancroft, Executive Officer of the Homebuilders Association of Portage and Summit Counties.
"The affordability as a result of regulatory compliance and material costs, labor shortages have a negative effect on our industry," he said.
It's a price tag that will soon be going up as a result of the 25% tariffs levied this week on imports from Canada and Mexico. Of the $8.5 billion in sawmill and wood products imported into the U.S. in 2023, nearly 70% came from Canada.
"This is going to be a 7,000 square foot house," said Andrew Gotlieb, President of Keystate Homes inside a home he's building in Lake County. "So this lumber package was well above $350,000 and so 25% more on that if tariffs take that into effect," he said. "I mean that adds up on a $350,000 lumber package."
Even if half of the wood comes from the U.S., Gotlieb, who is also President of the Homebuilders Association of Greater Cleveland, the cost increase will still be significant.
"And that's just including your rough lumber, that's not including the finished lumber."
In addition, a lot of the lime and gypsum products for drywall are imported from Mexico, there's also steel and aluminum.
"We have suppliers and vendors right now that are really working feverishly to get a handle on exactly how much the cost for each of these components is going to be," Bancroft said.
As to how the increased costs are handled, Bancroft said it varies.
"Some builders though do a 'cost plus' type of build contract which lessens the impact but if you have a straight build-to-order contract, or you're a production builder, or semi-production builder and it's a build-order contract that's coming off your bottom line," he said. "Probably three years ago lumber went from $300 a board foot to $3,000 a board foot. That ended up costing some builders $30 or $40,000 off of their bottom line because they were already under contract with their clients."
Gotlieb for his part said he's up front with his customers.
"I'm just a really transparent builder. So I tell every client that I don't have a magic wand and I don't have a crystal ball. But I can tell you that whatever the price is for lumber, that's what you're going to pay directly."
The hope among builders and their customers is that the tariffs are short-lived, with Vice President JD Vance leaving the door open to the possibility that they very well could be, provided that Canada addresses the underlying issue, the flow of fentanyl over the border into the U.S.
"The president's going to have conversations with the Canadians," Vance said. "We need to see real engagement on the fentanyl issue, on the drug issue. That is fundamentally the underlying element of these tariffs."
"When you look at the National Association of Homebuilders policy on this, we do not want to interfere with Mr. Trump's agenda," said Bancroft. "He's been elected president and we understand that and we want to see him be successful with his agenda but housing is such a critical component of our economy that anything he can do to lessen the burden upon us so that we continue trying to come back to pre-covid building levels is absolutely vital to us."
"We have a critical shortage of housing across the country, in terms of millions of units. In the state of Ohio, we're under built by about 200,000 homes," he said.
