Commodity Price Volatility Hits Homebuilders As Tariffs Reshape Costs

Commodity price volatility – driven by slow demand and tariff fallout – has sharply increased the cost of building materials.

The single most significant factor driving Q4 2025 commodity prices was aggressive tariff implementation:

• Steel: 50% tariffs (implemented June 2025)
• Aluminum: 50% tariffs (implemented June 2025)
• Copper: 50% tariffs on products/components (August 2025)
• Lumber: 35.2% total on Canadian imports (potentially rising to 45%)
• Cement/Concrete: 25% on Canadian/Mexican imports

An AGC-NCCER survey found that 43% of general contractors reported at least one project canceled, postponed or scaled back in the past six months due to higher material costs driven by these tariffs.

Some commodities are declining in price, while others are rising more slowly. Most commodities shown in this report declined in the latter part of the quarter, suggesting a trend that may persist through the first half of 2026. 

Reduced lumber supply due to selective mill closures is pushing prices high enough to keep other mills open. If the renewed home sales pace does not pick up soon, we expect further curtailments at lumber mills.

Metals such as steel, aluminum, and copper are surging due to data center construction and electric-vehicle demand. However, aluminum and copper wire are trending lower, underscoring that raw metals and finished goods often follow different pricing trends because of distinct supply-and-demand dynamics.

Steel producers, including Nucor, CMC, and Hybar, are adding more than 1.5 million short tons of rebar capacity in 2026, which will temper some price growth despite tariff pressures. Copper wire is down 6%. 

When housing demand rises and is coupled with growing demand for aluminum and copper for EVs and data centers, we could see a spike in wire prices in the second half of this year.

It could be a big one.

Cement and readymix concrete prices have been stable may be expected to rise as the housing market improves. A 25% tariff on cement from Canada and Mexico took effect in 2025, creating significant cost pressure. Domestic cement supply is operating at full capacity, and the remaining demand is met from Canada, Mexico, Brazil, and China.

If you can get a cement plant built in the U.S., it is a safe bet that it will operate at full capacity. Good luck getting approvals for a new cement plant – it’s nearly impossible due to environmental constraints.

Morgan Stanley expects crude prices to gradually decline to $60 per barrel by summer, which will affect diesel fuel, plastic products, and all products made with adhesives, paint, and house wrap.

Quarterly Highlights

In the Notable Changes below, it may seem less relevant to continue comparing with 2019, but we think it is important to stay grounded in pre-pandemic metrics so we do not accept today’s prices as the new normal. Making houses more affordable depends on our ability to reduce costs. Building material prices were not exactly low in 2019, but it’s a good benchmark—for now.

Aluminum Wire

With more homebuilders using copper-clad aluminum wiring, the aluminum wire commodity pricing index is among the top 5 on our watch list. Aluminum wire prices have been flat for 4 months but have surged 1390% (not a typo) since 2019. Most of the aluminum wire we use in the U.S. is made here; we do not think this is a tariff-affected increase.

Copper Wire

Copper wire prices fell 6% in Q4 and are up 322% since 2019. Demand for copper wire is down, while demand for raw copper is up. About 87% of copper wire is produced in the US and is not affected by tariffs.

Carpet Fibers

Pricing is down 3%, largely due to weaker residential construction demand and lower oil prices. We expect the trend to continue. 

Lumber

Lumber prices continue to bounce along the bottom. Deals can be found by the patient buyer. Lumber mills have been shutting down across the country. Time to stock up?

Diesel Fuel

Fuel prices are flat in Q4 and are expected to remain downward for some time.

Cement and Ready-mix

Cement and concrete demand is driven by commercial construction, especially large capital projects. The U.S. has 10 construction projects valued at over $1 billion each, a first. Expect labor and materials demand to be affected by these large projects.

Acrylic Resins

Oil prices are up 8% this quarter and 32% above 2019 levels. We expect acrylic resins to decline over the coming months as oil prices continue to fall. Acrylic resins are used in a variety of products, including vinyl windows, carpets, plastic pipe (PVC, ABS, PEX), cultured marble, house wrap, paint, exterior insulation, acrylic stucco, vinyl fencing, and any product requiring adhesive (such as plywood, wood flooring, and laminated beams).

Notable changes (use the slider for the full detail):

Looking around the next corner…

Labor Shortage – 499,000 workers needed

The Associated Builders and Contractors estimates the construction industry will need approximately 499,000 additional workers to meet demand in 2026. This massive labor gap has critical implications:

• Labor costs are rising faster than materials in several trade categories
• Labor-related expenses now outpacing materials in overall cost escalation
• Material cost savings may be offset by labor inflation

A supply chain evolution is needed to regain control of pricing, ensuring that the lower prices achieved in recent rebidding do not disappear as sales strengthen. If you already have SKU-level data in your back-office system and benchmarks to ensure you are paying the right price, the next level of cost improvement is labor. Labor scarcity, in both quantity and quality, will offset lower material pricing if not addressed head-on. 

I recently heard an interview with Mike Rowe, known for his television series “Dirty Jobs,” in which he tells of a young man who spent a few years earning his journeyman rating as an electrician and is now making $250,000/yr, with new offers continually enticing him to join another company. There is a finite number of laborers who can build our houses until we develop a robust training program to produce new recruits. 

Until that training boom happens, I recommend focusing on lean building principles to make better use of the labor we currently have. I once hired someone from outside our industry to support supply chain management. He brought a lawn chair from home, set it up with a wide-brimmed hat and refreshments, and for three days watched work progress on a new home community. He was bewildered that we make money, given the amount of waste in the systems we call normal. 

Off-site prefabricated wall panels and modular construction are examples of waste reduction, but not the only opportunities for improvement. We can help almost every worker on our job site accomplish more in the same amount of time by placing materials and tools closer to the work. Ensure all materials are available so they can complete the job without returning later. Implement job costing for trades to identify waste across houses. And the list goes on.

I’m hearing more experts predict a housing boom from 2027 to 2030 that will dwarf anything we’ve experienced. We neither have the labor nor the materials to support an additional one million homes per year – unless we do things differently. Builders working toward a 50% reduction in cycle time are preparing for the boom.

How will your strategy change to meet the potential surge?