Rising costs have builders warning of what's next

Builders hint at price hikes as market pressures mount

April 23, 2025 3:11 PM

While they already face pressure from consumer affordability constraints, the disruption caused by tariffs have some homebuilders making plans to raise prices later this year.

Builders were profitable to start the year, but common themes emerging from the largest publicly held companies in their recent earnings reports centered on the likely impact of tariffs. While they had minimal effect on 2025 figures so far, some businesses are basing much of their late-year strategy around the rising cost of imports.

If tariffs weren't in the conversation, affordability was, as buyers confront ongoing challenges in finding homes at prices levels they can manage. For the most part, the largest residential construction companies reporting in the past few weeks noted affordability applying greater pressure to their bottom lines, but all posted profits between January and March.

The new-home segment remained a bright spot throughout much of 2024, as buyers encountered scarce existing-home inventory. While softness on the homebuilding side of businesses meant profits failed to keep pace on a year-over-year basis, activity at their mortgage lending affiliates offset some of the effect.

Following are some highlights of homebuilder earnings announcements.

Pultegroup

While numbers remained in the black, Pultegroup leaders noted the effect both affordability and tariff concerns were already having on the new-home market in the first few weeks of the second quarter.

"We have seen consumers at all price points impacted by changing macro conditions and any resulting decline in overall consumer confidence," President and CEO Ryan Marshall said in the company's earnings call.

"Whether it's the volatility in the stock market, concerns about tariff induced inflation, the fluctuation in interest rates or the growing talk of recession, demand in April has been more volatile and less predictable day to day," he said.

Pultegroup also said buyers should expect to pay more later this year from the expected tariff impact, with the company anticipating a 1% increase in the average selling price.

"It'll impact every single price point and consumer group that we serve," Marshall said.

The portfolio of brands under the Pulte name posted total net income of $522.8 million in the first quarter, a 21.1% decrease from $663 million a year earlier. Pre-tax profit within the homebuilding segment finished at $645.3 million, down 22% from $827 million a year earlier.

Income within its financial services lending arm came in at $90.8 million on a pre-tax basis between January and March, shrinking 1.66% from $92.4 million in the first quarter of 2024.

D.R. Horton

The nation's largest homebuilder by volume, D.R. Horton, said the early days of tariff talk raised plenty of questions, but expressed confidence it would be able to withstand the threat of potentially higher material costs as it played out.

"From what we've seen in the conversations we've had with our suppliers, we're not expecting material changes at this point," said chief operating officer Michael Murray in the company's earnings call on April 17.

"Over the last several years, our suppliers have done a good job of having to respond to supply chain challenges," added President and CEO Paul Romanowski.

"We do feel that our strength and size and scale across our markets will put us in a good position to hold those costs and see the lower end of any impact from tariffs wherever they land," Romanowski continued.

Like Pultegroup, leaders said any tariff impact on its operations, should it occur, wouldn't appear until the latter half of this year, after the company's 2026 fiscal calendar begins in October.

Net income across all of D.R. Horton's business segments, including homebuilding, rental operations, lot development and financial lending services in the company's second quarter, which ran from January through March, pulled back by 30.9% year over year to $810.4 million from $1.17 billion.

The company closed on 19,726 new homes, which helped bring in $935 million in pre-tax income. Its mortgage financial services took in $73 million in pre-tax profit. The numbers decreased 31.1% and 6.4% from $1.36 billion and $78 million over the same period last year.

"The 2025 spring selling season started slower than expected as potential homebuyers have been more cautious due to continued affordability constraints and declining consumer confidence," company leadership also noted.

Taylor Morrison Home Corp.

The Arizona-based builder and lender noted the effect of import taxes was already showing up on both supplier and consumer sides of its operations.

"We're starting to see some increases, mainly from the metals and aluminum tariff," said Chief Financial Officer Curt VanHyfte on its earnings call. Current tariffs in force include a 25% tax on all aluminum and steel imports, many of which go into components of new homes.

The effects wouldn't show up in home prices until the company begins its fourth-quarter starts, but tariffs led Taylor Morrison to update guidance to "some low single-digit house cost inflation for the year."

Consumers also reacted noticeably to Liberation Day, the term coined by President Trump for April 2 when he announced a sweeping set of tariff rules, some of which have since been paused.

"We expected April to probably be the sales peak month of the year. Obviously, we're not done yet. I'm not sure that will be the case," Taylor Morrison CEO Sheryl Palmer said.

"We definitely saw the impact of the Liberation Day announcement. The first week — I think that had put some folks on the sidelines," she added while noting numbers had picked up as the month progressed.

The company bucked earnings trends of its peers, though, posting year-over-year growth in net income. The bottom line grew 12.2% to $213.5 million in the first quarter from $190.3 million a year earlier.

With the average price of Taylor Morrison homes higher than the national average, the increase suggested affordability concerns weighed less on consumers looking to purchase at the higher end of the market. The company also attributed sales growth to a temporary decline in interest rates during the quarter.

"I expect we will continue to see many home shoppers taking a wait and see approach to their purchasing decisions until there is greater clarity on the economic outlook," Palmer said.

Homes closed increased to 3,048 in the first quarter from 2,731 over the same three months last year. Net sales orders decreased, though, to 3,374 from 3,686.

Home closings brought in $1.83 billion in net revenue for Taylor Morrison, up 11.8% from $1.64 billion a year earlier.

Net revenue from its financial services lending operations totaled $51.2 million, a 9% increase from $47 million over the same three months in 2024.

NVR Inc.

The parent company of Ryan Homes, NVHomes and Heartland Homes reported net income of $299.6 million, a 24% decrease compared to $394.2 million in the first quarter of 2024. The latest number pulled back from the fourth quarter's $457.4 million.

"Gross profit margin was negatively impacted by higher lot costs and pricing pressure due to continued affordability challenges," the company said in a press release.

Its homebuilding operations posted pre-tax profits of $369.5 million, contracting 16.3% from $441.7 one year earlier. Profits shrank even as homebuilding revenue came in higher at $2.35 billion, up 2.8% from $2.29 billion over the same three months in early 2024.

New orders in the first quarter of 2025 decreased by 11.6% to 5,345 units, when compared to 6,049 units in the same period last year.

In mortgage lending, the company reported first-quarter pre-tax income of $32.5 million, 12% higher compared to $29 million a year ago. Closed loan production finished at $1.43 billion.