With strategies in place to adapt to changing conditions, many believe the next four years will be a time to play offense, leveraging economic tailwinds to expand operations and meet the nation’s housing needs.
The U.S. homebuilding industry faces a mix of optimism and concern as it looks ahead to the policy environment under president-elect Donald Trump’s administration.
While the rhetoric around mass deportations of undocumented immigrants and steep tariffs on foreign goods presents real risks, many industry leaders believe the potential economic tailwinds of lower corporate taxes, deregulation, and a more favorable lending environment will outweigh these challenges.
For homebuilders navigating a volatile housing market, the prevailing sentiment is that the opportunities to play offense in the next four years will outweigh the risks of playing defense.
In an M&A story we wrote earlier this week, Tony Avila, CEO of Builder Advisor Group, notes:
We expect, with a Trump presidency, additional M&A in the homebuilding sector," Avila adds. "We anticipate a new Fed Chairman appointed by Trump (after 2026) will be more dovish than Powell, which should lower mortgage rates. We anticipate that the use of tariffs will be less inflationary than expected and that the threat of tariffs will be used to negotiate better trading terms with global partners, which will help the American economy. We also anticipate less stringent regulation, which will reduce inflationary friction.
Labor Risk: The Threat of Mass Deportations
The homebuilding sector’s historically high reliance on immigrant labor, including undocumented workers who are not counted among pay-rolled employees, is a critical concern under Trump’s proposed mass deportation policy. According to the March 2024 National Association of Home Builders (NAHB) report, immigrants constitute 31% of the residential construction workforce, with even higher shares in key trades like plastering (64%), drywall installation (52%), and roofing (47%). The Fall 2024 Home Builders Institute (HBI) Labor Market Report further underscores the industry’s chronic labor shortage, noting that over 723,000 new workers are needed annually to meet demand.
Stan Marek, CEO of Houston-based Marek Brothers, encapsulates the industry’s fears in a Bloomberg article reported this week by Julia Love:
These are men and women who’ve realized the American dream, only to see it stripped away overnight.”
Marek experienced an ICE audit in 2012, which forced him to fire longtime employees and reshuffle his workforce. His story reflects the deep human and operational cost of mass deportations, a scenario many builders hope to avoid.
However, some leaders remain cautiously optimistic that the policy will not reach its extreme.
Doug Bauer, CEO of Tri Pointe Homes, expresses this sentiment in an interview this week with CNBC’s “The Exchange.”
As you look back on the Trump years, we had no issue with labor. So I think, on the margin, it’s not going to be a big deal.”
Bauer’s confidence may stem from Trump’s tendency to adopt extreme positions as a starting point for negotiation rather than rigid policy enforcement.
Historical precedents also offer a mixed outlook, and it’s anybody’s guess right now as to what action and impact Donald Trump will carry out. What’s not in question is that whatever that action and impact amount to, he will declare it a victory in terms of his campaign promises.
Operation Wetback in the 1950s, which forcibly deported over a million Mexican workers, caused long-term disruption in agriculture and construction. Today, repeating such policies could paralyze housing markets in immigrant-heavy states like California, Texas, and Florida, where immigrants make up 40% of the construction workforce.
Yet, industry leaders hope that Trump’s pragmatic deal-making tendencies .– and the enormous cost, time, and political capital it would take to carry out such a sweeping initiative – will temper both the instincts and their impacts.
Tariff Concerns: Adapting to Supply Chain Pressures
Another wildcard is Trump’s proposed tariffs, which could target goods critical to homebuilding, such as Canadian lumber and imported fixtures. NAHB data shows that nearly 10% of building materials used in residential construction are imported, with Canada accounting for a significant share of dimensional lumber.
Jim Tobin, CEO of NAHB, warns:
Any tariffs that raise the cost of building products are going to flow directly to the consumer, and this will have a detrimental effect on housing affordability.” However, industry leaders like Gabriel Rodriguez, president of Miami-based A Customs Brokerage, have pointed to the sector’s resilience in adapting to earlier tariffs. “Kitchen sinks moved from China to Malaysia and now Mexico. Flooring moved to Ecuador. Supply chains are diversifying.”
Moreover, experts like Realtor.com senior economist Ralph McLaughlin believe that new tariffs will have minimal impact on builders who have already secured materials or land. For others, land price adjustments in pro forma calculations may offset higher material costs.
Bauer remains sanguine about the potential tariff impact, emphasizing broader economic gains under Trump:
I think there’s going to be a positive business and economic effect from this administration.” His view reflects an industry-wide belief that tax and regulatory changes will counter increased material costs.
Catalysts for Optimism: Economic Tailwinds Under Trump
- Corporate Tax Policy as a Growth Lever
Builders like Bauer highlight corporate tax cuts as a cornerstone of Trump’s economic agenda.
The corporate tax rate is going to remain flat or go down,” Bauer says. This reduction is expected to unlock capital for reinvestment, fueling land acquisition and housing development.
- Regulatory Relief and Access to Capital
Trump’s deregulatory stance is another potential boon. Bauer predicts that reduced oversight across federal agencies like HUD and the EPA will streamline permitting and compliance processes, lowering costs for builders. Additionally, he believes easing financial regulations will “open the financial spigot” for small and mid-sized builders, addressing a persistent capital bottleneck. - Interest Rates and Housing Demand
Recent Federal Reserve rate cuts, coupled with Trump’s influence on fiscal policy, could lower borrowing costs for both buyers and developers. This would ease affordability challenges and stimulate housing demand. - Doug Bauer predicts “a pretty robust spring selling season,” driven by a combination of economic confidence and pent-up demand.
Playing Offense: Strategic Adaptation Amid Risk
Despite the risks, homebuilding leaders are positioning their businesses to capitalize on potential economic tailwinds. Strategies include:
- Proactive Workforce Advocacy: Builders are pushing for pragmatic immigration reforms that support workforce continuity while avoiding mass deportations. Chelsie Kramer of the American Immigration Council notes,
It’s a lot of just trying to mitigate harm,” including encouraging workers to renew visas and apply for citizenship.
- Supply Chain Diversification: Lessons from past tariffs have driven builders to adopt more resilient supply chains, adapting strategic warehousing infrastructures, and sourcing materials from alternative regions to minimize dependency on any single country.
- Operational Efficiency: Builders are leveraging technology and process improvements to offset cost increases and improve project timelines.
The Balanced Perspective: Deal-Making Over Extremes
Many industry leaders view Trump’s policy positions as starting points for negotiation rather than final objectives. As one executive notes,
Trump’s history is that he always starts big but ultimately settles for something manageable.”
This belief allows builders to focus on the opportunities his administration might offer—particularly in tax and regulatory policy — while remaining prepared to mitigate risks.
Doug Bauer sums up the prevailing sentiment this way:
The economic windfall from this administration will help the industry as a whole. We’re optimistic about what’s ahead.”
A Season of Opportunity Amid Uncertainty
The homebuilding sector is no stranger to volatility, and the uncertainties of a new administration bring both challenges and opportunities. Leaders understand the potential risks of mass deportations and tariffs but are betting on a more favorable macroeconomic environment to drive growth. With strategies in place to adapt to changing conditions, many believe the next four years will be a time to play offense, leveraging economic tailwinds to expand operations and meet the nation’s housing needs.
As the industry navigates these uncharted waters, one thing is clear: homebuilders are prepared to adapt, innovate, and thrive—no matter what comes next.
Source: Homebuilding Leaders Are Optimistic About Trump 2.0: Here's Why