In a recent Builder interview, Zonda’s Todd Tomalak lays out a clear picture for builders. Tariffs and producer responses are set to lift building costs about 5.5% in 2025, mostly in the second half, with the biggest swings in lumber, steel, and aluminum. Data quality from official sources has slipped, which muddies planning and slows decisions. At the same time, buyer psychology, not balance sheets, is holding back moves. High-income households who could transact are in a “deer in the headlights” pause over job-loss fears. History suggests this type of deferral often ends with a strong rebound. Tomalak points to the early 1980s, when a large deferral gave way to outsized demand, and he highlights Q2 2026 as a likely inflection. The practical takeaway for small and mid builders, get ready now. Lock key categories, concentrate brand partnerships, build alternates for metal-heavy scopes, keep cycle-time variance tight, and watch real-time demand markers like equity taps and high-income purchases.

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Tomalak’s base case, uncertainties clear over the next nine months, positioning Q2 2026 as the turn. Readiness beats timing.

  • Costs: Tomalak expects tariffs and producer reactions to raise building costs about 5.5% in 2025, concentrated late in the year. His breakdown includes baseline inflation, a direct tariff effect, and domestic price pushes. He flags possible Section 232 outcomes by spring as another headwind for metals.
  • Data quality: Roughly one-third of CPI inputs now come from estimates rather than observed prices, up sharply since 2019. That degradation affects inflation, housing, and immigration reads, and it slows decision cycles for builders who rely on lagging indicators.
  • Market mix: The distribution of metros softening versus growing most closely matches October 2012 and October 2007, two very different periods that each preceded major shifts. Statistically, it is rare and points to a turning point.
  • Psychology over math: A record share of top-income households believe they face a 50% chance of job loss within five years. Many could move, but fear is freezing action. In the early 1980s, luxury buyers led the rebound, quietly, and product leaned toward premium but understated.

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Signals under the surface

  • Deferral, not hangover: Twice as many homeowners now say they want to move “as soon as possible” versus 2020. If that deferral releases, existing-home sales could surpass 7.5M at the next peak.
  • Retail gap: Per-capita sales at building-material dealers sit about 15% below 2019, even with more households. Gaps like this tend to close as mobility rises.
  • Lifestyle pull: Off-premise alcohol consumption was flat for decades, then grew 10% from 2016–2019 and another 10% during COVID, reaching 1960s levels. The practical link, demand for outdoor kitchens, beverage zones, and entertaining spaces holds up in higher-end projects.
  • Credit turn: Home-equity extraction is up ~38% year over year, an early sign households are tapping balance sheets again. Given today’s equity, it could run higher later in the cycle.

References

– Tariffs, Data Gaps, Fear: Why Housing May Be at a Turning Point. Builder Magazine, Oct 8, 2025.
https://www.builderonline.com/builder-100/people/tariffs-data-gaps-fear-why-housing-may-be-at-a-turning-point