As top U.S. home builders gathered this week in southern California for the annual Builder 100 conference, Zonda released its second-quarter Building Products Outlook report. The housing market research company’s forecasts are bleak, with historical similarities drawn between the impacts of the Trump’s administration’s tariff policies and the economic fallout of the 1973 oil embargo and 1982’s double-dip recession.

Zonda predicts that countries will hash out trade agreements and 20% to 30% of the Trump administration’s reciprocal tariffs will be eliminated within three months of taking effect on July 8, which is when the administration’s 90-day tariff pause is set to expire. However, the company expects the remaining tariffs to “drive higher costs to homebuyers and (create) overall headwinds to real incomes due to broader inflationary impacts.”

“We think the industry should be prepared for an increase of about 9.3% to ‘sticks and bricks,’ taking into account not only direct costs from tariffs, but also baseline inflation and knock-on costs from domestic manufacturers,” Todd Tomalak, Zonda’s principal of building products advisory, noted in a press release.

Remodeling outlook

Zonda forecasts that the peak impact of tariffs will be felt by homeowners in the second half of 2025. As a result, the company predicts that many homeowners will scale down remodeling projects or scrap them altogether. Zonda projects that 20% of “midrange remodels” between $5,000 and $34,000 will be downgraded to small repair projects in 2025, while 27% of larger remodeling projects will be scaled down below $35,000.

The Zonda analysis found that windows and doors are the most price-sensitive home improvement projects and are the least likely to be upgraded when costs increase. By contrast, homeowners are more likely to pony up for flooring, electrical and kitchen upgrades such as appliances and cabinets.

Cash-out refinances

The report notes that “nearly 50% of mortgage holders are locked into mortgages that were more than 300 basis points below market rates in 2024, which reduces their mobility by nearly 50% per household.” Zonda also reports that when adjusted for inflation, home equity extraction is “at a 29-year low, even though home equity is at all-time highs.”

Zonda thinks that this disparity will “drive some incremental cash-out equity extraction” in 2025. The report adds that, historically, “modestly lower mortgage rates drive large increases in dollars extracted, which in turn are typically spent on remodel activity.”