Key Takeaways

Shares of several homebuilders fell Thursday on concerns that the Trump administration's new tariffs could raise costs and slow construction of new homes in the U.S.

The stocks of D.R. Horton ( DHI ), Lennar ( LEN ), Toll Brothers ( TOL ), PulteGroup ( PHM ), NVR ( NVR ), Taylor Morrison Home ( TMH ), KB Home ( KBH ), and Meritage Homes ( MTH ) were all down sharply Thursday.

The Invesco Building & Construction ETF ( PKB ) and the iShares US Home Construction ETF ( ITB ), which track the performance of the sector , were both down almost 5%.

Average House Could Cost $6,400 More to Build, UBS Says

UBS analysts said in a Thursday note that their work indicates about 7% of the materials and equipment used to build homes in the U.S. is imported and is now subject to an average tariff of 22%. The analysts expect the average home to become $6,400 more expensive to build because of the tariffs.

The tariffs won't just impact imported goods, the analysts said, as they expect a "knock-on price increase" of about 5% for domestic homebuilding supplies.

The analysts said they expect the burden of the higher prices will be spread across the industry of suppliers and homebuilders, as higher prices for consumers should be a last resort. Any price increase to the average home "could prove challenging in a choppy demand environment already constrained by meaningful affordability challenges," they wrote.

With homebuilding stocks having fallen over the last several months on tariff concerns, the analysts said they "believe the market is presenting a particularly attractive entry point for investors."

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