The Building Products Landscape: Volatility, Tariffs, and a Softer Housing Market

In late 2024, Todd Tomalak and the Zonda building products team used the word volatility to characterize a sharp shift in price sensitivity in the building products market mid-2024. Since then, conditions have become more complicated, with numerous tariffs, bond—and mortgage—market volatility, and a much softer housing environment in the spring.

To better understand the shifting building products landscape, Tomalak, principal, advisory of building products for Zonda, shared how the market has shifted to begin 2025, highlights of the new Building Product Outlook forecast from Zonda, and how volatility is working through the building products industry.

How has the building products market shifted in the first quarter of 2025?

First quarter volumes played out similar to our forecast, but risks outlook for the remainder of the year shifted significantly.

Building products companies are facing a challenging progression:

1. A shift to a more price-sensitive consumer since mid-2024, which we expected because excess pandemic-era savings was fully exhausted and debt payment;
2. An added tariff (announced in January) which resulted in some pre-buying of materials – this made sales of some companies look better than fundamentals supported. Some manufacturers also benefited from builder incentives driving upgraded products in new homes;
3. A much weaker spring housing market, and soft remodeling demand; and
4. An escalation of tariffs in April, which take time to impact the housing market.

As a result, our baseline view of risks to housing and the economy shifted significantly. We think the industry faces significantly more challenges in the second quarter through the fourth quarter of 2025.

The word volatility has been used to describe many aspects of the economy over the past several months. How is volatility impacting the building products space and working through the industry?

Volatility is an understatement. In the past five years, there have been 50% more periods of outlier swings in building products prices than the prior 50 years cumulatively. That includes the period of the 1970s inflationary crisis. In 2020 to 2022, the cause was the pandemic, but now unpredictability is driving consumers to curtail spending and defer moves and home improvements. At the same time, suppliers face questions regarding what pricing they can reasonably pass along to customers without losing market share. Many manufacturers set prices amid the 2022 shortages and are just now discovering whether homeowners are willing to spend their limited funds on their products or shift to a lower cost alternative.

How has the outlook for new construction and remodeling spending changed since the most recent forecast?

We lowered our baseline forecast considerably (over 550 basis points lower than before) for 2025. We also don’t expect manufacturers can actually pass along the price increases they face (at least not all of them can). We also stress test several scenarios where tariffs get resolved to different degrees and shifts in macro assumptions. In most instances, the second half of 2025 gets progressively more challenging, but the knock-on impact to 2026 is still in question. We feel we have a good handle on how the pieces work together.

What do you think will be important factors or data to watch for stakeholders in the building products space in the coming months?

Path of price escalation, rates, and bond market behavior are critical to watch closely. We also think luxury homeowners are an interesting segment to watch, as that group is less sensitive to mortgage rate gyrations and has considerably higher purchasing power. We note that luxury purchases were some of the earliest to recover after the Global Financial Crisis in ~2009. 2025 is not the same, but luxury buyers will be worth paying attention to.