- DC’s pending home sales rose steadily from February to March, signaling strong buyer demand.
- 25% of U.S. softwood lumber comes from Canada, making U.S. housing markets highly vulnerable to trade disruptions.
- Only 26% of DC homes saw price reductions, pointing to resilient demand despite rising prices.
- Labor shortages—especially from tighter immigration policies—may worsen construction delays and costs.
- High building material prices are being passed on to buyers, exacerbating home affordability in DC.
Home affordability has long been a challenge in the Washington D.C. metro area. While housing prices continue to soar, a major factor often ignored is the increasing cost of building materials. Trade tariffs, supply chain disruptions, and labor shortages have all contributed to material cost increases. These items directly affect construction expenses, which in turn inflate home prices. In this article, we will see how the skyrocketing cost of materials is affecting the DC housing market and what that means for first-time buyers, longtime homeowners, builders, and investors.
Why Building Material Prices Are So High
The Role of Global Trade and Tariffs
The U.S. construction industry is connected to global trade. In recent years, the introduction of tariffs on important building materials like Canadian softwood lumber, Mexican steel, and Chinese aluminum has sharply increased construction costs. Instead of stabilizing prices, these policies have added instability to the market.
As of 2024, the Trump-era tariffs on Canadian lumber still affect material costs. Lumber futures remain unstable due to changing trade agreements, disputes over duties, and inconsistent import amounts. Canadian softwood lumber, in particular, still has extra duties when shipped into the U.S. Economist Dustin Jalbert, who specializes in building materials, points out that about 25% of U.S. softwood lumber consumption comes from Canada, showing a deep dependency that policy disruptions can take advantage of (Jalbert, 2024).
Pandemic Aftershocks and Supply Chain Bottlenecks
The COVID-19 pandemic showed weaknesses in global and domestic supply chains. Delays at ports, labor shortages at mills, and unexpected demand surges all contributed to a crisis in the availability and cost of materials like lumber, concrete, drywall, and roofing shingles. Even years later, many suppliers still deal with backlogs and transportation issues that increase both timelines and prices.
Inflation and Energy Costs
Building material prices do not increase by themselves—general inflation affects everything from transportation to manufacturing. The increased cost of fuel, adhesives, and chemical resins impacts composite materials and roofing products. Materials that use a lot of energy, such as cement and glass, are particularly sensitive to price increases in oil and natural gas, adding costs to already expensive projects.
Canadian Lumber Dependency: A Structural Weakness
Canada’s role in the U.S. wood supply chain is not just about choice—it’s about necessity. The quality and versatility of Canadian softwood lumber make it a key product for U.S. builders. Compared to Southern yellow pine, which has a denser grain and fewer uses for framing and finishing, Canadian lumber offers better adaptability.
This dependency becomes a strategic weakness during trade negotiations or political disputes. When tariffs or duties are introduced, Canadian exporters often reduce shipments, leading to scarcity and price increases in the U.S. market. Jalbert explains that this weakness in the lumber supply chain makes quick recovery difficult when distribution is disrupted—especially in urban areas like Washington D.C., which already face limited buildable land and high demand (Jalbert, 2024).
Contractor Response: Passing Costs On to Consumers
How Builders React to Rising Costs
In most consumer markets, rising input costs require sellers to find efficiencies or accept lower profits. However, in residential housing, the laws of supply and demand allow builders to pass on these costs directly to buyers, particularly in high-demand cities like DC.
Builders working in Washington, D.C., must deal with a very competitive environment with limited inventory. Because of this, they can raise prices without a major slowdown in sales. On the other hand, in housing markets with decreasing demand—such as parts of the Sun Belt—builders often have to absorb the costs or offer incentives to keep sales moving.
Pricing Power in High-Demand Markets
D.C.’s limited inventory and consistent demand mean that additional construction costs are passed on. Contractors rarely consider stopping building when demand is so strong. Instead, they change their pricing strategy, confident that buyers—often those with higher incomes—will pay the difference.
Jalbert calls this “downstream elasticity”—a situation where the market can handle cost increases without a similar drop in demand (Jalbert, 2024). This strength helps builders manage risk but worsens affordability for buyers.
Rising Demand: Pending Home Sales Tell the Story
Data from Altos Research shows that home demand in D.C. is not just staying the same—it’s increasing. Weekly pending home sales increased from 596 in late February to 847 by mid-March:
- Feb. 21: 596
- Feb. 28: 598
- Mar. 7: 629
- Mar. 14: 847
This 42% increase in just three weeks highlights the pent-up demand in the market. Even as interest rates and property values remain high, the desire for homeownership in D.C. remains strong (Altos Research, 2024).
This suggests that pricing is not yet a strong enough obstacle to reduce buyer interest. It also means that structural inputs like building material prices continue to be important drivers of the market’s direction.
New Listings: Seasonal Boost or Sustainable Growth?
In mid-March, D.C.’s housing market saw 674 single-family homes and 619 condos listed for sale—a 12% increase from the previous week. Nearly 449 of those were new constructions, suggesting that developers are still active despite rising costs.
Compared to just 412 new builds in October 2023, this indicates a positive trend in supply. However, builder optimism may decrease if material price instability continues or labor shortages worsen. New construction is especially sensitive to upfront costs and long-term project timelines—two factors increasingly strained by supply chain and policy variables (Altos Research, 2024).
Inventory Levels Are Creeping Up
As of late March, there were 4,024 single-family homes available across D.C. housing markets—a 6.36% increase from the prior week. While this may reflect growing seller confidence, it’s also possible that some properties are staying on the market longer due to affordability issues for buyers.
A slow but steady inventory increase could provide needed relief over time, particularly if pricing decreases. However, if input costs continue to increase without control, this balance could be lost.
Price Reductions Remain Low – An Indicator of Strong Demand
Only 26% of available homes in D.C. have had price cuts—a strong sign that sellers feel no need to lower asking prices. In a decreasing or correcting market, this number would typically be between 30–40% or higher.
Low price reductions suggest strong absorption and competition among buyers, confirming that supply is still less than consistent demand. For home affordability, however, this is bad news. It means that fewer bargains exist and that entering the market remains difficult for average-income families (Altos Research, 2024).
Labor Market and Policy: A Looming Construction Bottleneck
The discussion about home affordability and building material prices is not complete without considering labor. Jalbert also points out that restrictive immigration policies could slow the construction pipeline even further. A large portion of the residential construction workforce in the U.S. is made up of undocumented labor, especially in roles such as framing, drywall installation, and roofing.
If immigration reform leads to mass deportations or stricter employment verification laws, developers may struggle to find legal replacements quickly. This would extend build times, reduce construction starts, and increase labor costs as demand for skilled workers increases—adding more pressure onto the already-pressured DC housing market (Jalbert, 2024).
How High Material Costs Hit Home Affordability
When the cost to build increases due to items like tariffs and labor shortages, these expenses do not disappear—they are added to the final sale price of the home. Consider a mid-range townhome in D.C. that costs $400,000 to build. A 10% increase in material prices or delayed labor could increase that figure to $440,000 or more. That additional $40,000 is passed on to the buyer, raising monthly mortgage payments and further complicating loan approvals.
Because D.C. already has one of the highest costs of living and housing in the country, these price hikes push even more people out of the ownership possibility. Middle-class buyers are often forced to rent longer or move completely. In this way, increased material costs directly hurt the broader goal of improving home affordability in Washington, D.C.
Implications for Las Vegas Real Estate
Even though Las Vegas is different from D.C. in economic structure and cost of living, it’s also affected by national supply and labor issues. According to Steve Hawks, a real estate expert with over 4,000 transactions, Las Vegas builders are very sensitive to any change in costs or project timelines.
Higher prices for Canadian lumber, concrete, or drywall affect budgets nationwide. In Las Vegas, where profit margins are smaller and land use is more expansive, cost hikes can directly cause delays, smaller developments, or stopped projects entirely. This not only affects builders but potential homeowners who face decreasing inventory and rising prices.
Policy Outlook: Can the Government Ease Material Pressures?
There is significant pressure on Congress and the White House to reassess tariff policies affecting builders. With housing affordability reaching critical levels in many parts of the U.S., policymakers are starting to understand that material costs must be part of the solution—along with zoning reform, lending standards, and public housing initiatives.
However, any action—including potential tariff rollbacks—will not show immediate results. Supply chains need time to adjust, and until then, developers, investors, and consumers must deal with a high-cost environment.
Is D.C. a Canary in the Coal Mine?
Washington, D.C. might be a preview of what’s coming in other major U.S. metros. The combined issues of high material costs, labor shortages, and restrictive trade policies are not unique to the capital—they’re systemic. If similar conditions appear elsewhere, we might see affordability crises spread to cities like Seattle, San Francisco, Denver, and other places.
The lessons from D.C.—including the importance of local policy, supply chain strength, and skilled labor—are important in building housing strategies nationwide.
Actionable Tips for Buyers and Investors
- Get pre-approved early to protect yourself against rising financing and material-linked home price increases.
- Watch construction trends and labor availability in your market to better understand future pricing.
- Change materials and prearranged delivery contracts if you’re a builder to protect against instability.
- Invest in properties now if future affordability is expected to worsen due to combined cost items.
- Watch legislative trends—subsidies or tariff reductions could create buying or selling chances.
A Ground-Level View from Steve Hawks
Real estate veteran Steve Hawks summarizes the situation directly. “We’re looking at a national housing problem caused not just by interest rates but by infrastructure problems—materials, labor, and supply chains,” he says. “If builders can’t absorb the costs, they won’t build. That stops growth, limits inventory, and increases prices.”
In markets like Las Vegas and Washington, D.C., the early signs are already clear: expensive materials, limited inventories, optimistic sellers, and discouraged first-time buyers. Understanding the national factors behind these conditions is the first step to changing the situation.
Citations
- Jalbert, D. (2024). Interview insights on U.S. dependence on Canadian lumber supply. Provided in HousingWire article detailing the D.C. housing market trends and building materials.
- Altos Research. (2024). Weekly data on pending home sales, real estate listings, and inventory levels in Washington D.C., March.
- Fastmarkets. (2024). Analysis of building material supply constraints and cost increase due to tariffs.