Homebuilders maintained a subdued outlook in May, pressured by higher mortgage rates, rising inflation and affordability constraints. Ongoing conflict in Iran raises the risk of increased building material prices, further complicating an already uncertain environment.
However, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), homebuilders appear to be more confident than they were a month ago.
Builder confidence ticked up three points in May to 37. Meanwhile, the current sales conditions index rose three points to 40, the future sales index increased three points to 45, and the traffic of prospective buyers index increased three points to 25.
Among firms navigating a hard, narrow course between doing moderately well and doing all they can to survive, there are two kinds of “more confident.” One signifies “better” and the other one, felt by many homebuilding business leaders in this market, means “better than when it was worse.”
Despite a positive uptick in sentiment, the builder confidence gauge remained negative overall. Buyers are stretched thin, and builders still have to use generous incentives to facilitate new sales. Adding to these pressures, builders could soon face higher costs for a host of essential building materials.
In April, NAHB’s Chief Economist Robert Dietz noted that “62% of builders reported suppliers have increased building material costs due to higher fuel prices.” Dietz also flagged that 70% of builders reported material cost uncertainty made it challenging to price homes correctly.
Additionally, the Associated Builders and Contractors released data last week indicating that construction input prices are up 6.2% so far in 2026.
With the price of oil still elevated nearly three months after the onset of the war in Iran, many construction material suppliers have already instituted or announced price increases. While many public homebuilders say that they haven’t yet seen construction costs directly, those same builders acknowledge that there could be impacts in the latter half of the year if the conflict isn’t resolved soon.
Suppliers announce price hikes
Over the last several weeks, many publicly traded suppliers of building products announced looming or immediate price increases, largely due to rising fuel and shipping costs.
Paint, for example. In April, PPG announced price increases of up to 20% across its paints, coatings and specialty products portfolio. Sherwin-Williams also announced a 9% price hike on paint products and an 18% increase on thinners, reducers, and bulk solvent products, which took effect on May 1.
Sherwin-Williams Chair, President & CEO Heidi Petz, during a Q1 2026 earnings call in April, acknowledged that the conflict in Iran impacted prices.
“As we entered the year, we expected raw material inflation to remain relatively benign. However, the rapidly evolving tariff environment and broader geopolitical uncertainty have created a more dynamic cost backdrop than we originally anticipated,” Petz said.
John Groton, Sector Lead for Materials, Energy and Utilities at Thrivent, told HousingWire’s The Builder’s Daily that it’s not surprising that paint was quickly impacted by rising field costs.
“There’s a fair amount of petrochemical inputs in a bucket of paint, and so it is happening directly. What’s happening in the Gulf is affecting the polyolefins chain, and the resins and epoxies that come out of that end up in a gallon of paint. So that’s happening quickly,” Groton explained.
Price increases for roofing materials could happen soon as well.
Owens Corning, for instance, announced that it is raising shingles prices 6% to 9% starting June 1. Malarkey Roofing Products, a division of Amrize, similarly announced in a letter in April that it would increase prices on all residential roofing products by up to 10% starting May 18 “due to rapidly escalating raw material and fuel costs.”
Prices for cement and aggregates, which refer to granular raw materials such as sand, gravel, and crushed stone, are also likely to tick up by the mid single digits in the near future, Groton said.
“Diesel is a very important cost input to an aggregates company. I mean, that’s intuitive. It’s expensive to move rocks around, and a lot of those contracts are cost pass-through. So the builders and developers will be stomaching those cost increases, and that is directly an outcome of the Persian Gulf,” Groton explained.
Prices for Oriented strand board (OSB), a common homebuilding material, could also be impacted, as the resins and glues used to make OSB are petroleum-based. Unlike other materials, OSB pricing is already weak because new home starts have been relatively soft. However, if OSB producers keep losing money and cutting supply, prices are more likely to move higher from here than lower.
According to Groton, even if the Strait of Hormuz is fully opened with no issues overnight, it will likely take months before conditions return to normal.
“Even if this thing resolves tonight, the supply chain angle and the inventory rebuild angle are going to keep diesel and gasoline prices up through at least the fall. There’s so much replenishment that needs to happen,” Groton explained. “That’s just getting going, and that’s going to stick for months, even if this resolves.”
How price increases could impact homebuilders
During the latest round of public homebuilder earnings calls, homebuilding executives noted that they are not yet paying higher prices for construction materials. However, they acknowledged that there could be impacts in the back half of the year if the price of oil remains elevated for much longer.
M/I Homes CEO Robert Schottenstein, during the company’s latest earnings call on April 22, said that there hadn’t yet been an effect on material pricing. However, he acknowledged there could be impacts if supply chain issues persist for much longer.
To counteract or blunt any price increases, M/I Homes plans to lean on its decades-long relationships with subcontractors and suppliers that the company has worked with in both strong and weak markets.
“We know that’s a two-way street, and there are times that they work with us. There are times that we’re going to have to work with them,” Schottenstein said.
AMH CEO Bryan Smith, during an earnings call earlier this month, said that there hadn’t yet been noteworthy impacts, since they are “pretty well locked in on price” for current development projects.
“In the event that it persists, we probably wouldn’t see that play out in costs until the end of ‘26 or into ‘27,” Smith said.
Smith Douglas Homes CEO Greg Bennett, on the company’s most recent earnings call on April 29, also indicated that higher prices for building materials could be on the horizon.
“We know that if this fuel situation stays higher for longer, we’re going to get hit with fuel surcharges and some of those things,” Bennett said.
Builders weigh trade-offs
The war in Iran isn’t the only factor that could push up prices for building products. Tariffs remain a concern, although the full impact is still uncertain.
One key tariff, a levy on Canadian softwood lumber, is expected to fall from its current rate of 35.16% to 24.83% this summer, providing some relief for builders that rely on lumber from Canada. Tariffs on other products like steel, aluminum, copper, and kitchen cabinets and vanities also remain intact.
Frank Sorrentino III, founder, chairman, and CEO of ConnectOne Bank, and a former high-end single-family homebuilder in northern New Jersey, said that many contractors and builders are considering trade-offs.
Sorrentino has observed that builder clients are increasingly weighing whether to buy certain imported products or switch to domestically produced alternatives to navigate tariffs on foreign goods. There’s been a broader push toward U.S.-based sourcing, which Sorrentino argues has driven trade-offs in materials decisions.
Homebuilders have already worked hard to reduce their construction costs in the post-COVID era, often successfully. With higher fuel costs in the mix, builders may have to work extra hard to keep costs to a minimum, perhaps with certain trade-offs or by opting for materials that don’t need to be transported as far.
“I see a lot of substitution going on. Are we going to buy Canadian lumber? Am I going to buy a prefab product here in the United States? There’s a lot of value engineering. I think that’s going back into construction. I think a lot of that was lost over the last decade or so, because things were just, for lack of a better word, a little bit too good for everybody,” Sorrentino argued. “Well, now I think there’s a reemphasis around the price consciousness part and value-engineered part of construction.”
