Are things looking up, or about to crash off a cliff? When it comes to Michigan’s construction industry, it depends on how you read the tea leaves.

2024 was a significant course correction over 2023 in residential home construction. The Home Builders Association of Michigan (HBAM) reported that 15,137 single-family home permits had been issued in 2024, the highest number since 2021 and a 5 percent increase compared to 2023.

Yet most industry experts predict trouble ahead. Writing for Professional Builder, the publication of the National Association of Home Builders, industry expert Calum Mair warned that tariffs imposed by President Trump could “significantly raise construction input costs” and “have a noticeable impact on project budgets.”

“We have seen some information coming in related to what those tariffs could look like for our industry, but the thing at the end of the day – at least for now – is that even the experts don’t know,” says Lauren Tucker, executive director of the HBA of Northwest Michigan.

The residential construction numbers

HBA Northwest Michigan represents eight counties: Antrim, Benzie, Grand Traverse, Kalkaska, Leelanau, Manistee, Missaukee, and Wexford. Due to inconsistent reporting across that territory, Tucker says she doesn’t have “exact numbers” for how many single-family home building permits were issued in 2024, though she estimates northwest Michigan was in line with the state’s overall 5 percent uptick in single-family home construction last year.

While growth is good, things have been anything but predictable. In the last six months, Tucker says, Grand Traverse County has ranged anywhere from 10 to 50 new construction permits per month. Some of those fluctuations have to do with seasonality, but Tucker says the presidential election was a big factor as well.

“We definitely saw a little bit of a slowdown in the September/October time period, and I'm sure that was related to the election coming,” Tucker says. “I think all businesses saw a little bit of a slowdown, frankly, because people were really feeling uncertain on what that was going to look like. Fast-forward to March and now you're seeing people that want to get going on projects again, and they want to get going right now, before any potential impacts would change their course of action.”

The tariff numbers

Rob Dietz, chief economist for the National Association of Home Builders (NAHB), predicts the new tariffs will increase homebuilder costs from $7,500 to $10,000 for every house they build.

The biggest culprit behind those increases? Lumber. According to Leading Builders of America, tariff impacts on lumber packages alone will add about $5,000 to the per-home construction budget. That’s because Canada accounts for about a third of the lumber used in America’s home construction industry. And while builders will look for other supply chain options to reduce their costs, the sheer scope of that shift in demand likely means that alternative options will get more expensive, too. 

On March 1, Trump signed an executive order “to immediately increase domestic timber production and streamline federal policies to enhance forest management, reduce wildfire risks, and decrease reliance on imported timber.” The NAHB and Leading Builders of America have both applauded that action, saying it should help to lessen the blow of tariff impacts on home construction.

The housing numbers

Still, expanding domestic supply chains will take time, and in the interim, Tucker expects Michigan and other states near the Canadian border will bear the worst brunt of the new tariffs.

According to Crain’s Detroit Business, Michigan lost 800,000 jobs between 2000 and 2009, and was still 250,000 jobs shy of its pre-recession levels a decade after the 2008-2009 financial crisis. Those numbers bear out in the state’s home production statistics, which have never recovered from the Great Recession.

“Most economists believe a state the size of Michigan should be building 25,000 new homes per year just to keep up with population shifts and the loss of aging housing stock,” the HBAM reported last year. “The last time production levels hit this mark was in 2006. Since then, Michigan has built 13,000 new homes a year on average.”

The numbers are mirrored in northern Michigan, which Tucker says helps explain why housing demand so dramatically outstrips supply in the region – and why prices are through the roof.

In 2023, a Housing Needs Assessment published by local nonprofit Housing North identified housing gaps of 8,813 rental units and 22,455 for-sale units across a five-year projection period of 2023 to 2027. Those numbers account for the entire 10-county region Housing North serves, which includes Antrim, Benzie, Charlevoix, Emmet, Grand Traverse, Kalkaska, Leelanau, Manistee, Missaukee, and Wexford counties.

For just the eight counties HBA Northwest Michigan represents, the deficit was around 19,000 units, according to Tucker, and that number is growing by an estimated 3,000 units a year. The new crackdown on illegal immigration could exacerbate the issue further, Tucker says, as about 30 percent of the local construction workforce is immigrant labor. 

These factors are combining to create a domino effect for housing in northern Michigan. Fewer construction workers has meant a worsening housing gap, creating a situation where supply is consistently too low to satisfy demand – especially at affordable price points. The lack of balance between supply and demand then elevates pricing further, as does inflation. And tariffs and strict immigration policies could make it even more expensive to build.

One bright spot? Local and statewide pushes to get more kids into the skilled trades seem to be paying dividends.

“We’ve seen a huge increase in this upcoming generation, in terms of individuals that are interested in creating things,” Tucker says. “The trades offer incredibly lucrative and rewarding careers, and they don't carry the huge debt load that often comes from going to college. I think we’re getting better at communicating that message.”

This story is an abridged version on an article that appears in the April issue of the Traverse City Business News, on newsstands next week.