The housing industry is navigating a period of economic turbulence, but signs point to opportunity ahead. Zonda’s building products principal Todd Tomalak outlined the forces shaping building products, consumer demand, and future growth. From tariffs and shaky government data to unusual patterns in home sales, Tomalak emphasized that the market is at a rare inflection point—and one that builders, developers, and manufacturers should prepare for now.
“Tariffs alone are expected to add roughly 5.5% to building costs this year,” Tomalak noted, with lumber, steel, and aluminum leading the volatility. At the same time, the Bureau of Labor Statistics is struggling to collect reliable data, making Zonda’s proprietary tracking increasingly critical for gauging real market activity.
Beyond the economics, consumer psychology is proving to be a powerful driver. Even households with the financial means to move are pausing out of job-loss fears—a “deer in the headlights” effect. Yet history suggests that once uncertainty lifts, pent-up demand will fuel a surge in mobility and remodeling. Tomalak points to the early 1980s, when deferred moves gave way to one of the strongest rebounds on record, as a model for what could unfold again.
For industry players, the message is clear: secure key product categories, strengthen brand partnerships, and plan for volatility. While near-term headwinds remain, Tomalak sees reasons for cautious optimism, with Q2 2026 positioned as a potential turning point.s
Tim Sullivan: It’s my pleasure to introduce Todd Tomalak, our principal leader for building products at Zonda. He’s much more than that, as today’s conversation will show. We’ll explore the economy, tariffs, housing, and consumer behavior. Todd, let’s start with your background.
Todd Tomalak: I entered the industry in October 2007—terrible timing—leaving banking to join Kohler’s research group. Later I moved into M&A and strategy, stayed through the financial crisis, then spent seven years building a research practice at another firm. Now at Zonda, I cover building products, working with a wealth of data that helps us understand trends.
Tim Sullivan: Your work is national in scope, correct?
Todd Tomalak: Yes. Building product companies make large-scale investments, so we start with macro questions—growth, demand, pricing—then drill into local geographies. We also serve investors who need to know what’s likely to change quickly.
Tim Sullivan: Tariffs are on everyone’s mind. What’s your take?
Todd Tomalak: Our August forecast shows the new wave of tariffs will raise building costs about 5.5% this year, mainly in the second half. That figure includes 2% inflation, 2% direct tariff impact, and domestic producers pushing prices higher. That’s better than the 9% we feared earlier, but volatility remains—especially in lumber, steel, and aluminum. Watch Section 232 anti-dumping duties; they could create more headwinds by spring.
Tim Sullivan: We also rely on government data, including BLS. But accuracy is a concern.
Todd Tomalak: Right. It’s not manipulation but degradation. About one-third of CPI inputs are now estimated by economists—up sixfold from 2019. The data-collection process is breaking down, which affects inflation, housing, and immigration estimates. This makes business planning harder, and it’s why Zonda’s observational data is increasingly valuable.
Tim Sullivan: You’ve described today’s housing market mix as unusual.
Todd Tomalak: Yes. Normally markets move at different speeds. What’s unusual now is the distribution of how many are softening versus growing. We’ve compared this to 25 years of monthly data. The closest matches were October 2012, when single-family rental investors bought distressed properties, and October 2007, just before the crash. It’s statistically rare and signals a turning point.
Tim Sullivan: You’ve also used the phrase “deer in the headlights.”
Todd Tomalak: We’re moving from mortgage-rate lock-in to fear-driven inaction. Even households who could move are frozen by uncertainty. One survey shows a record share of top-income households believe they have a 50% chance of job loss within five years. That’s unprecedented. We saw a smaller version of this in the early 1980s. Interestingly, back then, luxury consumers were first to rebound, though inconspicuously—buying Tiffany jewelry in plain bags. Building products adapted with understated but high-end designs.
Tim Sullivan: Another signal you’ve tracked is alcohol consumption.
Todd Tomalak: Yes, it’s wild. For four decades, per-capita off-premise alcohol consumption was flat. Then it grew 10% from 2016–2019, and another 10% during COVID. Levels now match the 1960s. Half-jokingly, I say this supports demand for outdoor kitchens—those fridges are full.
Tim Sullivan: What about remodeling and future moves?
Todd Tomalak: The Wall Street narrative is that we had a COVID-driven wave of moves and remodels, followed by a hangover. We think that’s wrong. It’s actually deferral. Many people are stuck in homes they bought with limited inventory, and surveys show twice as many homeowners now want to move as soon as possible compared with 2020. We saw this pattern in the early ’80s: the largest deferral of moves in history, followed by the largest rebound. If that plays out again, existing home sales could soar past 7.5 million.
It’s worth noting Home Depot was founded in a similar environment: declining mobility and remodeling spend, followed by the biggest surge of moves and DIY on record. Today, per-capita sales at building material dealers are 15% below 2019, despite more homes and people. That gap suggests a rebound is coming.
Tim Sullivan: You’ve tied current conditions to the 1970s stagflation era.
Todd Tomalak: Yes. Back then, the term “lumber recession” described industry consolidation, with large firms absorbing smaller ones. We’re beginning to see that again. In nine months, several uncertainties will be clearer: the new Fed chair, tariff decisions, and rate direction. We don’t need perfect conditions, just marginal improvement. That should ease high-income uncertainty and mark the beginning of a turn. We’re more positive about Q2 2026 as an inflection point.
Tim Sullivan: What should industry players watch and do now?
Todd Tomalak: First, watch whether high-income households start resuming purchases. Also monitor home-equity extraction—it’s up 38% year-over-year, signaling a bottom, but should be much higher given current equity levels. Action steps: prepare for an unfavorable Section 232 outcome by locking in lumber, appliances, and select products. Build relationships with a few leading brands for the next 2–3 years—this hedges risk and positions you for upside. Think portfolio, not just unit cost. Some brands come with attachment ecosystems that boost margins across categories. And strengthen builder–brand relationships with forward commitments; that brings both savings and alignment.
To reach Tim Sullivan and learn how Zonda can help consult on your project, email him at tsullivan@zondahome.com. You can reach Todd Tomalak at ttomalak@zondahome.com
