Tariffs Could Mean Higher Prices for Your New Home—Here’s How

Tariffs are taxes that governments place on imported goods. Companies often pass these higher costs onto customers, leading to price increases across a wide range of everyday items. While tariffs are intended to protect domestic industries, they can come with side effects: higher consumer prices, rising inflation, and added pressure on home prices.

Tariffs and Building Materials

One of the most visible effects of tariffs is the rising cost of construction materials like lumber, steel, and aluminum. These materials are crucial for building new homes, and when tariffs increase their prices, builders are forced to pass along those costs to homebuyers. Per the NAHB/Wells Fargo Housing Market Index (HMI) April 2025 survey, builders estimate that the United States’ recent tariffs add an estimated $10,900 to a new home’s typical construction costs.

Higher construction costs can slow down new housing projects. When housing supply shrinks but demand remains strong, prices for both new and existing homes can climb even further.

Impact on Home Affordability

Tariffs can also drive up the cost of home renovations and repairs due to materials needed for upgrades becoming more expensive. As homeowners invest more into renovations, the value of homes in the same market areas can rise, further impacting affordability.

Additionally, tariffs can lead to higher inflation. In an effort to keep inflation in check, the Federal Reserve often raises interest rates. Higher interest rates mean more expensive mortgages, increasing the total cost of buying a home. That said, when tariffs trigger an economic downturn, the Fed may eventually cut interest rates to stimulate growth.

Tariffs in Context

On April 2, President Donald Trump launched a new wave of tariffs, targeting nearly all imported goods. Lumber imports from Canada, a vital material for U.S. home construction, were hit particularly hard. Canadian lumber currently faces a 14.5% tariff, with the possibility of rising to 34.5%. Until U.S. production can ramp up, higher lumber tariffs are expected to keep construction costs—and housing prices—elevated.

Four other presidents have previously instituted high protective tariffs: John Quincy Adams, John Tyler, Benjamin Harrison, and Herbert Hoover. All of these tariffs were repealed approximately four years after their respective introductions, and their harmful economic effects are often credited for the opposition party winning each of the subsequent elections.

The Bottom Line

Tariffs are already shaping the 2025 housing market. By raising construction costs and contributing to inflation, they’re making both homes and mortgages more expensive in the short term. If these tariffs eventually lead to a recession, lower interest rates could bring some relief at the expense of broader economic uncertainty.