How New Tariffs Will Shake Up the U.S. Housing Market

Prepared by Square Feet Appraisals in collaboration with Delaware Beaches Online

Homebuilding Just Got More Expensive—And Buyers Will Feel It

The U.S. housing market is already under serious pressure. Home prices remain high, inventory is low, and affordability is a growing concern. Now, new tariffs on building materials from Canada, Mexico, and China are about to make things even tougher for homebuilders—and ultimately, for buyers.

What’s Getting Hit by Tariffs?

Several key materials used in home construction will be affected by these tariffs, including:

• Lumber – One of the biggest components of a new home. A large portion of U.S. lumber comes from Canada, which now faces a 25% tariff.
• Drywall (Gypsum) – Essential for interior walls and ceilings. The U.S. imports a significant amount from Mexico, Canada, and Spain.
• Home Appliances – Most household appliances come from China, which is now subject to a 20% tax, up from a previous 10%.  According to the Trump administration, these tariffs were implemented as a measure to curb the influx of fentanyl into the United States.

How Much Will This Cost Homebuilders?

According to the National Association of Home Builders (NAHB), the new tariffs could increase construction costs by $7,500 to $10,000 per home. Lumber alone is expected to add an extra $4,900 per home on average. When home prices rise, fewer buyers can afford them. Last year, the NAHB estimated that every $1,000 increase in the median price of a new home priced out approximately 106,000 potential buyers.

The Lumber Problem: A Perfect Storm

Lumber has been a rollercoaster ride for the housing market. Demand soared during the pandemic, causing prices to spike. Now, the 25% tariff on Canadian lumber means builders will have to pay even more. And while President Trump has ordered an increase in domestic lumber production, that’s not an immediate fix.

• It takes up to three years to build new sawmills.
• Skilled labor shortages make it tough to ramp up production quickly.
• U.S. lumber producers will likely raise their prices to match imported lumber.

In short, builders are stuck paying more no matter what.

What This Means for Buyers and Sellers

So, what does this mean for the housing market? In short: higher prices and fewer choices. Here’s what to expect:

• New Home Prices Will Rise – Builders will have to pass these extra costs on to buyers.
• Existing Home Prices Could Go Up, Too – As new construction gets pricier, demand for existing homes will rise, driving up prices.
• Remodeling Costs Will Increase – If you’re planning a renovation, expect to pay more for materials.
• Mortgage Rates Are (Slightly) Helping – The one bright spot? Mortgage rates have dipped from recent highs, with the 30-year fixed rate now around 6.64% (down from 7.26% in January).

A Tough Road Ahead for Housing

These tariffs come at a time when the housing market is already struggling. Sales of newly built homes dropped 10% in January, and contracts on existing homes hit record lows. If costs keep rising, builders may slow down new developments, further tightening the already strained supply of homes.

Final Thoughts

The U.S. housing market is at a crossroads. Tariffs on essential materials are set to drive up construction costs, making homes more expensive for buyers. While the administration is trying to boost domestic lumber production, it’s not an overnight solution. For now, homebuyers should prepare for rising prices, and sellers may see increased demand for existing homes.