On Tuesday, President Donald Trump’s administration imposed new tariffs on imports from Canada and Mexico while increasing existing tariffs on goods from China, a move expected to raise prices for new homes, according to a recent CoreLogic report.
That’s largely because tariffs affect essential home construction materials, including wood products, cement, steel, aluminum and appliances, so homebuilding costs are projected to rise.
As a result, construction costs could increase by 4% to 6% over the next 12 months, adding roughly $17,000 to $22,000 to the sticker prices for new homes, according to CoreLogic.
With the cost of a newly constructed home averaging around $422,000, these added expenses may further strain affordability for first-time homebuyers, the study says.
Higher tariffs could push up home construction costs
Imports from China now face a 20% tariff, up from 10% in February, while imports from Canada and Mexico currently face a 25% tariff. Canadian softwood lumber, which was already subject to a 14.5% duty, now effectively faces a nearly 40% total tariff with the new increase.
Two key materials used in home construction, softwood lumber and gypsum products including lime, are largely sourced from Canada and Mexico, respectively. Nearly 70% of U.S. softwood lumber imports come from Canada, while 71% of gypsum and lime imports come from Mexico, according to the National Association of Home Builders.
“Even incremental increases in the cost of materials, labor and equipment make it that much more difficult to build a home profitably,” says Pete Carroll, executive for public policy and industry relations at CoreLogic. “This further disrupts efforts to close the critical gap in U.S. housing supply.”
For materials that can be produced domestically, there are already “indications that a rush on domestic materials would overwhelm current production,” potentially leading to supply shortages and price increases, the report says.
CoreLogic’s findings align with other industry estimates on the impact of tariffs. Rob Dietz, chief economist at the National Association of Home Builders, offers a more conservative estimate, telling CNBC that builder costs could increase by $7,500 to $10,000 per home.
And an analysis by John Burns Research & Consulting estimates tariffs could drive up average building material costs by 10%.
“Before the tariffs were announced, we expected building material prices to rise 3% in 2025 due to normal market conditions. With the new tariffs, this increase could reach 10%,” Matt Saunders, a senior vice president at John Burns Research & Consulting, tells CNBC Make It. “As builders pass these extra costs on to homebuyers, housing will become less affordable.”
