Between fluctuating interest rates and a competitive housing market with tight inventory, homebuyers have had a tricky time getting on the property ladder. But the U.S. government has added another potential barrier to homeownership: international tariffs, which will likely drive up the cost of home prices in 2025.

You’ve seen the headlines – trade policies are coming into effect that add taxes on key construction materials and home goods, amongst other industries. These tariffs are set to inflate the cost of building homes, buying new homes, and renovating existing ones.

Tariffs on lumber, concrete, steel, aluminum, and major appliances are adding thousands of dollars to the price of new homes. According to builders and industry experts, these costs are being passed directly to consumers, especially impacting first-time buyers and those searching for affordable options.

How Tariffs Are Raising Home Building Costs

Tariffs are essentially taxes applied on imported goods, meaning the importer – in this case, American homebuilders – must pay an additional cost for importing supplies, materials, and appliances from another country.

The latest government announcements on tariffs span 25 percent tariffs on all goods from Mexico and Canada, tariffs on imports from China, and 25 percent tariffs on imports of steel and aluminium from around the world.

While the tariffs are designed to bolster domestic production and foster job creation, they’re sending shockwaves throughout the home construction industry.

“Roughly 70 percent of building materials are imported, and of that total, more than 20 percent comes from China and a bit more than 20 percent comes from Canada and Mexico. It isn’t just lumber. It’s gypsum, dry wall. A third of appliances are imported. A large share of refrigerators are manufactured in Mexico,” Robert Dietz, chief economist at the National Association of Home Builders, told Barron’s, a financial sector outlet published by the Dow Jones.

Builders are particularly impacted by tariffs on:

• Canadian Lumber: The U.S. has imposed tariffs on Canadian softwood lumber for years, with rates fluctuating between eight percent and 20 percent. The 25 percent across-the-board tariff on Canadian goods coming into the U.S. would be in addition to the 14.5 percent duty already in place on lumber, making the much-needed Canadian import rise by nearly 40 percent
• Concrete, cement and gypsum (used for drywall): Next to wood, concrete and cement are core components to traditional homebuilding. Analysts suggest that about 25 percent of concrete used in residential and commercial building is imported with Canada and Mexico as key suppliers. American builders also imported $481 million worth of lime and gypsum – used for making plaster and drywall – in 2024. Overall, more than 70 percent of imports of softwood lumber and gypsum – two essential materials American homebuilders rely on – come from Canada and Mexico, the NAHB says.
• International steel and aluminum: Tariffs of 25 percent on imported steel and aluminum, also key materials in home construction, will raise the costs for framing, roofing, and other structural elements of home building.
• Housing fixtures – predominantly from China: Many home appliances, cabinets, flooring materials, and light fixtures come from China. Market insights suggest these costs could increase by anywhere between 10 and 20 percent for builders.

Roof shingles and masonry products shouldn’t see any impact from the trade wars at all because they’re domestically sourced materials due to their weight and hefty shipping costs. Prices for asphalt-based roofing and other petroleum-based construction materials could decrease as the new government is gearing up for increased oil production.

But on a whole, $204 billion worth of goods were used in the construction of both new multi-family and single-family homes in 2024, according to the NAHB. And $14 billion of those supplies and materials were imports from outside of the country.

If builders try to circumvent these tariffs by sourcing locally, market analysts warn this could create bottlenecks, creating price hikes for domestic resources.

The Impact of Tariffs on Home Prices for Homebuyers

While homebuilders have to cover the tariffs to have their supplies imported, these escalating costs eventually make their way to the end consumer – the homebuyer.

Industry estimates point to a four to six percent increase in construction costs over the next calendar year, adding $17,000 to $22,000 to the sticker prices for new homes. When the NAHB polled builders, they pegged the cost increase at a more conservative $9,200 per home.

Keep in mind, the average new home price in 2025 is just under $460,000.

“[Tariffs] are going to affect the cost of construction – of homes and apartment buildings. Remodeling construction will become more expensive. If tariffs are significant, prices will move up, but probably just as a one-time adjustment, rather than a persistent increase,” Dietz said. “Tariffs have to be paid by somebody. Usually, that is the consumer.”

Dietz said homebuyers and builders need to have important discussions about how resourcing costs will affect the final product. This could include conversations on whether buyers are open to considering alternatives in materials, delaying non-essential upgrades, and fitting their home with domestic appliances where possible.

Timing is also key. The federal government said it would delay the impending tariffs on Canada and Mexico for a month, expiring on April 2, giving builders time to organize their supply chain. It’s a live situation that potential homebuyers should monitor closely as policy changes take effect.

In the meantime, the NAHB has appealed to the government, urging it to exempt building materials from the proposed tariffs because of their harm to housing affordability.