Homes – the most expensive item most Americans ever buy – are about to get even pricier if the Trump administration’s proposed tariffs take effect.
An analysis from John Burns Research and Consulting, which focuses on the housing industry, estimates the cost of a newly constructed home will increase by nearly 5% if the White House’s proposed tariffs are implemented. That’s about $21,000 on the median-priced new home.
While the Trump administration paused proposed 25% levies on Canada and Mexico for at least a month, a 10% tariff on goods imported from China took effect Monday.
Tariffs "are going to be an affordability shock if they come through,” said Matthew Saunders, senior vice president of building products research at the company.
Residential construction requires many ingredients. In most categories, the vast majority of the import supplies come from the trading partners targeted this month.
Roughly 60% of all hardware imports come from China, Canada and Mexico, according to Saunders’ analysis. Nearly three-quarters of imported sawmill wood products come from Canada. And perhaps surprisingly, the U.S. imports more major household appliances from Mexico, by dollar amount, than from China.
Though 5% may not sound like a lot, some context is crucial. The median price of a new home in December 2024 was $427,000, according to the Census Bureau. That’s up 30% in five years – and mortgage rates now are roughly double what they were just before the COVID-19 pandemic.
And tariffs may also have some knock-on effects, Saunders noted. For example, domestic suppliers of materials are likely to raise their prices in line with those from tariff-affected countries simply because they can.
The simmering trade war with Canada is also likely to affect the supply of lumber in the longer run, said Stinson Dean, an investor who runs Deacon Lumber.
“The bigger problem is the long-term effect of making sawmill operations in Canada unviable because of their increased cost to do business in the U.S.,” Dean said. “We don't need that much lumber right now because of the state of the housing market, but eventually that'll change, and we'll need all the lumber we can get.”
When consumer demand for new homes perks up – likely when mortgage rates fall significantly – the production capacity won’t be there, he said.
“You don't even have to implement the tariff. The threat of the tariff has already done the damage to potential increases in supply.”
Higher costs for building materials also exacerbate severe labor shortages in the construction industry, Saunders said. Many homebuilders won’t be able to swallow all of the additional costs, and at some point consumers won’t be able to afford to buy.
“In terms of immigration, potential deportations, tariffs, these are all adding to what's already an unsupportable environment.”
Source: USA Today
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