Tariffs typically raise the cost of building new homes. That leads to higher home prices and lower housing supply, at a time when affordability can be a challenge for many buyers.
This pressure is even greater when you factor in stricter immigration policies that limit the availability of construction labor. The industry has long relied on undocumented workers, and with fewer laborers available, wages are climbing. The result is an overall increase in construction costs.
When President Trump announced new tariffs on April 2, materials from Canada and Mexico covered under USMCA were excluded. That meant most imported construction goods would not be affected. But the situation has since shifted. The White Last month the House announced 34 percent tariffs on Canadian lumber, which is a key material in residential construction.
According to the National Association of Home Builders (NAHB), around 7 percent of the materials used in a new home are imported. Two of the most common are softwood lumber from Canada and gypsum from Mexico, which is used for drywall. Many home appliances are also imported, especially from China.
The NAHB estimates that a typical single-family home includes about $174,155 in building materials, with $12,713 of that made up of imported products. Their March 2025 survey found that recent tariff announcements could increase construction costs by $9,200 per home.
Whether that cost is passed on to buyers depends on the housing market. If homes can be sold for higher prices, buyers may absorb them. If not, builders will likely take the hit through thinner margins, which could slow down the pace of new home construction.
While there is potential to source more softwood lumber within the U.S., domestic sawmills do not currently have the capacity to meet demand. Increasing production takes time, investment, and certainty. And with such a fluid business environment, making long-term decisions around hiring or expansion becomes a lot more difficult.
The silver lining is that these challenges have pushed the construction industry to get more creative. Many builders are exploring alternative materials, investing in new technologies, and improving efficiency on job sites. Over time, innovation and adaptability can help offset rising costs and open the door to more resilient, affordable housing solutions.
If you are ever in need for creative financing due to market shifts like these, feel free to reach out to our team, we’re always here to help.
