05-02-2025
Trump's tariffs will raise the roof on home prices
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 supplies come from the trading partners targeted this month. Roughly 60% of all hardware comes from China, Canada, and Mexico, according to Saunders' analysis. Nearly three-quarters of the 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.
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While 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 pandemic period.
More:Housing market rewind: Home sales drop in 2024 to level not seen since the '90s
And tariffs may also have some knock-on effects, Saunders noted. For example, domestic suppliers of materials are likely to hike their prices in line with those from tariff-affected countries simply because they can.
The simmering trade war with Canada is also likely to impact 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 told USA TODAY. '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 added. 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,' he said.
