How Tariffs Could Impact Housing in 2025
April 2025 Market Insight
Tariffs aren’t something we usually think about when it comes to real estate. Sure, there have been trade issues here and there that kind of affected what goes into building a home (anyone remember the 2002 steel tariffs?). But when we start talking about 25% tariffs on materials like lumber and drywall—the core of just about every new house—it’s enough to get the housing industry’s attention. And because of that, it has mine too.
Let’s be clear: this isn’t about what’s right or wrong politically. That’s above my pay grade, and I’ll leave it to the economists and policy experts to debate. But if something has the potential to impact homebuilding or home sales in a real way, it’s worth a closer look.
So here’s a quick breakdown of what’s going on—and what it could mean for our market as we head deeper into the spring season.
What’s Happening?
There’s a lot of buzz around potential tariffs coming from multiple countries. At the time I’m writing this, the details are still up in the air—but what’s on the table is a 25%+ added tax on imports from Canada and Mexico.
That matters because, according to the National Association of Home Builders, 72% of the lumber used in U.S. construction comes from Canada. And 74% of the materials used to make drywall come from Mexico. These are foundational materials in nearly every new home—especially in the more affordable segments of the market.
And that’s where this really hits home: we don’t have a shortage of high-end properties. The gap is in affordable and mid-range homes—and those are exactly the kinds of builds that feel the squeeze when costs go up. Builders may want to pass the added expense on to buyers, but that only works if the market allows it.
The Affordability Bottleneck
Buyers in the entry and mid-price ranges are usually working within pretty tight limits. Many use low down payment loans and need the appraisal to match up with comparable sales. That puts a cap on how much they can offer—and how much builders can charge.
So if a builder’s cost to build rises, but they can’t raise prices to match? The deal might not pencil out. The loan might not work. The sale doesn’t happen.
On the higher end of the market, it’s a different story. Builders can more easily bake an extra 10% into a $3 million home without the same pushback. Buyers in that range often have more cash and more flexibility.
So when tariffs push up building costs, it discourages construction where it’s needed most. And even if the tariffs don’t go into effect right away, just the uncertainty can cause builders to hesitate—slowing progress on much-needed housing.
A Generation Later, Buying Power Has Been Cut in Half
Here’s a stat that really puts things in perspective: the average age of a first-time homebuyer today is 38. Back in 1991? It was 28. That’s a ten-year delay in just one generation.
And check this out:
In 1981, the average home cost $68,900—or about $237,000 in today’s dollars. The average household income, adjusted for inflation, was around $80,000.
Today, the median home price is $420,000. The median household income is $65,000. That’s a home-to-income ratio of over 6x—more than double what it used to be.
Buyers are already feeling the pinch from high prices and elevated mortgage rates. So even a modest cost increase—whether from tariffs, labor, or interest rates—could be the thing that keeps many from moving forward.
So What Does It All Amount To?
The U.S. is short almost 4 million homes, and building is the only real way to close that gap. But if construction costs rise—even just from the fear of tariffs—it gets harder to build at price points where the demand is greatest.
And like most things in real estate, there’s nuance. But it’s fair to say these proposed tariffs aren’t likely to help the situation. They could make affordable housing even harder to come by—especially as the spring market ramps up.
No, this won’t singlehandedly derail the market. But it might be one more challenge in a season already packed with them. And when affordability breaks down at the bottom, it can cause a ripple effect all the way up.
If I had to guess? I’d say we’ll see inventory tighten, buyers in the low-to-mid range grow even more cautious, and builders slow down on the affordable front—because uncertainty always creates drag in a market that runs on confidence.
