If President Donald Trump’s current list of tariffs is imposed, the average cost to build a home could increase by between $17,000 and $22,000, according to a new analysis by CoreLogic.
Trump announced Monday night that he intends to slap 25% tariffs on all steel and aluminum imports coming into the country. He has already imposed a 10% tariff on Chinese goods. Currently on hold are 25% tariffs on all goods coming from Canada and Mexico.
CoreLogic’s analysis found that the tariffs could push home construction costs up by 4% to 6% over the next 12 months. Coupled with typical inflation, homebuilders may face a short-term increase of 10% in the price of building materials. The cost of household appliances, lighting and cabinetry could increase by between 10% and 20%.
These potential material cost increases could add $17,000 to $22,000 to the current price tag of a new home, CoreLogic estimates.
Aside from the short-term sticker shock, long-term increases in construction costs will put pressure on the profitability of real estate projects, which could have a cascading effect on housing affordability, the report states. Especially troublesome would be that the added costs would complicate efforts to build starter homes.
“The economics are now upside down. Even incremental increases in the cost of materials, labor and equipment make it more difficult to build a home profitably,” said Pete Carroll, CoreLogic’s executive vice president of public policy and industry relations in the report. “This further disrupts efforts to close the critical gap in U.S. housing supply.”
One way around the tariffs is to buy domestic materials. But there are indications that a rush on domestic sources would overwhelm current production.
Lumber is ideal for domestic sourcing, said Jay Thies, CoreLogic’s vice president of pricing analysis and delivery, in the report. Declines in the number of housing starts in recent years have led to the closing of U.S. sawmills and an 8% year-over-year decrease in sales volume for lumber manufacturers such as Boise Cascade.
Prices were already expected to surge with demand for materials for reconstruction in the wake of the Los Angeles fires, Thies said. CoreLogic plans to track how tariffs on goods could affect home prices in the mid- to longer-term.
“It’s still early, but we are seeing signs that price surges could appear in the current dynamic environment,” Thies said. “Reconstruction and new development will be initially affected unequally.”
