New Home Cost: Tariffs Will Add $9,200 to

In Washington, Home builders estimate that new tariffs will add $9,200 to the cost constructing a typical home, as stated by a survey of builders, the National Association of Home Builders reported Monday.

The threat of tariffs and elevated construction costs have pushed home builder sentiment down as economic uncertainty hovers over the housing industry.

“Construction firms are facing added cost pressures from tariffs,” said NAHB Chief Economist Robert Dietz. “Uncertainty on policy is also having a negative impact on home buyers and development decisions.”

Although tariff policy is frequently shifting in the early days of the Trump administration, it appears a new 25% tariff will hit imported Canadian lumber on April 2. The 25% bump comes on top of the existing 14.5% Canadian lumber tariff already imposed by the U.S. Department of Commerce. The total tariff of 39.5% on Canadian lumber represents a significant increase.

With 30% of the nation’s lumber imported from Canada, and many other building materials expected to fall under President Donald Trump’s new tariffs, home prices are destined to rise, and it’s happening as many Americans face steep home affordability challenges.

New U.S. tariffs are slated to hit imported good from Mexico and China as well.

Imports make up 7.3% of building materials used in new houses, the NAHB says. One-third of the appliances are imported. A significant amount of gypsum (drywall), a key ingredient in most new construction, comes from Mexico.

Builder Sentiment Hits Lowest Level in Seven Months

An index of builder confidence in the market for newly built single-family homes was 39 in March, down three points from February and the lowest level in seven months, as stated by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Monday.

“Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C.

The latest HMI survey also revealed that 29% of builders cut home prices in March, up from 26% in February. Meanwhile, the average price reduction was 5% in March, the same rate as the previous month. The use of sales incentives was 59% in March, unchanged from February.

On the bright side, the home builders express hope that a better regulatory environment will lead to an improving business climate.

The NAHB is forecasting the new home market to be flat this year. The nation’s single-family starts are slated to inch up 0.2% this year to an annual rate of 1.01 million home starts.

Houston Led Nation in Home Building Last Year

In 2024, Houston led the nation with 52,276 single-family building permits, up 5% from 2023. Houston was followed by Dallas with 47,191 and Phoenix with 30,166. It will be a struggle to maintain that pace in the year ahead, especially considering the impact that new immigration policies could have on the construction workforce in Texas.

The introduction of new tariffs by President Donald Trump is having an impact on the home building industry as builders calculate the cost of materials needed as the year progresses. Some builders are stockpiling extra materials now to avoid tariffs that lie ahead.

“The biggest change to the economy and the housing market in the last few months is obviously the election,” Dietz said at the NAHB’s IBS convention in Las Vegas in late February. He told an audience of thousands that tariffs have an inflationary effect on the economy. “A lot of changes, a lot of uncertainty. I think we need a little more certainty. It would certainly help the economy.”