The housing market could see serious trouble ahead as new tariff policies threaten to derail already fragile recovery efforts. Industry experts warn that proposed tariffs on building materials may push homeownership further out of reach for many Americans.
“The housing market is potentially facing a lost year,” says Mark Zandi, chief economist at Moody’s Analytics. His recent analysis suggests that housing affordability, already strained by high interest rates, could worsen if tariffs drive construction costs higher.
These concerns stem from the potential for new tariffs on Canadian lumber, Chinese steel, and aluminum imports. Such measures could add between $5,000 and $12,000 to the cost of building a typical American home, according to estimates from the National Association of Home Builders.
For prospective homebuyers already struggling with elevated mortgage rates hovering near 7%, these additional costs could prove insurmountable. First-time buyers would feel the impact most severely, as their purchasing power continues to erode against a backdrop of stubbornly high prices.
Construction industry leaders have voiced strong opposition to the proposed tariffs. “We’re finally seeing some stabilization in material costs after the pandemic-related supply chain issues,” explains Robert Dietz, chief economist for the National Association of Home Builders. “New tariffs would reverse that progress and further constrain housing supply.”
The timing couldn’t be worse for the housing sector. Recent data from the Commerce Department shows housing starts decreased by 3.6% in April compared to the previous month, highlighting the market’s vulnerability. Builders have already scaled back projects due to affordability concerns and labor shortages.
The ripple effects could extend beyond new construction. Existing home prices may rise further as limited inventory pushes buyers to compete for available properties. This scenario would intensify the affordability crisis that has locked many middle-income families out of homeownership.
“We’re caught in a perfect storm of high interest rates, material cost increases, and now potential tariff impacts,” says Lawrence Yun, chief economist at the National Association of Realtors. “This combination could set back housing market recovery by 12 to 18 months.”
Some economists suggest the housing impact could have broader economic consequences. Housing traditionally serves as an economic engine during recoveries, generating jobs and consumer spending on appliances, furniture, and home improvements.
Regional impacts would vary significantly. States with booming housing markets like Texas, Florida, and Arizona might see the most dramatic slowdown if tariffs are implemented. These markets have relied heavily on new construction to meet demand from relocating households.
Small and mid-sized builders express particular concern about navigating these challenges. Unlike larger developers, they typically lack the financial resources to absorb significant cost increases without passing them along to buyers.
“We operate on thin margins already,” says Mike Holloway, who owns a construction company in Atlanta. “If lumber prices jump 20% because of tariffs, I’ll have no choice but to raise prices or possibly shelve some projects entirely.”
Consumer advocates worry about the long-term implications for wealth building. Homeownership represents the primary wealth-creation vehicle for most middle-class Americans. Delays in purchasing homes can significantly impact lifetime wealth accumulation, particularly for younger generations already struggling with student loan debt.
Housing economists point to previous tariff implementations as cautionary tales. When the Trump administration imposed lumber tariffs in 2017, new home prices increased by approximately $9,000 on average, according to industry data.
The Federal Reserve’s fight against inflation complicates the picture further. While the central bank aims to cool the economy through higher interest rates, additional inflationary pressures from tariffs could force rates to stay higher for longer, creating a double burden for potential homebuyers.
Some industry analysts suggest alternatives to blanket tariffs. “Targeted approaches to trade issues would minimize collateral damage to housing affordability,” argues Jenny Schuetz, a housing policy expert at the Brookings Institution. “Policymakers need to consider these second-order effects on working families.”
As debate continues over trade policy, one thing remains clear: the dream of homeownership, already deferred for many Americans, could become even more distant if construction costs climb further. The housing market’s fragile recovery hangs in the balance, with significant implications for both individual households and the broader economy.
