New Tariffs Could Add $10,900 to Home Construction Costs — What Does This Mean for Buyers?

Building a house just got more expensive. Recent tariff increases have construction industry experts warning that buyers could face significantly higher prices as the cost of materials climbs. The U.S. government’s tariff expansion — raising rates on steel and aluminum from 25% to 50% in June, then adding 407 more items in August — is reverberating through the construction supply chain at a critical moment when the housing market already faces labour shortages and elevated financing costs.

The Real Cost: What Contractors Are Seeing First

The impact isn’t abstract. According to industry leaders, contractors are experiencing the pinch immediately through higher material bids, while consumers may not see the full effect for months.

Albert Bou Fadel, founder and CEO of SmartBarrel, explains how tariffs flow through the entire building process: “For core materials like steel and aluminum, tariff increases quickly translate into higher bids. Metals are embedded in every structural element, framing, rebar and building system. Lumber follows the same pattern — the U.S. imports 80 to 85% of its softwood from Canada, so any tariff adjustment there can add thousands to a home’s skeleton.”

Appliances and electrical systems face similar pressures. Over 60% of major home appliances sold in the U.S. contain imported parts or assemblies. This means tariffs on upstream components drive up prices for wiring, fixtures, HVAC systems and kitchen packages. Even concrete, which is mostly sourced domestically, experiences cost creep through imported additives and equipment.

The situation creates a compounding problem for builders. When building a house becomes more expensive due to material spikes, contractors lose their financial flexibility. “The real challenge isn’t just higher material costs,” Bou Fadel notes. “It’s that contractors instantly lose their buffer. Once prices spike, every scheduling delay, unexpected rework or coordination issue becomes dramatically more costly.”

The Numbers: A $10,900 Impact on New Construction

The National Association of Home Builders (NAHB) calculated that current tariffs could add approximately $10,900 to the cost of building a typical new home. This estimate reflects the roughly 7% of homebuilding materials that are imported, combined with the heightened 50% tariff rate now applied to critical inputs.

However, this figure represents a national average. Bou Fadel emphasizes that actual costs vary significantly by project. “Homes with multiple appliance packages or more imported metal content can experience much larger increases, while smaller starter homes relying predominantly on domestic materials might fall below this benchmark,” he explains.

Will Building Costs Drive Home Prices Higher?

The answer remains uncertain and depends heavily on local market dynamics. Recent research presents conflicting signals about how construction cost increases translate to consumer prices.

Brookings Institution research from October indicates that rising material costs can slow housing production overall. Builders may delay projects or reduce their scope, which can eventually push prices upward in markets already experiencing housing shortages.

Yet other market indicators suggest different outcomes. D.R. Horton, America’s largest homebuilder, revealed during its July earnings call that affordability pressures have prompted the company to expand incentives — mortgage-rate buydowns, closing-cost assistance and adjusted upgrade packages — rather than raising sticker prices directly. This suggests that in some regions, consumers may experience better financing terms or package adjustments instead of immediate price jumps.

Real estate analyst Sain Rhodes at Clever Offers points to historical patterns: tariff-driven material spikes have typically been followed by “price increases within 30 to 90 days, then demand destruction and reduced building activity within four to six months.”

The Bottom Line

How much is building a house going to cost with these tariffs in place? The answer depends on timing, location and market demand. In regions with strong buyer demand, higher construction costs are more likely to translate directly into higher home prices. In markets with weaker demand, builders may absorb costs through incentive packages or delayed construction rather than price increases. Either way, contractors are adjusting their operations now, even if homebuyers don’t see the full impact reflected immediately.