After an aborted launch on Sat. Feb. 1, 2025, President Trump’s 25% tariffs on imports from Canada and Mexico have been postponed to a Mar. 6, 2025 launch—new tariffs on China remain in effect. In the meantime, though, real estate analytics giant CoreLogic has published a new report that dives into the data of this question: How much will tariffs impact construction costs, and on which building materials?
Builders and economists have expressed concern that the tariffs could have an inflationary impact on prices of home-building materials and, in effect, homes—though the full effects remain difficult for economists to parse out based on further uncertainties regarding retaliation or escalation.
“It’s still early, but we are seeing signs that price surges could appear in the current dynamic environment,” wrote Jay Thies, CoreLogic’s vice president of pricing analysis and delivery, in the report.
To contextualize its projections on tariffs’ impact, the CoreLogic report tracks recent changes in prices of building costs since the end of 2023.
Broadly, the report concludes that construction costs could rise by 4-6% over the next 12 months if the administration implements the tariffs on Canada and Mexico (as currently proposed). The current average cost of new construction in the U.S.—$422,000—could rise to between $439,000 to $444,000.
This new increase would be added on top of routine annual increases in building material prices driven primarily by expected inflation. In the short-term, the report estimates builders could see material price hikes as high as 10% on materials.
New construction declined overall in 2024—CoreLogic’s report cited a 5.8% decline in housing starts from 2023 to 2024, mostly based on land availability and already growing construction costs.
The report notes that if tariffs further disincentivize new construction through higher costs, the domino effect will see existing home stock prices rise due to lower overall inventory, which could further price consumers out of the market.
The current median price for an existing American home in October 2024—$385,000—is lower than new home prices. However, the report stated that “either option is increasingly out of reach for many Americans, and tariffs appear unlikely to help their plight.”
“Even incremental increases in the cost of materials, labor, and equipment make it that much more difficult to build a home profitably. This further disrupts efforts to close the critical gap in U.S. housing supply,” said Pete Carroll, CoreLogic’s EVP of public policy and industry relations in the report. “If we’re going to create and restore homeownership opportunities for families, we need to fill in this single-family starter home segment that’s missing.”
Material breakdown
Essential homebuilding materials that the tariffs could most impact are, according to CoreLogic, lumber and other wood products (from Canada), concrete and cement (from Canada and Mexico) and steel (from China). Costs on housing fixtures such as appliances could also see increases.
The report listed roofing shingles and masonry products as products that would not be significantly affected due to them being primarily domestically-sourced. Trump’s intended goal of increased oil production could also boost output, and lower costs, for asphalt roofing and petroleum-based building products, claimed the report.
Thies stated in the report that domestic production of materials could fill the gap that tariffs would create in builders’ supply-chains. However, it would not necessarily help affordability. If builders look to cheaper domestically-produced materials, then the resulting “supply-chain bottleneck” could result in further price hikes passed onto consumers. The report cites the homebuilding uptick in 2021, when prices on lumber saw a 54% increase, as a recent example of this.
As of January 2025, the building materials that saw the largest annual price increases were:
- Aluminium conduits (12.5%)
- Steel decks (11.2%)
- Concrete blocks (7.2%)
The materials that saw the largest annual decreases in prices by January 2025:
- Galvanized pipes (a 8.6% drop)
- Lumber (6.2%)
- Plywood (3.8%)
Lumber price declines were cited earlier in 2024 as an effect of decreased buyer demand during the same year.
The materials that saw the least annual price changes overall were asphalt shingles (a 0.8% increase), structural steel (a 1.3% increase) and drywall (a 1.6% decrease).
Citing past price increases driven by climate disaster damages, the report notes that the addition of tariffs could be a “tipping point” in prices, and location sourcing, for reconstruction efforts after the Los Angeles wildfires.
“Reconstruction demand in the wake of the Los Angeles fires is likely to increase prices temporarily, but we are watching longer-term trends to determine how the supply chain will absorb tariffed inventory since there is a possibility that prices could track higher in the mid-term,” said Thies.
See the full report here.
