The New Housing Landscape 2025: How Trump’s Tariffs Impact Homeowners, Buyers, and Builders

It’s not hard to see that America is facing a housing crisis. Mortgage rates are at 20-year highs, home prices are near an all-time peak, and median household income has trailed behind price increases for decades. If you’ve been following the recent tariff news, you may already know that the national affordability crisis could get worse.

On May 12, a 90-day pause in tariffs was announced, temporarily reducing duties on Chinese goods from 145% to 30%. According to the National Association of Home Builders (NAHB), 27% of our construction material comes from China. With the possibility that tariffs could be reinstated after this period, future housing costs remain uncertain.

To better understand how Trump’s tariffs could affect housing affordability if they remain at the levels initially proposed, we analyzed the potential impact on homebuilding and remodeling costs.

Impact on Homeowners

One of the core goals of imposing tariffs on imports from other countries is to stimulate the local economy; if material costs from foreign nations are arbitrarily made more expensive, sourcing and manufacturing domestically becomes more viable. Unfortunately, building out the local infrastructure to support the demand for construction projects will take time. Until then, Trump’s tariffs will affect home remodeling and renovation costs, as well as insurance premiums.

Increased Renovation Costs

We started our research by looking at the specific materials that go into renovation and remodeling projects and how tariffs will affect pricing for each. The table below includes the materials that will see the most significant uptick in costs.

Based on these changes, the average home remodeling cost could increase between 10% and 15%. The exact bump in pricing will depend on the specific remodel you’re completing and how much of the price increase is absorbed by construction companies. Home additions that require lumber for framing and new plumbing, electrical, and HVAC equipment will see some of the largest bumps.

As budgeting for remodeling can be challenging even without the added complexity of changing material costs and uncertainty, we calculated how much extra you’ll need to budget for particular projects that will be affected by tariffs in the near future.

​​Insurance Premiums Could Increase

Renovation and remodeling costs aren’t the only areas where homeowners will be spending more. Insurance premiums could also go up, whether you’re making major changes to your home or not.

Without tariffs, the average homeowner’s insurance premium was expected to go up by $261 by the end of 2025. That’s an 8% increase year-over-year. If Trump’s tariffs are fully implemented, home insurance premiums are expected to increase an additional $106, according to Insurify. That’s a 40% attributable solely to tariffs, and an 11.26% increase year-over-year as opposed to the 8% projected without tariffs.

Impact on Homebuilders

The data suggest that home renovation costs could go up by between 10% and 15% as a direct result of Trump’s tariffs, but some of that added cost may be absorbed by contractors. Additional factors like mass deportations could also create issues with labor shortages and lead to further complications for contractors.

Increased Imported Material Costs

According to the NAHB, building material costs have increased an astronomical 34% since December 2020, and Trump’s tariffs will make that figure climb even further. Mexico, China, and Canada are the top three importers the U.S. relies on for home construction materials, so the tariffs on these three countries are going to be the most impactful.

Tariffs for goods from China were the most extreme at 145%, before the 90-day pause announced on the 12th of May. Tariffs imposed on Canada and Mexico are currently paused, but have changed numerous times over the past few months and have fluctuated between 10% and 25%. China is the premier importer of goods related to home construction, so Chinese tariffs will have a significant impact on renovation and construction costs.

Increased Business Costs and Reduced Profit Margins

Higher material costs mean smaller profit margins for homebuilders unless they pass those higher costs onto consumers. The increase in building material costs is already inflating prices for construction projects, but with housing already less affordable than it ever has been, homeowners may be less willing to spend on renovations and remodels unless contractors eat some of that added cost. The negative impact of tariffs could be more severe in states that rely more on goods from China, Canada, and Mexico.

Things get more complicated when you consider that American manufacturers might use tariffs as an impetus to raise prices on domestic construction materials. Even if the market turns more to domestic goods, material costs could still increase for contractors.

Smaller businesses, like local lumber yards, may find it more challenging to absorb those higher costs than larger companies. That either means higher costs passed on to consumers, or smaller companies finding it difficult to keep their doors open.

Labor Shortages 

The mass deportations proposed by Trump could also create issues with labor shortages. Immigrants make up approximately 30% of the workforce in the construction industry, and the NAHB estimates that 2.2 million new skilled construction workers will need to fill those labor gaps in the coming years.

Some states rely more heavily on immigrants, particularly in industries like construction. The NAHB reports that around 41% of California’s related workforce, for example, is comprised of immigrants who may be affected by mass deportations. Immigrants make up 40% of the construction workforce in New Jersey, 38% in Florida and Texas, and 37% in New York, so these states could see the biggest hit.

Unfortunately, a strained labor supply would also mean fewer new construction projects. There’s already a shortage of homes, according to housing experts, so a dip in new construction could lead to more competition among buyers and even higher housing costs.

Impact on Homebuyers

People looking to buy their first homes or relocate may have it even worse than homeowners looking to renovate or remodel. Not only are homebuyers affected by the increasing material costs for construction, but the potential labor shortages in the construction industry and a general decrease in housing availability will also play important roles in home prices. Add in interest rates at 20-year highs, and affordability plummets.

Higher Home Prices and Lower Availability

Those same material costs that affect homeowners looking to renovate, build out, or build up will affect home prices in general.

Sellers who have invested more in their property value will expect an ROI relative to the higher costs, and the price of new construction will also increase due to higher material costs. In new construction, specifically, homebuilders are very likely to pass on the inflated costs to consumers. The NAHB estimates that a new home will increase in price by $10,900, just from tariffs alone.

As mentioned above, mass deportations being carried out by Trump are expected to lead to labor shortages. That will mean fewer new homes being built, and the dip in availability could also lead to more competition and higher home prices.

Decreased Demand and Market Uncertainty

Much is uncertain about how the housing market will respond to Trump’s tariffs, and the demand for housing could actually go the other way and decrease due to market uncertainty.

Historically, housing prices have gone up, and real estate has long been considered a “safe” investment, at least with respect to long-term ROI. With the housing market already in a slump, uncertainty about the timing and scope of tariffs and how their impact will play out could put off prospective homebuyers who may not have the same faith in the market that buyers have in the past.

Even if housing prices don’t increase significantly in response to the tariffs, the U.S. is going through a tumultuous period, and when people are worried about their jobs or the future, making a major investment in a home may not be at the top of everyone’s to-do list.

Potential for Higher Mortgage Rates

Finally, uncertainty about the housing market doesn’t just affect buyers—it can also play a role in lending practices. Mortgage lenders always weigh risk and reward, and this can have an effect, albeit a relatively minor one, on mortgage rates. In the week ending April 17, 30-year fixed mortgage rates were at 6.83%, up 3.17% from the week prior. That’s the largest one-week jump in mortgage rates in nearly a year.

The Future of Housing Under Tariffs

Despite the 90-day pause in tariffs on some Chinese goods, the long-term effects on the U.S. housing market remain a concern. If tariffs revert to the elevated levels initially proposed, home remodeling costs could rise by 10% to 15%, insurance premiums may jump beyond current projections, and new construction costs could increase by an estimated 2.55%.

Unfortunately, this could just be the beginning, and long-term effects may prove to be even more severe. With mass deportations threatening to downsize the construction industry’s workforce at the same time, we could be gearing up for an even larger issue with housing affordability than we’ve been dealing with for the better part of a decade.