Lew Sichelman
In the market for a newly constructed house? You might want to hurry. Soon, new homes are likely to cost more and take longer to build.
The reason: the Trump administration’s initiatives on tariffs and immigration.
While the president has professed his intention to bring down housing costs, placing tariffs on the country’s largest trade partners could do the opposite. Tariffs could raise the price of a new-build house by as much as $22,000, according to an estimate from CoreLogic.
Furthermore, immigrants make up about 23 percent of the construction workforce, per the Urban Institute, with an estimated half of them undocumented. Any mass deportation effort would only exacerbate the current shortage of construction workers.
At this writing, the tariffs are on pause. But the National Association of Home Builders is still advocating for an exemption for building materials, should the tariffs be reinstituted.
“Our lobby team has met nonstop with almost any member of Congress that they can find to get our message across,” NAHB’s Karl Eckhart told the trade publication Builder. “These Canadian and Mexican tariffs are going to have a direct and painful impact on the price to build a house.”
How Much of an Impact?
How much of an impact? That’s anyone’s guess. NAHB’s chief economist, Rob Dietz, citing estimates from members, says prices could go up by as much as $10,000. John Burns Research and Consulting says the tariffs, if fully enforced as proposed, would add 10 percent to the median-priced model.
That’s because roughly 70 percent of the lumber in a typical house comes from Canada. Mexico is the largest provider of gypsum for drywall. And many household appliances like refrigerators and ranges come from international trade.
“While home building is inherently domestic, builders rely on components produced abroad,” writes Carl Harris, NAHB’s immediate past chairman, in an open letter to President Donald Trump. “Imposing additional tariffs on these imports will lead to higher material costs, which will ultimately be passed on to home buyers in the form of increased housing prices.”
According to the association, every $1,000 increase in the price of a median-priced new home knocks nearly 115,600 households out of the market. And although the tariffs are on hold, some builders have begun raising their prices in anticipation that Trump will ultimately drop the hammer.
Builders have few options. They can eat the rising costs to a point, but beyond that, they must either pass them on to their buyers or build smaller houses with fewer amenities.
As for immigration, the administration has already begun rounding up undocumented immigrants. And any massive deportation effort will further hinder an industry that’s already some 250,000 workers shy.
Builders’ labor costs already are going up. If it becomes even more difficult to find workers, they’ll have to pay higher wages – or lose out to competitors who will.
Housing Market Woefully Under-Built
The new-home market is already woefully under-built when compared to population growth. The housing shortage is estimated at 3.7 million units, which has helped push prices and rents to record levels. While the number of housing units grew by 10 percent between 2010 and 2023, according to the Urban Institute, the number of households grew by 13 percent.
The Center for Migration Studies estimates that 54 percent of foreign-born construction workers are undocumented. Consequently, says the Urban Institute, deportations could bring about the loss of some 1.7 million construction workers. In Texas alone, where an estimated 23 percent of all construction workers are undocumented, the American Immigration Council says the state’s housing business stands to lose as many as 337,000 workers.
But it goes beyond that: “In a climate of heightened enforcement,” says the Urban Institute, “workers who were born in the U.S., are naturalized U.S. citizens, or are green card holders may also fear racial profiling and enforcement risks for themselves and family members.” Due to this widespread fear, some workers elect to stay home from work rather than put themselves and their families at risk.
It already takes 10 months or so to build a house, once a sales contract is signed. But with fewer workers to go around, it will inevitably take longer – not just weeks longer, but months.
Some real estate industry observers have suggested that the stock-market jitters triggered by Trump’s tariffs could lead to cheaper mortgage rates during the spring selling season.
And leading figures in the Trump administration have told national media outlets or are otherwise on record saying they think the nation’s economy will be better off, and more competitive, after some economic “pain,” to use the president’s term. But many economists strongly dispute the idea.
If you need another reason to get moving on that new house, there’s also evidence that sales incentives are slowly falling away.
There was some speculation that price cuts, giveaways, discounted mortgage rates and other incentives had become so prevalent that buyers had come to expect them as a matter of course. And that may be so, with 59 percent of all builders offering them, according to the latest NAHB survey.
Marketing company Zonda agrees that incentives are “still common,” with 73 percent of builders offering them on their “quick move-in” houses. But Zonda says a smaller number of builders, around 56 percent of them, are offering these perks on to-be-built homes.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
