In 2025, tariffs are expected to have a significant impact on the American real estate market, primarily due to increased building material costs and potential disruptions to supply chains.
This could lead to higher home prices, increased rental costs, and a slowdown in new construction projects.
Increased Building Material Costs
Tariffs on imported materials like lumber, steel, and aluminum will directly raise the cost of construction—costs that are likely to be passed on to consumers.
Take lumber, a crucial material for residential construction. The National Association of Home Builders (NAHB) estimates that tariffs could increase the cost of building a single-family home by $7,500 to $10,000. Some sources estimate the increase could be even higher, potentially reaching $10,900. These increases are largely attributed to tariffs on imported lumber, particularly from Canada, which accounts for roughly 85% of all U.S. softwood lumber imports and represents nearly one-quarter of the U.S. supply, according to NAHB.
Higher Home Prices
With higher construction costs, new home prices are expected to rise, making homeownership less affordable. The rental market will likely feel the effects as well.
If new construction slows down due to higher costs, demand for rental properties could increase—pushing rents upward, especially in competitive markets like Chicago.
Our Perspective
In this shifting market, our role remains the same: we’re here to advise you and help you build a successful strategy.
It’s also important to keep in mind a few fundamental truths about real estate:
- Real estate is a tangible asset and has historically been a solid investment.
- Of the last four U.S. recessions, only one resulted in a significant drop in housing values. (In 2008, the U.S. housing market collapsed due to a bursting housing bubble and a subprime mortgage crisis. This was primarily caused by cheap credit and lax lending standards, which fueled a rapid rise in home prices followed by a sharp decline.)
- Over 80% of American homeowners are equity-rich in their current homes, and most have mortgage rates under 4%. In other words, inventory will likely remain low, helping keep home values relatively stable.
- Buying and selling will continue regardless of broader economic conditions. External factors—such as job relocation, downsizing in retirement, purchasing for investment, or moving for better schools—will continue to drive activity.
An experienced, responsive, and knowledgeable realtor is your best partner in navigating this market.
