Real estate will always be a safe bet because, let’s face it, people will always need a roof over their heads. But as home prices climb higher and higher, renting is starting to look a lot more appealing than buying. Over the past decade, median home prices in the U.S. have skyrocketed from about $223,000 in 2014 to over $412,000 in 2024—a jaw-dropping increase of nearly 85%. Why is this trend hitting overdrive right now? One words: tariffs.
Tariffs, simply put, are taxes slapped on goods imported into the country. Imagine I’m bringing in 1,000,000 teddy bears from Bolivia, and the U.S. decides to impose a 50% tariff on Bolivian imports. Suddenly, those teddy bears cost me 50% more to bring in, and I’d likely pass that extra cost onto you, the buyer. The same logic applies to construction materials. The Trump administration just imposed hefty tariffs on steel and aluminum, and it’s shaking up the construction industry. Developers are feeling the pinch, and guess who ends up footing the bill? The end client—you and me.
Understanding Tariffs
Before we dive deeper, let’s unpack what tariffs really mean. It’s not just about jacking up prices for developers; it’s a bigger game involving politics and economics. Tariffs can be a bargaining chip to negotiate better trade deals with other countries or a push to get us buying American-made goods instead of foreign ones, boosting our own economy. But no matter the grand intentions, there’s always collateral damage. Right now, that damage is landing square on the construction industry—and, by extension, anyone dreaming of owning a home.
What Tariffs Have Been Imposed?
On February 10, 2025, the Trump administration rolled out proclamations that hit developers hard. They imposed a flat 25% tariff on all steel imports and raised aluminum tariffs from 10% to 25%, effective March 12, 2025. These tariffs apply to all countries—no exceptions—and even extend to derivative products like nails, wires, and structural steel. Copper and lumber have also been flagged for potential tariffs, with Trump signaling more trade restrictions could be on the horizon. These are the raw materials that builders rely on, and now they’re all getting pricier.
How Do These Tariffs Affect Developers?
Steel: Steel is the backbone of construction. It’s used for framing buildings—think of it as the skeleton that holds everything up. It’s also in screws, nails, and reinforcing bars that keep concrete strong. With a 25% tariff, every steel beam or handful of nails costs more, and that adds up fast on a big project.
Aluminum: Aluminum might not sound as critical, but it’s everywhere in construction. It’s used for window frames, roofing, and siding because it’s lightweight and doesn’t rust. It’s also in electrical wiring and HVAC systems. A jump from 10% to 25% on aluminum tariffs means higher costs for these essentials, making every home or apartment building more expensive to finish.
Copper: Copper is the go-to for electrical wiring in homes and businesses. It’s also in plumbing pipes and fittings because it’s durable and conducts heat well. If tariffs hit copper too, as Trump has hinted, the cost of wiring a house or installing a bathroom could soar, driving up the overall price tag for builders.
Lumber: Lumber is the wood that frames your walls, floors, and roof. It’s the classic building block of American homes. While the 25% tariff on lumber isn’t fully locked in yet, any increase would hit builders hard, especially since lumber prices already fluctuate wildly. More expensive wood means pricier homes, plain and simple.
Homebuilders Pass Costs Onto Buyers: When the price of steel, aluminum, copper, or lumber goes up, developers don’t just eat the cost—they pass it on. It’s basic business. If a builder’s budget for a new house jumps by $20,000 because of tariff-driven material hikes, they’re not going to take the hit themselves. That extra cost gets tacked onto the home’s sale price, meaning buyers like you pay more. It’s a domino effect: higher material costs today, higher home prices tomorrow.
Increase in New Home Prices: Construction costs are already on the rise, and these tariffs are pouring fuel on the fire. According to industry analysts cited by Reuters, steel prices for a single warehouse project jumped 8-10% after the tariffs took effect, adding millions to the budget. A real-world example comes from Business Insider, which reported on March 10, 2025, about a Texas-based developer, Lennar Homes. Facing a 25% steel tariff and a lumber market still reeling from past shortages, Lennar increased prices on a planned 200-home subdivision in Austin by $15,000 per unit—overnight. That’s an extra $3 million across the project, all because of tariffs. Industry experts predict construction costs could rise 5% or more in 2025 alone, compared to the usual 3% annual bump. For a $400,000 new home, that’s an extra $20,000 or more—money most buyers don’t have lying around.
The Bottom Line: The National Association of Home Builders (NAHB) warned that these tariffs could “substantially impact builders’ ability to deliver” new projects. With no relief in sight—no duty drawbacks or exemptions—developers have little choice but to charge more. That means the dream of a brand-new home slips further out of reach for many Americans.
Compounding Affordability Issues: It’s not just tariffs making homes pricier—mortgage rates and inflation are piling on too. As of March 2025, the average 30-year mortgage rate hovers around 6.5%, up from historic lows of 2.7% in 2020. Inflation, meanwhile, is ticking up, partly fueled by these trade policies. According to economists quoted by Bloomberg, Trump’s tariffs could boost inflation by 0.4 points or more, making everything from groceries to gas costlier. When you combine higher home prices with higher borrowing costs and a shrinking dollar, buying a home feels like climbing a mountain with no peak.
2018 vs. 2024 Cost Comparison: Let’s break it down. In 2018, a $300,000 home with a 4.5% mortgage rate meant a monthly payment of about $1,520 (assuming a 20% down payment). Fast forward to 2024: that same home might cost $450,000 thanks to rising prices, and with a 6.5% rate, your monthly payment jumps to $2,275. That’s an extra $755 a month—or $9,060 a year—just to live in the same house. For many, that gap turns homeownership into a fantasy.
Why It Hurts: Higher interest rates mean you pay more over time, even if you scrape together the down payment. Inflation erodes your savings, making it harder to get there in the first place. Tariffs amplify both problems by driving up construction costs, leaving would-be buyers stuck in a vicious cycle of “too expensive to buy, too broke to save.”
Shift to Luxury Housing: Developers facing these higher costs aren’t sitting still—they’re pivoting. With steel, aluminum, and potentially copper and lumber eating into profits, many are shifting focus to luxury housing where they can charge premium prices to offset the tariffs. Affordable housing? Not so much. It’s less profitable, so supply stays tight. According to a report from The Wall Street Journal, one Chicago project slashed affordable units by 77% after the steel tariff hit, prioritizing upscale condos instead.
Rent Spikes as Homeownership Fades: As buying a home becomes a pipe dream, more people turn to renting. Demand surges, and landlords can jack up prices. In 2024, median rent hit $1,900 a month, up 20% from 2019. With tariffs pushing new home prices even higher, expect that number to climb faster in 2025. According to local news outlets in cities like New York and Chicago, builders are pausing projects or scaling back, leaving fewer options for budget-conscious renters.
A Renters’ Nation: The ripple effect is clear: developers prioritize high-end builds, affordable homes vanish, and renting becomes the default. Homeownership rates, already dipping below 65% in 2024, could slide further as tariffs widen the gap. America’s turning into a nation of renters—not by choice, but because tariffs and their fallout are pricing us out of the market.
