Tariffs, lumber, and drywall… oh my!
What this could mean for housing (and why I’m paying attention)
Tariffs aren’t usually something that pops up in real estate conversations. Sure, there’s been the occasional trade shake-up that’s bumped the cost of materials. But now we’re looking at potential 25% tariffs on Canadian lumber and drywall from Mexico, the literal bones of most homes, and that’s a headline worth tuning into.
Let me be clear: I’m not here to unpack political agendas or debate what should or shouldn’t happen on Capitol Hill. That’s above my pay grade. But when something has the power to impact the cost of building homes, especially in a market already stretched thin, it’s worth understanding what’s happening and how it might affect buyers, sellers, and builders alike.
So, what’s going on?
Right now, the U.S. is considering slapping tariffs on a broad range of imported goods, including construction materials like lumber from Canada and drywall from Mexico. Nothing is finalized as of today, but there’s enough chatter and momentum around these moves that it’s causing concern in the building world.
According to the National Association of Home Builders, 72% of the lumber used in U.S. construction comes from Canada, and 74% of drywall materials come from Mexico. These are essentials for building homes, especially more affordable ones.
And here’s the kicker: the real crisis in housing isn’t luxury inventory. It’s the missing middle. Those entry-level and mid-range homes that first-time buyers, young families, and down-sizers need. That’s the exact part of the market that gets hit hardest when material costs jump.
Why this matters: Affordability is already fragile
If building gets more expensive, builders have to raise prices to stay profitable. But in the lower price ranges, there’s only so much wiggle room.
Most buyers in that segment are already maxing out their budgets. They’re using FHA or conventional loans with tight appraisal constraints. They can’t just “stretch a little more” to cover the extra $20K a tariff might add to the final price.
But on a $3M home? Builders can absorb that cost, or pass it on with minimal resistance. That’s a different ballgame entirely.
So instead of building the kinds of homes we need more of, developers lean toward the luxury market where the math still works. It’s a tricky cycle and one that tariffs could absolutely make worse.
This all comes on top of some tough numbers
Get this: the average first-time homebuyer is now 38 years old. In 1991, it was 28.
And the home-to-income ratio? It’s doubled.
In 1981, the average home cost $68,900 (roughly $237,000 in today’s dollars). The average adjusted household income was around $80K.
Today, the median home price is $420,000, and the median income is $65K.
That’s a ratio of more than 6x income to home price and that’s before you factor in things like mortgage rates, student loans, and, yes, increased building costs due to tariffs.
So what does this mean for our market?
We’re already short close to 4 million homes in this country. We need more housing, and we need it fast, especially homes that are accessible to first-time buyers and middle-income families.
Tariffs aren’t the only issue, but they’re one more headwind for builders who are already dealing with higher interest rates, labor shortages, and regulatory hurdles. And when building stalls in the lower price tiers, it puts pressure on the entire housing ladder. It’s all connected.
Will tariffs alone tank the market? Probably not. But they could make an already tough situation even trickier especially heading into the spring and summer seasons when activity typically ramps up.
Bottom line? If you’re thinking about buying, selling, or just wondering how all of this could affect your real estate plans, I’m here to help make sense of it. Let’s connect and talk through it. No pressure, just good information.
-Gee
