Are home prices about to climb even higher? While mortgage rates and buyer demand usually take center stage, tariffs are another factor that could shake up the market. As builders react to rising uncertainty over material costs, new construction could slow, keeping inventory tight and pushing home values even higher. In this video, we will consider what this means for buyers, sellers, and the housing market as a whole.
Eric Andersen, B.A., M.Div.
Owner/Designated Managing Broker, Andersen Realty Group
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Transcript:
Home prices have been rising for a while now. Low inventory, high mortgage rates, and a market still adjusting from the pandemic have all played a role. But now, there’s another critical factor to consider, one that has nothing to do with interest rates or buyer demand: tariffs.
I’m Eric with Andersen Realty Group, and normally, tariffs come up in conversations about steel or manufacturing—not when discussing the cost of a three-bedroom house. And yet, national trade policy could have a direct impact on home prices. If tariffs raise the cost of building materials, new construction could slow down. And when fewer new homes are built, supply stays tight and prices will remain elevated.
The potential of increased cost for materials has builders nervous. Homebuilder confidence just dropped five points in February to its lowest level in five months. Builders rely on stability, and uncertainty about material costs is having a negative effect. Nearly a third of what goes into building a home—things like lumber, appliances, and fixtures—comes from international trade. If those materials become more expensive, builders won’t absorb the extra cost. They’ll pass it on to buyers.
And that doesn’t just affect people shopping for new construction. It sends ripple effects across the entire housing market. If builders pull back, fewer homes will be available. That keeps inventory tight, which puts upward pressure on home values.
For homeowners, this could be an unexpected advantage. With fewer new homes to compete with, existing homes become more attractive. Sellers are already seeing strong demand. During the week of February 10th, the Chicagoland area saw a twenty three precent increase in listings going under contract. This is the largest increase since October, and it’s up twenty one percent from this time last year. Buyers aren’t getting much relief, either. Median market time in Brookfield, Downers Grove, and Westmont is nine days, and sellers in each of those markets are getting a median one hundred percent of asking price. If new construction slows, resale homes will likely see even more demand, pushing prices even higher.
The impact of tariffs on new construction would be even more direct. One estimate suggests the average price of new construction could climb anywhere between seventeen to twenty-two thousand dollars as a result of tariffs. Add in mortgage rates that have been north of six and a half percent, and buyers are facing a tough market. Many may have no choice but to shift their focus to resale homes, adding even more pressure to an already competitive space.
For builders, this isn’t just about pricing—it’s about whether to build at all. Builders were expecting 2025 to bring fewer regulatory hurdles and a more favorable environment. Instead, now they’re weighing whether to slow down new projects altogether. Few builders are offering any kind of price cuts. What more are offering are rate buydowns. These will help buyers in the short term, but we’re still left with a larger affordability issue.
The next few months will be interest. Spring is usually a busy season for buyers and sellers, but this year, the picture is complicated. More resale homes are hitting the market as homeowners try to take advantage of high values. At the same time, builders are deciding whether to move forward with new projects or hold back. If construction slows, this will further restrict inventory and keep prices high.
While supply and demand are the biggest driver of home prices, we also need to consider the impact of economic factors and policy decisions on supply. Global trade policy, regulations, and builder sentiment are all factors that can have a big impact on inventory and home values. If new tariffs put further pressure on supply, home values may have only one way to go—up. If you would like help selling your home in the western suburbs of Chicago or are a buyer looking for help navigating this market, reach out using my contact information, below. And please remember to like this video, subscribe to my channel, and turn on notifications. I’m Eric with Andersen Realty Group, a family-owned brokerage where we treat our clients like family.