Tariffs Are Raising the Cost to Build and Fix Homes. Sellers Should Know Why.

The Federal Reserve Bank of Chicago has put numbers to what many in the housing market have been feeling: tariffs imposed in 2025 are hitting the industries most connected to homes — building materials, appliances, and furniture — harder than almost any other sector of the economy. For anyone planning to sell, the ripple effects go beyond sticker prices at a hardware store.

Where the Cost Increases Are Landing Hardest

Chicago Fed staff economists analyzed tariff exposure across industries from March through December 2025 and found manufactured goods bore the heaviest burden. Electrical appliances, equipment, and components saw input costs rise by nearly 3%. Furniture and related products were up close to 2.5%. Construction materials came in around 1.5%. Fabricated metals, textiles, and motor vehicle parts also posted meaningful increases.

By contrast, utilities, insurance, and rental and leasing services were among the least affected — meaning the pain is concentrated precisely where homebuilding and home preparation costs live.

The National Association of Home Builders estimates that roughly 10% of all residential construction materials are imported, and that builders brought in $14 billion worth of foreign construction inputs in 2024 alone — about 7% of the $204 billion total spent on single-family and multifamily materials that year. Lumber from Canada and metals used in framing are significant contributors. In the NAHB's most recent Housing Market Index survey, about 73% of builders reported material costs running higher than a year ago, with some reporting increases of up to 15%.

Smaller builders are absorbing the worst of it. Larger companies can stockpile materials ahead of price spikes, lock in longer-term supplier contracts, and negotiate deferred price increases. Builders putting up dozens or hundreds of homes a year have leverage that a small local contractor simply doesn't have.

What Fewer New Homes Means for People Selling Existing Ones

When construction costs rise and smaller builders pull back, fewer new homes enter the market. That sounds like good news for existing-home sellers — less competition — but the dynamic is more complicated than that.

Higher build costs get passed to buyers in the form of elevated new-home prices, which compresses the pool of buyers who can qualify or who are willing to stretch. Buyers who get priced out of new construction don't simply disappear; many shift their attention to existing homes in similar price ranges. That can support demand in certain price bands. But it can also mean buyers arrive at the negotiating table already frustrated by affordability, carrying less flexibility on price, repairs, or concessions.

On the other side of that equation: if a seller needs to make pre-listing repairs or upgrades — new appliances, flooring, kitchen fixtures — those projects now cost more. The appliance and furniture categories hit hardest by tariffs are exactly the items sellers often swap out to make a home show well. A new dishwasher, a set of kitchen appliances, lighting fixtures — the price of each has moved up. Sellers who budgeted for pre-listing improvements based on costs from a year or two ago may find themselves short.

The Job Market Didn't Offset the Cost — And That Matters for Buyer Confidence

One of the central arguments for broad manufacturing tariffs has been that protected industries would add jobs, putting more workers in a position to buy homes. The Chicago Fed's economists were skeptical. Their analysis found no clear evidence of significant short-term job gains in tariff-protected industries — but also no evidence of major job losses. The labor market, in other words, didn't move decisively in either direction.

That matters for sellers because buyer confidence is closely tied to employment stability. A buyer who feels secure in their job is more likely to stretch on price, waive contingencies, or move quickly. A buyer who is uncertain — even if employed — tends to negotiate harder and move more slowly. When the economic narrative around tariffs remains unresolved, that uncertainty seeps into the psychology of the housing market. Days on market can creep up not because demand has evaporated, but because buyers are taking longer to commit.

The Cato Institute released separate findings consistent with the Chicago Fed's conclusions, noting that manufacturing gains have been strongest in computers, electronics, and aerospace — industries that happen to face among the lowest tariff rates. The sectors carrying the highest tariff burden are not seeing the offsetting growth that would translate into more homebuyers entering the market.

What Sellers Should Actually Do With This Information

The practical upshot for anyone preparing to list is this: price your improvements carefully and be selective about what you fix. Not every pre-sale project pencils out at current material and appliance costs. Focus on repairs that affect inspection outcomes and lender approvals — roof, HVAC, plumbing, electrical — rather than cosmetic swaps that may not return their cost at closing.

If your home is priced in a range where buyers are also considering new construction, understand that the new-home price floor has risen. That can work in your favor on price positioning, but only if your home is genuinely competitive on condition and location. A buyer comparing your 10-year-old home to a tariff-inflated new build will weigh the price gap against the cost of future updates.

Sellers weighing whether to list now versus waiting for tariff clarity should consider that the Chicago Fed's own economists noted longer-term analyses are still needed before anyone can say where this ends up. Waiting for certainty in a tariff environment may mean waiting a long time. If your reasons to sell are personal — relocation, estate, upsizing, downsizing — the macro picture is unlikely to become cleaner in the near term. Knowing the current numbers, including what buyers in your price range are navigating, is more useful than trying to time a policy outcome.

If you want a baseline on what your home would fetch in the current market without committing to a full listing, Local Home Buyers USA's instant-offer tool can give you a data-grounded figure to work from.