What's Driving the $10,900 Jump in New Construction Expenses?

Building a home has never been cheap, but recent shifts in trade policy are reshaping the economics of residential construction. The National Association of Home Builders (NAHB) recently flagged a concerning trend: new tariffs could push construction expenses up by approximately $10,900 per home. Understanding where this increase comes from—and whether it will trickle down to buyers—matters for anyone considering a new property purchase.

Where Does That $10,900 Really Come From?

When calculating how much it would cost to build a house today, you need to factor in materials sourced internationally. The U.S. federal government recently elevated tariff rates on steel and aluminum from 25% to 50%, then expanded those duties to cover over 400 additional categories including structural components, appliance parts, and construction equipment. NAHB’s $10,900 estimate reflects the roughly 7% of building materials imported into the country now facing these higher duty rates.

But the tariff’s reach extends further than the headline number suggests. Albert Bou Fadel, founder and CEO of SmartBarrel, explains that tariffs penetrate every layer of construction: “For core materials like steel and aluminum, even a 10 to 25% tariff increase quickly shows up as higher bids because metals flow through every structural element, framing, rebar and building system.”

Breaking Down the Supply Chain Impact

Different material categories face distinct pressures. Lumber carries outsized significance because the U.S. imports roughly 80 to 85% of its softwood from Canada—any tariff adjustment there can add thousands to a home’s framing costs. Appliances and electrical systems follow similar dynamics, with over 60% of major home appliances containing imported parts or assemblies.

Concrete production remains largely domestic, but costs still climb through imported additives and imported construction equipment. The cumulative effect across dozens of material categories is what produces the $10,900 figure, though individual projects vary widely depending on their design and sourcing mix.

The Contractor Squeeze Gets Worse

Here’s the less obvious consequence: rising material costs eliminate contractors’ financial flexibility. “The real impact isn’t just pricier materials; it’s that contractors instantly lose their ‘buffer,’” according to Bou Fadel. Once input expenses jump, every scheduling delay, rework requirement, or supplier hiccup becomes exponentially more expensive. Project timelines grow riskier, and margins shrink faster.

This pressure compounds an already difficult environment. Builders are simultaneously navigating labor shortages, elevated financing costs, and persistent inflation in material pricing. Adding 25% to 50% tariffs on key inputs forces tough decisions about whether to absorb costs, request higher bids from clients, or restructure projects around cheaper domestic alternatives.

Will Homebuyers Actually See Price Increases?

The connection between rising construction costs and final home prices isn’t automatic. Recent market research reveals mixed signals about how this expense surge will appear on price tags.

Some builders are absorbing costs through incentives rather than sticker-price hikes. D.R. Horton, the nation’s largest homebuilder, indicated during its July earnings call that affordability pressures have pushed the company toward offering mortgage-rate buydowns and closing-cost assistance instead of raising base prices. In competitive markets where buyers feel squeezed, developers often choose to enhance packages or subsidize financing rather than price homes higher.

Yet the dynamic shifts in supply-constrained markets. Brookings research from October shows that rising material expenses can slow housing production as builders postpone projects or scale back ambitions. That reduced supply can create upward price pressure over time, particularly in regions already experiencing inventory shortages.

Real estate analyst Sain Rhodes at Clever Offers notes that historically, tariff-driven material spikes produce a delayed effect: “price increases within 30 to 90 days, then demand destruction and reduced building activity within four to six months.” In other words, the $10,900 cost increase might first appear as contractor bids going higher, then eventually influence home prices—but the timeline and magnitude depend heavily on local market conditions.

The Bottom Line

How much it will cost to build a house in 2026 and beyond depends on which materials your project requires and where you’re building. Homes with extensive imported components or multiple appliance packages could exceed the $10,900 average, while smaller starter properties relying on domestic materials might stay closer to current price points. The question of whether these construction cost increases become home price increases remains partially unanswered—some markets will see direct price jumps, others will see slower construction and incentives instead. Either way, the tariff impact is already showing up in contractor bids and builder expense calculations.