The Makeup of a New Home Price
A new home’s price primarily consists of construction costs, which account for 61% of the total price. These construction costs can be divided into:
- Wages and salaries: 34% of the total price.
- Materials: 27% of the total price.
While the majority of these materials are sourced domestically, 7.3% are imported—that’s about $9,671 for Salem’s average new home price of $490,653 in 2024.
The Tariff Effect on Materials
If a 30% tariff was imposed on certain imported materials. For the $9,671 worth of imported materials in a median-priced home, an additional $2,901 in tariffs will be paid by American companies.
What Does This Mean for Homebuyers?
The good news is that tariffs don’t cause a drastic price spike. In this case, the impact of a 30% tariff adds around $3,000 to the cost of a new home—a 0.61% increase on the average price. So it isn’t zero, but it shouldn’t cause home prices to spike unless builders source more materials from imports.
The Ripple Effect on the Housing Market
While the direct impact on new home prices is relatively small, the tariffs could indirectly influence the market in a few ways:
- Builders absorb costs: Some builders might choose to absorb these costs, reducing their profit margins but maintaining competitive pricing.
- Higher renovation costs: Homeowners looking to renovate might feel the pinch if tariffs increase the cost of imported materials like steel or lumber.
- Supply chain adjustments: Builders may seek alternative suppliers, potentially delaying construction timelines.
A Small Increase, Big Implications
While the tariffs on imported materials may only add a few thousand dollars to the price of a new home, every dollar matters when housing affordability is already stretched thin. For buyers, this highlights the importance of understanding how broader economic policies can trickle down into their budgets.
If you’re considering buying or building a home, staying informed about market factors like tariffs can help you make smarter decisions.