How Tariffs Could Affect Your Next Home Purchase

Think tariffs have nothing to do with your next home? Think again. Whether you're buying, selling, or investing, international tariffs could have a direct impact on how much house you can afford—and how much you'll end up paying. From rising construction costs to shifting mortgage rates, tariffs are starting to play a bigger role in the housing market than most people realize.

What Are Tariffs and Why Do They Matter?

So what is a tariff? A tariff is a tax on imported goods. That can include lumber, steel, appliances, and even the drywall used in home construction. If the U.S. places a 25% tariff on Canadian lumber, builders have to pay more to bring that in. And that added cost gets passed down to you—the consumer and the buyer.

So how does this affect your wallet? Let's talk about home affordability. For the past couple of years, the housing affordability index in Huntsville has been below 100—for the first time since I’ve been tracking it, or really since I started selling homes over the last couple of decades.

That means the median household income can’t afford the median-priced home in Huntsville. While Huntsville is still doing better than many other markets, affordability is well below historical averages. In simple terms, it’s getting harder to buy a home in Huntsville and really across the country.

Tariffs could help bring that number back above 100, improving affordability by lowering construction costs in the long term. Probably not in the short term, but down the road. They could also lead to lower interest rates, which we’re already starting to see. That would make homeownership more accessible for more families and help bring more balance to the market.

How Tariffs Could Actually Lower Monthly Payments

Affordability isn't just about price—it’s about monthly payments and what people can actually afford. That comes down to two things: the price of the home and the interest rate on your mortgage. If you’re financing your purchase, tariffs could add $7,500 to $10,000 to the price of a new home, according to the National Association of Home Builders.

The good news is that only about 7% of the average home includes imported materials. That number could drop even further if more of those materials are sourced domestically and those jobs shift back to the U.S.

Here’s where it gets interesting. Interest rates are starting to come down as the 10-year Treasury yield falls, which is tied to the stock market decline and broader global uncertainty. I spoke with a banker today, and their chief economist is now predicting six interest rate cuts by the Fed this year.

If that happens, the example I'm about to walk through could look even better. But let’s do the math. Say the average home in Huntsville costs $350,000. At a 7% interest rate—which is where we were just a few weeks ago—the monthly mortgage payment (principal and interest) is about $2,330.

Now, let’s say tariffs increase the home price by $10,000, bringing it to $360,000. But let’s also say rates drop to 6%. If that’s the case, your monthly payment would be around $2,160—a savings of about $170 per month.

That adds up to over $2,000 per year. So even with a slightly higher purchase price, lower interest rates can significantly improve affordability and help more people get into a home. Interest rates have a bigger impact on monthly payments than price alone. And as rates dip into the high fives and low sixes—and possibly even lower—demand is likely to jump.

Why Sellers May See a Boost First

Sellers will likely benefit first. As more buyers enter the market, builders will follow—especially as construction becomes more profitable with lower borrowing costs and fewer incentives needed to attract buyers.

Right now, we’re seeing about 4 million homes sold annually across the U.S. During the height of COVID, that number jumped to around 6 million. Typically, we see about 5 million homes sold per year. If all of this plays out, we could see home sales climb to over 8 million annually.

Sellers, this could be a great time to see your home value rise. If you're curious about what your home might be worth in this changing market, check out this Home Value link.

Could Tariffs Actually Lead to a Housing Boom?

If tariffs actually work the way they’re designed to—which is still a big “if” with a lot of moving parts and risk—there could be some major upside.

First, more manufacturing jobs would mean more stable incomes and more qualified buyers, which would be a big win for the housing industry. That’s also good news for everyday Americans as we see more opportunities for homeownership.

Second, if tariffs lead to the elimination of income tax for families earning under $150,000, that means more take-home pay. That could translate into higher homebuying budgets and more people being able to afford their first—or even their next—home.

Producing more of our own building materials, like cutting our own timber, could also help bring down construction costs over time.

Put all that together, and we could be looking at a housing boom. There are a lot of millennials and other would-be buyers sitting on the sidelines right now. If affordability improves, demand could surge. That could lead to home sales exceeding 8 million annually—record-breaking numbers for the U.S.

As interest rates drop, even current homeowners who’ve been holding onto their lower rates may finally be ready to sell, move up, or downsize.

So the takeaway here is that tariffs aren’t just about politics. They could have a major impact on affordability, demand, and opportunity—potentially bringing the housing affordability index back above 100. That would open the door to homeownership for more people—not just in Huntsville, but across the country.