The FoxyAI Team

New tariffs on construction materials—particularly lumber, drywall, and home appliances—have added significant pressure to the U.S. housing market. These tariffs, imposed on goods from Canada, Mexico, and China, are expected to drive up the cost of building homes, making new construction projects more expensive. Homebuilders, investors, and insurers face rising risks—from increasing construction costs to shifting market conditions. 

AI-driven property intelligence can help mitigate these challenges, optimize material choices, identify renovation efficiencies, and predict market shifts.

The Impact of Tariffs on Construction Costs

As of March 2025, the tariffs have already started impacting the cost of essential construction materials. Lumber, which is critical for framing homes, has seen the most substantial increase. Approximately one-third of the lumber used in U.S. homebuilding is imported from Canada, and with a 25% tariff reimposed, builders are seeing prices for materials rise significantly. The increase in lumber prices could add $4,900 to the cost of building a home—and in total, builders could face an increase of $7,500 to $10,000 per home due to tariffs on various materials.

Tariffs have also affected other building materials like gypsum, which is used for drywall, and household appliances. These materials largely come from abroad, with the U.S. importing gypsum from countries like Spain, Mexico, and Canada, and China being the largest supplier of home appliances. As prices rise for these materials, homebuilders are left with two difficult choices: either pass the cost onto buyers, which could drive up home prices, or use fewer materials, resulting in smaller homes. Both options have far-reaching effects on the housing market, including the affordability and availability of new homes.

Effects on the Broader Housing Market

In addition to affecting new construction, tariffs are also reshaping the broader housing market. As the cost of new homes rises, buyers may shift towards existing homes, driving up prices in the resale market. Homeowners may become less inclined to invest in major remodeling projects due to higher costs for materials. This can limit the supply of homes available for sale, exacerbating the already-tight inventory of homes on the market.

While these tariffs threaten to worsen the housing affordability crisis, AI-driven property intelligence offers potential solutions for builders, investors, and insurers. 

How AI Can Help Mitigate the Impact of Tariffs

Unlike in prior decades before the advent of Artificial Intelligence, AI can now help mitigate risks and reduce costs by optimizing material choices. For example, AI models can analyze historical data to recommend the most cost-effective, locally-sourced materials that meet quality standards. By suggesting alternative materials or suppliers, AI can help builders reduce their reliance on expensive, tariff-affected goods.

Additionally, AI can identify opportunities for efficiency in renovation projects. With AI-powered property condition analytics, builders can pinpoint areas where materials are being underutilized, where cost-saving adjustments can be made without sacrificing quality, or specific areas of the home or potential projects that will result in the largest return on investment. This enables more effective budgeting and helps builders manage rising costs.

On a larger scale, AI models can also predict market shifts, offering valuable insights for investors and insurers. By analyzing market trends, AI can forecast the impact of tariff-induced cost increases on home prices and demand, helping investors make informed decisions. Insurers can use AI to assess risks more accurately—ensuring they can offer policies that reflect the new construction cost realities.

Navigating Uncertainty with AI-Driven Insights

While the tariffs are expected to continue reshaping challenges in the housing market, AI provides a powerful tool to help mitigate their impact. From optimizing material choices to predicting market shifts, AI-driven property intelligence can help builders, investors, and insurers navigate these turbulent times with greater confidence and efficiency.