Tariffs reappeared as a major factor in April 2025, as the U.S. housing market continued to respond to a dynamic worldwide economy. The most recent action from President Donald Trump’s administration—a partial 90-day halt on certain tariffs—adds complexity rather than clarity to the present situation. Although important building materials are still highly taxed, this temporary reduction offers some trading partners a respite, putting the housing sector under pressure. For real estate investors, developers, and homeowners, these trade policies, increasing interest rates, regional affordability concerns, and climate-related insurance changes have produced a chaotic yet exposing time.

What the Tariff Pause Really Means for Housing

On April 9, 2025, President Trump announced a 90-day suspension on most new tariffs, reducing the “reciprocal tariff” rate to 10% for 57 key trading partners, including the European Union, Japan, and South Korea. Although the news was initially viewed as a broad de-escalation, the fine print reveals a different narrative.

Autos, steel, and aluminum still carry 25% tariffs, which nevertheless have an impact on supply chains for the construction and automobile industries. Tariffs on Chinese goods have also been increased to 125%, reflecting the continuing tensions between the U.S. and China.

Constant taxes on building materials, particularly those on housing, harm the industry. Infrastructure growth relies heavily on steel and aluminum, from beams and framing to HVAC systems and appliances. These rising import prices continue to drive up building expenses, thereby squeezing developer earnings and postponing new construction.

Rising Construction Costs: A Persistent Problem

For many years, the building industry has been negotiating pricing volatility. The cost of raw materials remains high despite supply chain disruptions during pandemics and spikes in inflation. Ongoing high metal tariffs aggravate problems even as lumber costs fell earlier in 2024.

Largely due to the increased costs of steel and aluminum, recent research by the National Association of Home Builders (NAHB) indicates that builders are experiencing expenses 15–20% higher than they were before the pandemic. Although the 90-day break may reduce some input costs in particular areas, the materials most necessary for vertical and mixed-use buildings remain expensive.

As a result, many homebuilders are deferring or downsizing planned projects. This constrains supply and shifts focus away from affordable housing developments, where tighter margins make such cost increases untenable.

Home Prices Stagnate as Affordability Declines

The cumulative effect of higher build costs and persistently high interest rates has started to cool housing markets across multiple states. According to ResiClub Analytics, over 60 regional housing markets saw month-over-month declines in home prices as of April 2025, with notable slowdowns in Arizona, Texas, and Florida.

Although national home prices are still 1.2% higher year-over-year, this increase is modest compared to past years and exhibits notable regional heterogeneity. Areas strongly dependent on new development or suffering insurance premium increases, such as flood-prone areas in Louisiana and coastal Florida, are seeing unequal pricing adjustments.

First-time buyers still struggle to afford it. Many purchasers find themselves priced out of the market due to compounded monthly payments, insurance expenses, and low inventory at reasonable price points, while mortgage rates remain near 7%.

Mortgage Delinquencies and Buyer Fatigue

Adding to the affordability problem is a clear rise in mortgage delinquencies, especially among first-time buyers. A February 2025 study by Business Insider reveals that borrowers with FHA and VA loans are exhibiting higher delinquency rates, reflecting the financial pressure on purchasers who entered the market amid historically high price points in 2022–2024.

These patterns raise questions about a possible domino effect. Sellers may have to lower prices, developers might halt work on projects, and lending institutions may tighten credit criteria as more purchasers default or exit the market. In a worst-case situation, this cycle might exert downward pressure on regional property markets, particularly in overbuilt suburban or exurban areas.

Climate Change: The Silent Housing Crisis

Although inflation and tariffs garner attention, climate risk is gradually altering the foundation of U.S. housing. Increasingly, studies reveal that hurricane-prone coasts, wildfire corridors, and flood zones are becoming less insurable or insurable only at high premiums.

In Southwest Florida, for example, entire neighborhoods are seeing home values stagnate or fall due to surging flood insurance costs. The withdrawal of major insurers from high-risk states has left homeowners scrambling for limited and expensive policies through state-run programs. According to The Times, this insurance crisis could trigger the next major correction in the U.S. real estate market.

This reality is prompting institutional investors and developers to re-evaluate their asset allocations, shifting capital toward inland cities, mixed-use developments with resilient infrastructure, and states with more stable regulatory environments.

Investor Outlook: Where Is Capital Flowing in 2025?

Some parts of U.S. real estate are attracting investors despite the uncertainty. Markets like Raleigh, Charlotte, Indianapolis, and Salt Lake City are experiencing modest price increases, supported by diverse economies, lower climate risk, and reasonable affordability.

Institutional investors in the multifamily industry continue to seek build-to-rent opportunities as demand for rental homes increases among cost-conscious families. Ironically, both e-commerce and manufacturing reshoring are affected by the same global trade regulations, generating strain elsewhere; yet, industrial real estate remains a preferred asset class as e-commerce continues to expand.

Adaptive reuse initiatives, which transform underutilized commercial structures into residential or mixed-use areas, are also attracting private equity and real estate investment companies. Often ignoring certain building cost limits associated with new construction, these projects take advantage of urban renewal incentives.

What’s Next: The End of the Tariff Pause?

The 90-day pause announced in April is set to expire by mid-July 2025, unless extended. Political analysts suggest the move may be a temporary gesture to relieve pressure ahead of a contentious presidential campaign season, rather than a long-term policy shift.

Should the pause expire without broader tariff reductions, construction costs could spike further in Q3. Developers and investors may frontload projects to take advantage of the reprieve or wait until the outcome of the 2025 presidential race provides clearer policy direction.

A Market Defined by Complexity

The U.S. housing market in 2025 is neither crashing nor booming—it is shifting, influenced by an unprecedented confluence of factors: partially paused tariffs, climate risk, inflation, labor shortages, and policy uncertainty. While President Trump’s tariff announcement brought temporary relief to certain sectors, the core drivers of housing instability remain unaddressed.

For investors and developers, the moment calls for strategic flexibility. Understanding the regional impacts of trade policy, material costs, and insurance volatility will be key to navigating the next 12–18 months. Those who invest with foresight—factoring in macroeconomic volatility and micro-level resilience—will be best positioned to thrive in this new chapter of American real estate.