Welcome to Unlocking Real Estate, the podcast where we crack open the deals, strategies, and market forces shaping the property world. I’m your host, RJ Hernandez—developer, planner, investor, and lifelong student of the dirt beneath our feet and the structures we build on top of it.
In this episode, we’re diving into a topic that’s been hitting developers, builders, and even everyday homebuyers where it hurts: tariffs.
Lumber, steel, aluminum, electrical components—everything’s getting pricier. But what does that actually mean for the cost of construction, land acquisition strategies, and the viability of new development? And more importantly… what’s next?
Tariffs 101 – What’s Going On?
Brief recap of recent or ongoing tariffs: U.S. tariffs on Canadian softwood lumber, Tariffs on Chinese-manufactured building materials, electrical systems, and solar panels, Trade tensions with Mexico, impacting raw materials like cement and labor supply, Stat: Average cost of residential construction has increased 7–15% over the past 3 years directly tied to tariff-related supply issues.
For the average single-family home, that can mean $18,000 to $35,000 more in hard construction costs. Multiply that across a subdivision, and you're talking millions in margin erosion—unless pricing power holds, which in 2025… is getting harder to justify.
The Ripple Effect on Real Estate
Impact on land planning and feasibility: Projects that penciled 18 months ago might be underwater now due to inflated build costs.
Impact on homebuilders: Public builders are value-engineering more aggressively, delaying starts, and focusing on infill lots to preserve margin.
Impact on investors: Build-to-rent models might suffer in pro forma projections; cap rate compression adds pressure.
It’s not just the price of materials—it’s the uncertainty. When pricing volatility becomes the norm, lenders get jittery, builders delay, and cities feel the slowdown in fee revenue.
Forecast – What Comes Next?
Short-term (6–12 months): Expect continued cost volatility, especially if tensions with China or new tariffs with EU suppliers emerge.
Mid-term (12–24 months): Builders may begin reshoring supply chains; increased use of prefab and modular construction to reduce dependence on imported components.
Long-term (2026 and beyond): Tariffs may result in a permanent reshaping of construction economics in the U.S., favoring domestic suppliers but also forcing innovation.
If you’re a developer, now’s the time to revisit your cost escalation assumptions. If you’re a buyer, that price you’re balking at today might be the deal of the decade tomorrow. And if you’re an investor? Look for inefficiencies to exploit—because chaos breeds opportunity.
Takeaways & Tools
Action steps:
Reprice existing land offers or bids based on 2025 material escalation.
Monitor the Producer Price Index (PPI) for construction inputs.
Consider joint ventures with suppliers or prefab providers to hedge risk.
Pro tip:
Use escalation clauses in construction contracts to protect margin.
Factor in tariff risk when analyzing new markets or asset classes.
That wraps up this episode of Unlocking Real Estate. The global economy isn’t just a headline—it’s directly shaping what gets built, when, and for how much.
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Til next time...Stay sharp, stay strategic, and keep unlocking real estate.
