Tariffs Can Impact the Housing Market

 

Tariffs are adding new price pressures to a housing market that is already expensive.

The change in tariff polices has created volatility in the markets and are being felt across the economy. The housing market is no exception: Tariffs could have a variety of effects on buyers, sellers, builders, and mortgage brokers.

Housing market participants are bracing for increased costs as housing affordability remains under pressure due to limited supply and elevated mortgage rates. Import taxes on materials like wood, plastics, glass, and metals will raise housing construction and renovation costs. Meanwhile, economic uncertainty is driving interest rates even higher, making it harder for lenders to close deals.

The reality of tariffs is not fully determined, as President Trump is using tariffs as a negotiating strategy but also trying to balance the international trade environment, where the United States has been enduring high tariffs imposed by other countries. His goal is to increase manufacturing and jobs here at home and make us less dependent on foreign sources for our needs.

Home Builders Face Higher Material Costs

Raw materials will likely become more expensive under the tariffs, especially if the tariffs proposed are fully implemented.

The White House has been particularly interested in lumber as it studies which imports come into the U.S. The U.S. imports about 30% of its domestic demand for lumber, according to the National Association of Home Builders (NAHB).

Lumber is currently exempt from tariffs, but that could change, according to a new report from the Commerce Department. Canada is one of the major suppliers of lumber to the U.S., providing about 80% of U.S. softwood lumber imports. The report indicated that import taxes on lumber from Canada could potentially double this year.

Tariffs on Mexican products could also raise the prices of stone tiles. Meanwhile, granite and marble costs could rise due to tariffs in Europe. Copper, steel, and aluminum may also be affected.

Home Renovators Will Also Feel the Impact of Tariffs

Home renovators are also likely to be affected by tariffs. While less reliant on lumber than home builders, renovators are also facing costs for fixtures, appliances and plumbing.

Tariffs on China could be particularly problematic for home renovators, who import several key housing materials from the nation, including cabinetry and glass.

Mortgage Rates Have Already Fluctuated

For mortgage brokers, tariff challenges come in the form of fluctuating mortgage rates and general business environment uncertainty.

Treasury yields have increased in the past week as investors price in tariff policies. Mortgage rates generally follow the path of the 10-year Treasury yield and jumped late last week from the week before.

The uncertainty in borrowing is makes it difficult for home buyers to finalize costs.