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Key Takeaways
- Different tariffs will affect the housing market, which is already expensive.
- The cost of raw materials, such as stone, copper, and lumber, could increase, making new homes more costly.
- Renovators may also see higher prices, as tariffs may increase the cost of appliances and fixtures, cabinets, and glass.
- Fluctuating mortgage rates can also affect borrowing costs.
Tariffs add new price pressures to an already overpriced housing market.
President Donald Trump’s changing tariff policies have rattled markets and are being felt across the economy. Tariffs can have a wide range of effects on the housing market, including buyers, sellers 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 for materials such as wood, plastics and metals are expected to increase costs of construction and renovation. In the meantime, economic uncertainty is driving rates higher, making it more difficult for lenders to close deals.
Home builders are facing higher material costs
Raw materials will likely become more expensive under Trump's tariffs, especially if the tariffs he has proposed are implemented.
When analyzing which imports enter the U.S., the White House has shown a particular interest in lumber. According to the National Association of Home Builders, about 30% of U.S. domestic demand is met by lumber imports.
According to a recent report by the Commerce Department, lumber is currently exempted from tariffs. However, this could change. Canada is a major lumber supplier to the U.S., accounting for about 80% softwood lumber imports. The report indicated that import taxes on lumber from the U.S.'s northern neighbor could more than double this year.
The threat to lumber is not the only one. Tariffs on Mexican goods could also increase the price of stone tiles. Tariffs in Europe could also increase the cost of granite and marmor. Trump has also floated specific tariffs on the copper industry and has already implemented steel and aluminium tariffs.
Tariffs will also pinch home renovators
Home renovators may also feel the impact of tariffs. While renovators rely less on lumber, they still have to pay for fixtures, appliances, and plumbing.
Home renovators could face a particular problem if they import from China several key housing materials, such as glass or cabinets, according to Eli Moyal.
“Many of the materials we use for projects, whether they are finished materials or rough materials, come directly or indirectly from China. So that's going to affect a significant part of the market,” he said.
Moyal said that clients could see project prices increase between 10% and 15% due to tariffs. However, not all of these costs are being passed onto consumers.
“Not everything goes to the customer, at the end of a funnel. “The manufacturer takes some and the distributor takes some. The builder will take some. And then the client sees some cost increase,” Moyal said.
Mortgage Rates have Already Fluctuated
For mortgage brokers, the biggest challenge is fluctuating mortgage rates.
Treasury yields have soared this week as investors price in tariff policies. The yield of the 10-year Treasury, a key factor in mortgage rates, climbed as high as 4.59% last Friday before easing slightly.
Mortgage rates typically follow the 10-year Treasury yield. They jumped from 6.7% to over 7% by the end of the week.
Phil Crescenzo Jr. of Nation One Mortgage Corporation, Southeast Division, said that the uncertainty surrounding borrowing is making it hard for home buyers to finalize their costs..
“If we're trying to lock an interest rate within the last four business days, they could move by half a percent, three-quarters of a percent, for the same cost in a four-day span. That's pretty significant,” Crescenzo said.
