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| Trump’s New Tariffs Set to Drive Up Home Prices Across the U.S. |
The U.S. housing market, already grappling with high interest rates and construction costs, is set to face another financial challenge as President Donald Trump’s newly imposed tariffs on Canada, China, and Mexico take effect. With duties targeting essential building materials such as lumber, steel, and household appliances, industry experts warn that home prices will likely climb further, impacting both new construction and existing home sales.
The new tariffs, announced in February and implemented in March, include a 25% levy on imports from Mexico and Canada, a 20% tariff on Chinese goods, and an additional 25% duty on steel and aluminum imports from all countries. A proposed 25% tariff on international lumber is still pending but could increase total duties on Canadian softwood lumber to 39.5%. Given that a third of the lumber used in U.S. home construction is sourced from Canada, the housing sector is expected to see significant cost increases.
Builders will bear the immediate financial burden, with estimates suggesting an increase of $7,500 to $10,000 in construction costs per home due to higher material prices. Lumber alone could add around $4,900 per home, according to the Leading Builders of America. In response, domestic suppliers are anticipated to raise prices, further straining the market.
As builders and suppliers navigate these new costs, the ripple effects are already evident in the stock market. Shares of home construction companies and material suppliers have declined, with firms like Owens Corning, Hayward, and AZEK seeing stock losses of over 3%. The iShares U.S. Home Construction ETF dropped to its lowest point since late 2023, signaling investor concern over the industry’s profitability amid rising costs.
The tariffs come at a precarious time, as builder confidence fell in February to its lowest level in five months due to economic uncertainty. While Trump has argued that tariffs will boost domestic production and tax revenue, experts warn that the added costs may deter developers from launching new projects. Instead of increasing housing supply, a key campaign promise, the tariffs could further restrict it, driving home prices higher.
With construction costs rising, homebuilders may be forced to downsize projects, leading to smaller homes or reduced amenities to offset expenses. Danielle Hale, chief economist at Realtor.com, noted that buyers may increasingly turn to existing homes as the price gap between new and resale properties widens. This shift could push up prices for older homes as well, adding more pressure on an already constrained housing market.
Another concern is the potential slowdown in home renovation projects. With higher costs on materials like drywall, appliances, and lumber, homeowners may hesitate to invest in remodeling, limiting opportunities for property upgrades and improvements.
To counter rising material costs, Trump has issued an executive order to streamline regulations and increase domestic lumber production. While the move was welcomed by industry groups, experts caution that expanding lumber production is a long-term process that could take years to yield results. Sawmill construction and labor shortages remain significant barriers to quickly scaling up domestic supply.
Meanwhile, Treasury Secretary Scott Bessent has highlighted the recent decline in mortgage rates as a positive sign for the housing market. Since Trump’s election, rates have dropped from 7.26% to around 6.64%, offering some relief to homebuyers. However, economists warn that the overall impact of tariffs, combined with ongoing affordability challenges, could outweigh the benefits of lower interest rates.