How Trump’s Tariffs Could Impact the Housing Market
Written by
Kerra Bolton
Edited by
Chris Cluff
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
President Donald Trump’s proposal to implement significant tariffs on the country’s key trading partners could have ripple effects on the U.S. housing market.
Trump has called for levying a 25% tariff on all imports from Canada and Mexico and 60% on China, along with “an additional 10% tariff, above any additional tariffs” on China, Reuters reported. However, the tariffs, while aimed at solving perceived social and economic issues, could drive up prices for new homes and renovations, further straining an already tight market.
“The tariffs will raise the cost of materials, which could directly increase the cost of constructing new homes,” said Wayne Winegarden, an economist at Pacific Research Institute. “Indirectly, the tariffs will weaken economic growth, which will also reduce the housing market’s vitality.”
Here’s how Trump’s tariffs could impact the housing market.
Next, find out which other industries could be most impacted.
Rising Material Costs
Tariffs are taxes that increase the costs of imported goods, including building materials.
“Raising construction costs and tariffs directly lead to higher home prices,” said George Carrillo, CEO of the Hispanic Construction Council (HCC). “For instance, the 2018 tariffs — 25% on steel and 10% on aluminum — caused material costs to jump by 10% to 15%, adding roughly $1 billion to construction expenses in just one year.”
Carrillo said small construction businesses, which comprise 80% of the industry, could be hit hardest by the tariffs.
“With slimmer profit margins, these firms struggle to absorb rising costs,” he explained. “New home construction, already challenged by labor shortages and disrupted supply chains, faces added strain from tariff-induced hikes.”
People struggling to rebuild their homes after natural disasters could be hit hardest by the effect of tariffs on home construction materials.
“Due to the damage from the devastating wildfires, the L.A. area is particularly vulnerable,” Winegarden said. “To rebuild from the damage, we need to encourage a greater supply of construction materials, given how large the need will be.”
Worsening the Affordable Housing Crisis
Higher material and construction costs caused by the tariffs could make buying a home out of reach for many people.
“The tariffs will slow down the economy and will also encourage the Federal Reserve to pursue a higher interest rate environment,” Winegarden said. “The net result will be higher mortgage rates for borrowers. Together, the higher rates coupled with the rising cost of construction will significantly reduce housing affordability.”
Ashley DeHart, a California-based Realtor, said tariffs could trigger a housing affordability crisis and widen the income gap.
“Higher prices require more of a down payment, higher closing costs and potentially a higher credit score needed to qualify,” DeHart said. “With the housing market already facing a debilitating shortage … this would make it even harder for first-time homebuyers or those with more restrictive loan types to compete with cash and conventional loan offers.”
What Homebuyers and Homeowners Can Do
Real estate expert Alexei Morgado, founder of Lexawise — an app that helps people prepare for real estate exams — said homeowners should stay updated about property value trends, because increased construction costs could enhance their home’s market value.
“However, homeowners must also be prepared for potential rises in property taxes and maintenance expenses due to economic inflation,” Morgado said. “Potential buyers might consider accelerating their purchasing decisions to avoid anticipated price hikes and secure a home before tariffs take full effect to achieve cost savings.”
Morgado added, “Exploring fixed-rate mortgage options can provide protection against possible interest rate increases linked to economic uncertainties.”
Prioritizing existing homes over new builds if housing prices jump and budgeting for potential renovation price increases are also steps homebuyers and homeowners can take.
“Avoid bidding wars that can push homeowners into an unstable position,” Winegarden said. “Rising rates coupled with rising prices can be devastating for homeowners who reach too far.”
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
More From GOBankingRates
