The U.S. housing market was already facing challenges due to high mortgage interest rates, a limited supply of existing homes for sale, and historically high home prices. The recent imposition of tariffs on building materials is exacerbating the situation.
Approximately 30% of softwood lumber used in the U.S. is imported, mainly from Canada, while wallboard, or gypsum, is imported from Mexico. President Donald Trump’s 25% tariff on goods from these trading partners will raise the prices of these essential materials. The tariffs on Mexican goods have been delayed for a month but remain a possibility.
The National Association of Home Builders has expressed concerns about the impact of tariffs on construction costs and home prices. Home prices have already risen significantly since the start of the pandemic, and the tariffs could further strain the market for buyers.
The NAHB is urging the Trump administration to exempt building materials from the tariffs to support housing supply expansion. Despite increased lumber production in the U.S., a significant portion of sawmill and wood product imports come from Canada and are subject to tariffs.
The new tariffs on imports from China, Canada, and Mexico could collectively raise construction material costs by billions of dollars, affecting builders’ ability to complete projects. Smaller homebuilders with tighter margins may be hit harder, but larger builders are also expected to feel the impact.
The construction industry is already grappling with a labor shortage, exacerbated by deportations of undocumented immigrants. The potential effects of tariffs on new housing construction could also impact the existing housing market, as increased costs may reduce buyers’ ability to save for down payments.
There were expectations of falling interest rates, but if inflation rises due to tariffs, rates could increase instead. The combination of economic factors and consumer perceptions of wealth could have a significant impact on the upcoming spring housing market.
