3 Ways Tariffs Could Affect The Housing Market

Tariffs are adding new price pressures to a housing market that was already pricing out many buyers.

President Donald Trump’s changing tariff policies have rattled 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.

Home Builders Face Higher Material Costs

Raw materials will likely become more expensive under Trump’s tariffs, especially if the tariffs he has proposed are implemented.

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

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., with about 80% of U.S. softwood lumber imports being sourced from the country. The report indicated that import taxes on lumber from the U.S.’s northern neighbor could more than double this year.

And lumber isn’t the only material under threat. Tariffs on Mexican products could also raise the prices of stone tiles. Meanwhile, granite and marble costs could rise due to tariffs in Europe. Trump has also floated industry-specific tariffs on copper and already implemented steel and aluminum tariffs.

Home Renovators Will Also Feel the Pinch of Tariffs

Home renovators are also likely to feel the pinch from 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 glass and cabinetry, said Eli Moyal, founder and COO of renovation project tracking service Chapter. 

“A lot of the materials that we use in projects, either the finished materials or the rough materials, are directly or indirectly from China. So that’s going to affect a significant part of the market,” he said.

Clients could see project price increases of between 10% and 15% from the tariffs, Moyal said, though not all of the increased costs are being passed on to consumers.

“Not everything is being put to the client, to the end of the funnel. The manufacturer takes some, the distributor takes some, the builder takes some, and then the client will see some increase in cost,” Moyal said. 

Mortgage Rates Have Already Fluctuated

For mortgage brokers, tariff challenges come in the form of fluctuating mortgage rates.

Treasury yields have soared this week as investors price in tariff policies. The yield on the 10-year Treasury, which heavily influences mortgage interest rates, rose as high as 4.59% on Friday before retreating slightly. 

Mortgage rates generally follow the path of the 10-year Treasury yield and jumped to more than 7% late in the week, up from around 6.7% a week earlier.

Phil Crescenzo Jr., vice president of Nation One Mortgage Corporation’s southeast division, said the uncertainty in borrowing is making it difficult for home buyers to finalize 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.