The impact on housing of President Trump’s latest set of tariff announcements, including a 35% levy on goods from Canada not covered under the U.S.-Mexico-Canada Agreement, is either mildly disruptive or significant, depending on who you ask.
This comes from a
Previous orders for Canada imposed a 25% tariff, but a White House fact sheet alleges “Canada has failed to cooperate in curbing the ongoing flood of fentanyl and other illicit drugs, and it has retaliated against the United States for the President’s actions to address this unusual and extraordinary threat to the United States.”
What is the impact of the new tariffs on homebuilders
Selma Hepp, chief economist at Cotality, sees the situation as a mixed bag.
“While the final extent of tariffs remains uncertain and dynamic, the impact on the homebuilding industry is expected to remain limited given that less than 10% of construction goods are imported,” said Hepp in an emailed comment.
“Nevertheless, tariffs already in place are starting to make their way into higher prices for consumer products and producer inputs — with outsized gains in the most recent [Consumer Price Index] in several housing categories, including windows and floor coverings, appliances, [and] other household equipment.”
For example, steel producers are reporting a faster pace of price increases since metals tariffs were introduced in the early rounds of the trade war.
“Also, with lumber continuing to be in the crossfires of the trade negotiations and anti-dumping trade disputes, lumber costs have increased 38% from last year and are at the highest levels since the post-pandemic drop in 2023,” Hepp said.
How the homebuilding supply chain is affected
Canada represents less than 9% of the total of foreign materials used in housing, added David Dworkin, president and chief executive of the National Housing Conference.
“But in the way the real world works, you can’t build the home without a key component,” Dworkin said. “So if you don’t have lumber, well you’re going to increase the cost of lumber in a home; it doesn’t matter that you don’t have as much Canadian impact on other materials.”
About 70% of U.S. saw mill and wood products come from Canada, which is “a big number,” Dworkin said. Approximately 20% of dry wall products are imported from Canada, in addition to about one-quarter of iron and steel and about 18% of copper used in construction.
“Significantly increasing the cost of these products is going to lead to a significant increase in the cost of housing,” Dworkin said.
Impacts on first-time home buyers
The increased cost for homebuilders is going to
Further harming costs are the labor disruption created by the Trump Administration’s mass deportation efforts.
“It’s ironic that the administration is so focused on interest rates, but increasing the cost of labor and construction material much more dramatically [has an] impact,” Dworkin said.
How the news affected mortgage rates
The immediate effect on mortgage rates is hard to judge, as the news came out just before Friday’s release of
It is likely both pieces of news got investors concerned, with the 10-year Treasury, one of the benchmark’s used to price the 30-year fixed rate mortgage, to close down approximately 14 basis points from Thursday, to 4.22%.
The last time the 10-year was at this level was on July 1, where its low for the day was 4.21% before rising back to 4.25% at the close.
There’s some debate as to whether that jobs report will drive the Federal Open Market Committee to cut short-term rates in September. Some are speculating that the recent news on inflation will keep it from acting.
“In the third quarter, we can expect to see more tariff-driven inflation, which may deter the Fed from lowering borrowing rates,” Hepp said. “Overall, this
