The American housing market was already struggling under the weight of high mortgage interest rate, A Low range of existing houses for sale and historically high house prices.
Now rates on building materials are adding even more pressure.
About 30% of the softwood used in the US is imported, largely from Canada. Wallboard, known as plaster, is imported from Mexico. The 25% tariff president Donald Trump has levied on goods from the two most important trading partners that will make products much more expensive. The Mexico rates were postponed for a month on Monday, but they are still on the table in the future.
“More than 70% of the import of two essential materials on which housing builders trust – softwood wood and plaster – come from Canada and Mexico respectively,” wrote Carl Harris, chairman of the National Association of Home Builders in a release. “Rates for wood and other building materials increase the construction costs and discourage new development, and consumers ultimately pay for the rates in the form of higher house prices.”
House prices have risen more than 40% since the start of the pandemic and were still 3.8% higher in November, compared to the previous November, according to the last reading of the S&P Corelogic Case-Shiller National Home Price Index. That annual increase was higher than the 3.6% in October.
Tasks on building materials can make the market even more difficult for buyers.
We believe that this can make the affordability crisis for first buyers. On the positive side, it can increase the pressure on the congress to implement policy that encourages more entry -level construction, including extensive tax credit programs, “wrote Jaret Seiberg, housing policy, housing policy, housing policy analyst for TD Cowen Washington Research Group.
Potential buyers from home have a real estate for sale during an open house in a neighborhood in Clarksburg, Maryland.
Roberto Schmidt | AFP | Getty images
The NAHB asks the Trump government to release building materials from the 25% rates, and notes its executive order on the first day of his presidency, that wanted to “expand the housing stock”.
While the US has increased the production of wood in recent years, 70% of the import of the country and the wood product – $ 8.5 billion – comes from Canada. They are already subject to a rate of 14.5%, so Trump's new policy would increase to more than 39%.
And 71% of the import of lime and plaster products come from Mexico, a total of $ 352 million. Other materials such as steel and devices are from China. Trump placed an extra rate of 10% on goods from China on Saturday.
New tasks on import from China, Canada and Mexico can increase building material costs by $ 3 billion to $ 4 billion if they all come into force, which influence builders' ability to complete projects according to the NAHB.
The rates are likely to hit smaller house builders with stricter margins harder, but large builders are not immune.
“Even with a smaller part of our wood from Canada, and some materials from Mexico, we will all be affected-which in turn can influence the consumer and their ability to buy a house in the short term, “Seryl Palmer, CEO of Homebuilder in Arizona Taylor Morrison. “At a time when some consumers still have difficulty overcoming higher interest rates, my sincere hope is that they will be short -lived.”
Builders are already fighting a shortage of labor that only gets worse after the Trump administration with mass deportations of immigrants without papers has started. About 30% of the construction workers are estimated to be immigrants, and a significant share of those employees have not documented, according to the National Immigration Forum, an immigration interest group.
“You can let them all out of the country, but who is going to build houses?” said Bruce McNeilage, CEO of Kinloch Partners from Nashville, a single -family home developer.
Although the majority of the effect of rates on new housing is, the existing market can also feel the effects. If the costs of other consumer goods rise, all potential buyers have less reserve money to save for a down payment.
There was also an expectation that interest rates would fall this year, but if inflation warms up again because of the rates, the rates could even rise. This stratification of both economic realities and emotional perceptions of personal wealth could hit the most important, upcoming spring market.