How Tariffs Could Pose A Costly Risk To Homebuyers: Here's What You Need To Know

The U.S. housing market has been stagnant for quite some time. Mortgage rates and sale prices remain sky-high while the inventory refuses to play catch-up. This has effectively frozen out most new homebuyers. President Trump's move to impose additional 25% tariffs on Mexican and Canadian imports (Canadian energy resources attract a lower 10% rate) could further complicate market dynamics. Granted, they're yet to kick into place and may never do if these countries strike a trade deal. But if things go sideways, it could have serious implications for homebuyers. On top of that, the Trump administration's "America First Trade Policy," which involves applying reciprocal tariffs on all trading countries, could further muddy the waters.

So, instead of indulging in the classic "will they, won't they" debate, we decided to speak to Jon Wade, real estate expert, resort market professional, and Broker Owner at The Steamboat Group, a family-owned and community-focused real estate firm in Colorado, to find out how tariffs could pose a costly risk to homebuyers. When prompted for his thoughts about the tariffs raising home prices during his exclusive House Digest interview, he responded, "Without a doubt, yes! New tariffs will inflate the price of homes. The reason is that it follows the market demand and supply rules in which a new price is added to compensate for the cost of the materials used." Put another way, "Builders and developers need to maintain profitability, so higher costs for raw materials will mean higher prices for new construction. It's important to note that renovations and remodels are also impacted by these changes."

Now that it has been established that tariffs will make homes costlier, it wouldn't hurt to understand what's exactly driving these prices. In his exclusive interview with House Digest, Jon Wade elaborates, "An estimated 30% of the [softwood] lumber used in the U.S. is imported from [Canada]." Considering some of these items already attract 14.54% duties (since the September '24 update), the combined rate could climb to 39%. In addition, Wade says, "Approximately 70% of gypsum imports come from Mexico." Combine that with steel and aluminum products (imported from Canada, China, and Mexico in order of percentage), it's no wonder home prices are set to rise dramatically. 

There's more. Wade says, "Besides raising construction costs, the way they directly affect home prices is by discouraging new housing developments and inflating mortgage rates." While President Trump did state on his Truth Social handle that interest rates should be lowered in tandem with tariffs, it remains to be seen how it will work out given the inflationary trend. Nevertheless, one thing is for certain: The problem of affordable home building isn't easing anytime soon. That's because immigrants make up 30% of construction labor. So, while limiting immigration may lessen demand, it simultaneously rids the industry of critical labor, complicating matters.

Further elaborating on his views about how the tariffs will affect the housing market, Jon Wade discloses in his exclusive House Digest Interview, "It's the whole system that is being affected because constructions may be delayed, and designs will have to be reconsidered and alternated. Not to mention that this will put strenuous pressure on the existing housing market as they wouldn't have these added costs." Sadly, this might not play out in the favor of buyers. "With such an increased demand, their prices will still be driven up," remarks Wade.

So, considering the current landscape, how should you prepare yourself before buying a home? Wade recommends a few precautionary measures. "Lock a good mortgage as soon as possible," he says. That way, of all the extra expenses that can sneak up on you when buying a home, you can rest assured higher interest payments aren't one, despite any rate hikes. However, expect delays. "As the market moves and shrinks, the demand might slow down processes such as mortgage approval," cautions Wade. While this can't be helped, consider simplifying your house hunt through collaboration. He suggests, "With the help of a local real estate agent, you'll be able to quickly cover more ground and recognize great opportunities before they scale out of control." Also, focus on resale homes that require little to no renovation. "New constructions will be affected the most, so considering existing homes might offer more stability in pricing," he concludes.