Owning a home is a crucial part of the American dream. However, it’s important to understand the current political landscape to make well-informed decisions!
Today, we’re going to talk about the new import tariffs that the current administration has imposed on various countries around the world, which directly impact all American markets and sectors – including the construction and real estate markets.
But how exactly do these measures affect the real estate market and immigrants looking to buy a home in the U.S.? Keep reading to find out!
What Are Trump’s Tariffs?
President Trump has imposed new tariffs on products that the U.S. imports from other countries. Back in March, he had already taxed imports from Mexico and Canada at 25%, though at the time, it was limited to these countries and a few specific materials—such as steel and aluminum, which directly affect Brazilian exports.
Now, Trump has announced new taxes on other nations, and very few countries have escaped the impact. In total, 185 territories have been taxed. While South American countries face tariffs around 10%, European countries face rates over 30%, and Southeast Asian countries are seeing tariffs between 40% and 50% – China and Vietnam are among the most affected countries, with tariffs around 34% for the first and 46% for the latter.
According to the president, this protectionist measure is intended to strengthen the internal American market and industry and make the economy less dependent on global trade.
The “tariff hike,” as it’s become known, is also a response to tariffs that, according to Trump, other countries apply to U.S. exports, thus being part of a reciprocal taxation strategy aimed at “doing justice” to the American economy.
How the Tariffs Impact Housing Prices in the U.S.
The U.S. economy is highly dependent on global trade, as it imports a lot of things – from food supplies to fashion goods. Construction materials are also on the list: around 70% of all lumber used for housing construction in the U.S. comes from Canada, and most drywall comes from Mexico, for example.
With the increase in material costs, the overall cost of construction also rises, directly affecting the final price of a house. In other words, new builds are expected to become more expensive.
There’s also no indication that banks will adjust their lending guidelines to accommodate these rising costs, which is another sign that the number of homebuyers may drop.
But the impact doesn’t stop there: once a real estate contract is signed, construction companies are required to deliver the project at the agreed price, with no changes. In order to absorb higher material costs while maintaining the final price, builders may have to cut back in other areas—possibly reducing the workforce or cutting wages.
So, moving forward, there may be fewer construction jobs available—and those that remain could pay less than it does right now.
What About Existing Homes? How Are They Affected?
With the increase in new construction costs, it’s expected that more people will look for older, previously owned homes. Due to the rising demand and a heated market, prices for these homes will likely rise as well.
This could lead people who plan to stop renting and buy their first home to postpone that dream, as well as those wanting to move to a different home. Once again, high demand could push both rental and home purchase prices up.
This scenario suggests a likely slowdown in the real estate market—which makes up about 15% of the U.S. GDP—especially during the upcoming Spring/Summer season, historically the best time to buy a home in the country.
Another indicator for this scenario is the 10.5% drop in new home sales in January of this year—before the tariffs on Mexican and Canadian products were even announced. But reduced purchasing power doesn’t mean homeownership is impossible.
MGN Fine Homes Is Here for You, Even in Uncertain Times
The consequences of Trump’s tariff hike will take time to unfold, and since it’s a very recent measure, we can’t be sure they will even go into effect. Congress, the Senate, and construction companies are already challenging many of the tariffs in court.
Even if the tariffs go forward, we know how to adapt to new realities—especially with a team of professionals committed to making things happen!
If you have a home ready to sell, don’t hesitate to list it. And if you’re ready to buy, don’t wait. Get in touch with us and find out how we can help!