Tariffs, Real Estate, and You
Tariffs are back in the public consciousness in a big way since our newly elected President Trump has begun using them to drive policy. For my longtime viewers, you know I am not for the left- politician or the right- politician. I am for smart government decision making. However, today I am leaving politics off the table and I just want to focus on tariffs, how they affect the housing market, and a timeline for how quickly they may impact homebuyers.
So, I first want to explain why we should be concerned about tariffs in the housing industry. The reality is that the four “Big L's” that affect everything to do with housing are Lumber, Labor, Lending, and Land - and anytime one of those are impacted in any way, we have to pay attention to how that will affect housing.
As we know, there was a recent 25% tariff put on Canadian lumber. Then, shortly later, that tariff was postponed from going into effect for a month. The reason why this tariff is so problematic in certain states is because certain states like Washington, Oregon, and other states bordering Canada, rely on Canadian lumber to build homes. About 30% of the lumber that the United States consumes each year comes from Canada. So, we don't want a twenty-five percent tariff on lumber and for the moment we can breathe a sign of relief that there isn't one.
The minute that Lumber category is affected by tariffs, that will be a big issue for our real estate industry. Now we've also seen tariffs put on steel and aluminum this week (effective February 10th). These are also important imports that affect construction, but they do not affect residential construction on the scale of lumber.
Let's talk about timing and imagine a tariff on lumber were to go into effect in 30 days. It takes time for that tariff to trickle down to the end product market where home buyers are impacted. In reality, it will probably take about a year to impact the consumer part of the housing market. This is because it takes 7- to 12-months to get a home built, because homes being built now are being built with lumber that is already purchased. Add to that the time it takes to develop land and create infrastructure. Now, for builds that have gone through the development process, that time is going to be shortened before it hits the consumer.
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However, the reality is that we don't want tariffs on Canadian lumber, we don't want tariffs on steel, we don't want tariffs on construction materials because we already have a pricing affordability crisis and cannot afford the homes that we have already. The cost of building has gone up as the cost of materials, lending, land, and labor have all gone up. Between the labor shortage, land shortages in places, and challenges in lending due to the cost of money today – all these things push our home prices up and make it harder for regular families to afford housing.
So, when you hear talk of tariffs, just understand that they ultimately will end up on the final price tag of any house that uses the product that has its cost increased by the tariff.
For now, yes, I'm concerned about steel and aluminum, but I am not nearly as worried about those materials as I am when I hear anything to do with tariffs and increases to the cost of lumber. We can take a breather for the moment, since these tariffs are paused for the time being, but I will be watching this issue very closely.
 By Denise Lones CSP, CMP, M.I.R.M. |
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