President Donald Trump announced Monday that 25% tariffs on imports from Canada and Mexico are “on schedule” after being put on hold for a month on Feb. 3. Trump said the administration is moving “very rapidly” to implement the tariffs, according to news reports.
The initial announcement on Feb. 1 called for a 25% tax on all imports from the two countries, with a reduced 10% rate on Canadian energy imports. This would be unwelcome news for the housing industry.
Should the administration reinstate the tariffs in March, the cost of building homes, particularly badly needed starter homes, could increase substantially, CoreLogic analysts Pete Carrol and Jay Thies said during a recently published podcast.
CoreLogic is estimating that tariffs would initially add around 5% to the cost of a home. A home costs on average around $400,000 to build, so the added tariffs on lumber and other building materials would increase the costs in the range of $17,000-$22,000. Homes in high-cost areas could see a substantial increase.
“It is hard to see tariffs as anything but a negative on affordability,” said Carroll, who is executive vice president of public policy and industry relations.
Eventually, the costs could come down as lumber mills and other supply chains ramp up domestic production; however, that could take several months, the analysts said.
The extra costs would have a greater impact on smaller homes of the type where there’s the greatest need, said Thies, CoreLogic’s vice president of price analysis and delivery.
“It’ll unfortunately have more of an impact on a smaller square footage type home than a larger square footage type home when you look at the parts and components that are required to build that structure,” he said.
CoreLogic estimates that the U.S. has a shortage of 4.4 million homes and rental units. Of that, the country needs roughly 1.3 million single-family homes affordable to lower- and moderate-income residents.
“It is very hard for builders to construct these homes at an attainable price point and still make a profit,” Carroll said. “Even marginal increases in labor, materials and equipment, it just makes it that much more difficult to build these homes profitably.”
Carroll pointed out policies that could lessen the impact of tariffs, however. He said if the federal government began to sell off Bureau of Land Management property near cities, the move could create affordable development space for homes and lower overall costs. Also, he noted, states and localities can encourage more density.
