My predictions on how housing will be affected.
President Trump’s proposed tariffs—10% on all foreign goods, up to 20% on imports from Canada, and 60% on goods from China—could profoundly alter the cost of building homes in the U.S., particularly in markets like Colorado. This guide outlines the potential impacts to help Realtors understand the upcoming shifts and better advise their clients.
Broad Impact on Home Prices
- Estimated Increase in New Home Costs:
- Lumber Costs: A 20% tariff on Canadian lumber, which supplies a significant portion of U.S. softwood, could add $8,000–$12,000 to the cost of a new home.
- Steel and Aluminum Tariffs: A 60% tariff on Chinese imports, including steel and aluminum, could increase the price of essential construction materials by 10–15%, adding $6,000–$9,000 to building costs for an average home.
- Fixtures and Finishes: With many interior finishes (e.g., lighting, appliances, and cabinetry) sourced from overseas, a 10–60% tariff could add $4,000–$7,000 to a new home’s price.
Impacts on the Typical Homebuyer and Seller
- Age Range of Buyers and Sellers:
- Buyers: Higher home prices and stagnant wages would delay homeownership for younger buyers, particularly Millennials and Gen Z. The typical first-time buyer’s age may increase from the current 33 years to 36–38 years.
- Sellers: Older generations may delay selling due to rising costs of downsizing or relocating, resulting in fewer homes entering the market.
- Frequency of Moves:
- Rising costs and interest rates will make moving more expensive, prompting homeowners to stay put longer. The average time between moves, currently 8–10 years, could stretch to 12–15 years.
- This reduced turnover could lead to tighter inventory, intensifying competition in already constrained markets like Colorado.
- Loan Qualifications and Lending Standards:
- Lenders may tighten qualification criteria to mitigate risks from higher-priced homes and potential buyer overextension.
- Buyers with strong credit scores and higher down payments will have an advantage, while those relying on low down payment programs may face steeper hurdles.
- Interest Rates vs. Tariffs:
- While tariffs drive up the baseline cost of homes, the effect of interest rates on monthly payments will likely have a more direct impact on affordability.
- For example, a 1% increase in mortgage rates adds $200–$300 to the monthly payment on a median-priced Colorado home, which can significantly outweigh the incremental cost increases from tariffs over time.
How Realtors Can Help Clients Navigate the Shift
- Educating Clients on Total Costs:
- Clearly explain how tariffs impact home prices and how higher mortgage rates will affect monthly payments.
- Use tools to calculate and illustrate how these changes play out over the lifetime of a loan.
- Focusing on Long-Term Investments:
- Emphasize the stability and equity growth of homeownership despite higher initial costs.
- Highlight opportunities for clients to invest in areas or homes with higher long-term appreciation potential.
- Advising on Market Timing:
- Encourage buyers and sellers to act sooner rather than later to avoid escalating costs and interest rates.
- Identify opportunities in underutilized programs, such as down payment assistance or energy-efficient mortgages, to offset rising costs.
- Networking with Lenders:
- Build relationships with lenders who offer innovative programs, flexible terms, or creative financing options that can help clients navigate the tighter lending environment.
- Guiding Sellers:
- Educate sellers on pricing strategies in a market where buyers face higher costs and tighter budgets.
- Help sellers make strategic upgrades that increase home value without over-investing in high-tariff materials.
Conclusion: Adapting to the Market Ahead
If President Trump’s tariffs are enacted, the U.S. housing market will experience a noticeable shift. New homes will become more expensive to build, affecting affordability and pushing up the age of first-time buyers. Higher costs will likely reduce the frequency of moves and tighten inventory further, especially in competitive markets like Colorado.
For Realtors, this presents an opportunity to provide exceptional guidance by educating clients, adapting strategies to market conditions, and connecting them with resources to overcome new challenges. By staying informed and proactive, Realtors can position themselves as trusted advisors in a changing economic landscape.
Author: Kato J. S. Mitchell – Operating Principal; Red Zebra Holdings, Westminster Asset Holdings, Operating Principal; Keller Williams Preferred Realty, LLC, & Lead Broker; The Mitchell Team @ Keller Williams Preferred Realty, LLC
Kato turned his top real estate sales team into a real estate empire. He has heavily invested in real estate in the Denver Metro Market and is Operating Principal of the largest real estate office north of I-70 in Colorado (Keller Williams Preferred Realty, LLC) Kato’s real estate team “The Mitchell Team @ Keller Williams” remains a strong competitor in the Denver Market where they specialize in complex distressed properties (divorces, foreclosures, REO, and probate/estate sales) as well as investment properties. “We help people manage wealth through real estate. Our first goal with clients is to increase their net worth past one million dollars quickly”, states Mitchell. Kato serves as a multi-year member of the Colorado Real Estate Commission’s Forms Committee assisting in the drafting of the contracts used by all Colorado Real Estate Agents. He was awarded the Dudley Award in 2004 for his national speaking tour. Kato was also awarded the Denver Business Journal’s “40 Under 40” in 2006. His real estate team: The Mitchell Team has been awarded the “5280 Magazine “Five Star Award for Excellence Winner” ten Years in a Row (2012 – 2021) for “Outstanding Customer Service” and Superior Quality as voted by their clients!” They are one of three companies in the state to receive that award more than six times. Most importantly, he is a husband & a father to three amazing children.
Leave a Reply