How Trump's Tariffs Will Affect The Housing Market In 2025

While he was campaigning, candidate Donald Trump talked about using tariffs as a means to increase American manufacturing. The idea was to help bring back U.S.-based jobs. The incoming president has suggested that these tariffs could reach as high as 60% on Chinese imports, and they might range from 10% to 20% on other countries' imports as reiterated in a recent interview with NBC's Kristen Welker.

One important economic aspect surrounding these tariffs centers on their potential impact on the housing market in 2025. It is important to remember that the specific details of such potential tariffs have not been determined. Questions abound on what types of goods and which countries might be exempt. The good news for the upcoming year's outlook on housing is that the overwhelming majority of such sourced building materials are not imported. Instead, housing market experts suggest that interest rates and bottlenecks in existing supply chains are the real threats to the market worth watching.

It's a significant misunderstanding of the home building market to assume that most building materials come from overseas. Not even 10 percent of residential construction building materials are imported, per the National Association of Home Builders as reported by Realtor.com. The majority of the relatively few imports come from Canada in the form of timber. Finishes and fixtures get sourced from various other countries. The biggest potential tariff expense impacting home builders would come from enacting such a cost on Canadian lumber. Market observers remain skeptical that the President-elect would really enact the tariff on close ally Canada's raw materials. Prime Minister Justin Trudeau has already flown to see Trump for a sit down meeting to start working through the issues.

The Canadian prime minister became the first G7 national leader to visit with Trump following the election. After the dinner the two leaders enjoyed at the Mar-a-lago club in Palm Beach, Trudeau declared Saturday that he enjoyed an "excellent conversation" with the incoming President, per Newsweek Magazine. President-elect Trump stated that the meeting was "productive."

Housing market experts are skeptical that such threatened tariffs will have a lasting impact on even these raw materials. Chief Economist Lawrence Yun of the National Association of Realtors conceded that even potential lumber tariffs might be given a phasing in period that would encourage American timber mills to fill in the production gap. It is also helpful that the inflation outlook has subsided.

The real threat to the housing market in 2025 comes not from potential tariffs, but instead from high interest rates and lingering bottlenecks in supply chains, according to President Stephen Haines of Artisan Built Communities per the article on Realtor.com.

Haines explains that interest rate changes act as a dual threat. They increase home buyers' monthly mortgage expenses at the same time as they cause financing costs for the builders to rise. The greatest fuel for cost increases to building supplies has come as a result of supply choke points, along with holdups in delivering finished products, he argued.

It is also important to remember that doors, windows, and cabinets that builders like Artisan Built Communities utilize are typically produced within the United States. As a result, builders like him will not be significantly impacted by potential tariffs. Haines echoed these sentiments with his remark that "there's way bigger problems." For many people, these issues might include paying off your mortgage.