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New tariffs could raise home prices and sideline potential buyers

The U.S. housing market was already struggling under the weight of high mortgage interest rates, a low supply of existing homes for sale and historically high home prices.

Now tariffs on building materials are adding even more pressure.

Roughly 30% of softwood lumber consumed in the U.S. is imported, largely from Canada. Wallboard, known as gypsum, is imported from Mexico. The 25% tariff President Donald Trump levied on goods from the two key trading partners will make those products that much more expensive. The Mexico tariffs were postponed for a month Monday, but they are still on the table in the future.

"More than 70% of the imports of two essential materials that home builders rely on — softwood lumber and gypsum — come from Canada and Mexico, respectively," wrote Carl Harris, chairman of the National Association of Home Builders in a release. "Tariffs on lumber and other building materials increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices."

Home prices are already up well over 40% since the start of the pandemic and were still 3.8% higher in November, compared with the previous November, according to the latest read from the S&P Corelogic Case-Shiller national home price index. That annual increase was higher than the 3.6% in October.

Duties on building materials could make the market even harder for buyers.

"We believe this could make worse the affordability crisis for first-time buyers. On the plus side, it could increase pressure on Congress to enact policies that encourage more entry-level construction including expanded tax credit programs," wrote Jaret Seiberg, housing policy analyst for TD Cowen Washington Research

Read more on cnbc.com
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