On September 24, 2024, new houses in Englewood Cliffs, New Jersey, will be built.
Adam Jeffery | CNBC
From wood to drywall to devices to finishing, a large part of what goes into a US house comes from outside the American borders.
The costs for these products are shortly before the slope, since the government of President Donald Trump imposes tariffs in China, Mexico and Canada. Goods from China are now subject to a tax of 20%, an increase in the previous 10% tax taxes and those from Canada and Mexico are exposed to a tax of 25%. The Canadian wood was already exposed to separate tasks of 14.5%.
The new tariffs could increase the construction costs between 7,500 and 10,000 US dollars per house, said Rob Dietz, chief economist at the National Association of Home Builders, and referring to US householders' estimates. Last year, the Nahb estimated that every increase in the average price of $ 1,000 from new real estate prices assumes around 106,000 potential buyers.
The biggest effects on the own home builders will take place by wooden cost increases, which, according to the leading Builders of America, the commercial group, which represents most of the country's publicly traded residential builders, are expected to be an average of $ 4,900 per house.
About a third of the wood used in US residential construction comes from Canada, and domestic wood producers are expected to increase their prices to meet the imported offer.
“Since Trump imposed the tariffs for the first time on February 1st, which were then delayed, we have recorded an increase in buying with prices for West-Ficht-KKK-Zwe-Zwe-Mal-four-pear rising of 13%,” said Paul Jannke, director of forest business advisors. “With the resumption of the 25% tariff for Canadian goods that are delivered to the USA, we expect Canadian manufacturers to stop sending wood to the USA. In the meantime, retailers who have hesitated must increase the uncertainties regarding tariffs, increase the purchases before the upcoming construction period. This will increase the prices higher.”
The wooden futures rose by 5% last week and rose steadily on Tuesday.
Trump issued an order of the executive on Saturday in order to increase domestic wood production by tightening regulatory and permissible processes. The HomeBuilding industry took this as a victory.
“A stable and affordable timberfall is of crucial importance for our industry to tackle the crisis of the country's range of housing,” wrote Ken Gear, CEO of the LBA, in a statement. “The domestic wood industry cannot satisfy the current demand. Therefore, we welcome President Trump to research opportunities to increase the domestic range as a long -term solution.”
The Nahb, which represents small to medium -sized private builders, “welcomed” the move, but said in a statement: “All additional tariffs on wood could further increase the construction costs and discourage new development, and consumers ultimately pay the tariffs in the form of higher real estate prices.”
What the domestic production increases immediately is easier said than done. Jannke estimates that it would take up to three years to build several new mills. He explained that there is a limited number of companies that produce Sawmill machines, and even less, perhaps one or two who can build a mill from top to bottom.
The wood producers had a high demand in the first years of Covid 19 pandemic, when the Hausbauer Gangbuster went to expand.
“However, so many people wanted to build [or] Expanded Mills that the lead times of device manufacturers pulled to two years, said Jannke. These mills are located in rural areas where the qualified workers are not needed to operate a modern sawmill. This added another year in front of the mill with full capacity. “
The employment population from registration to transport is already slim and decreased. It is one thing to open new country and to deregap the industry in the industry, but to find the workers who bring wood to the market is different.
“In the short term it will be very volatile,” said Kyle Little, Chief Operating Officer in Melville, New York, Sherwood Lumber. As for increasing production, “this is” this is not an influence of a switch. You take a 40-year-old supply chain and try to change overnight that is difficult. “
Homebuying landscape
Beyond wood, the homebuilding industry is subject to rising costs in the entire sector.
China is the market leader in household appliances. And the majority of the dry wall or plaster, which are used in the commercial and residential building, are imported from other countries. In 2023, according to the OEC World, a merchant data platform, the USA imported 215 million US dollars in plaster and became the largest importer in the world's product. It comes primarily from Spain, Mexico and Canada.
“Increasing costs due to tariffs for imports will only give the builders a few options. You can decide to hand over higher costs to consumers, which mean higher property prices or try to use less of these materials, which means smaller houses,” said Danielle Hale, chief economist at Realtor.com.
Hale found that the new building has the biggest effects, but the tariffs will change the landscape of the real estate market as a whole, including existing houses.
“We may see the willingness of the buyers to pay for existing houses if newly built houses are becoming more expensive, which would also mean increasing prices for existing houses. We can also see a lower appetite for important conversion projects that would affect these tariffs, and the ability of consumers to meet their houses in order to meet their current needs.
While the costs for the construction of the home will certainly increase, the Trump management has been advertising with lower mortgage interest in the past few weeks. According to Mortgage News Daily, the average interest rate for the 30-year-old was 7.26% on 13. January. It has now dropped to about 6.64%.
“I think one of the biggest victories for the American people has been since the election day, and the mortgage lenses have dropped dramatically since the inauguration,” said finance Minister Scott Bessent in Fox News on Tuesday.
Bessent found the distributed between the 10-year-old and the mortgage interest, although this spread has actually been significantly expanded since Trump took office.
The tariffs come at a time when the US apartment market is already under pressure. According to the National Association of Realors, the signed contracts for existing houses went to the lowest level in January. The turnover of newly built houses fell by 10%in January after December, according to the US people counting. And the prices are still stubborn, although the existence of houses for sale is still historically low.