Trump Tariffs, Rising Mortgage Rates, Threaten New Home Affordability

The current flap concerning the negative impact President Trump’s threatened steel import tariffs will have on commercial, industrial and infrastructure construction is unfortunately obscuring the body blow the Trump administration dealt to new home affordability last November. Trump’s 21% import tariff on Canadian softwood lumber, in combination with supply shortages caused by Canadian wildfires, has already pushed framing lumber prices up 31%. Since lumber material and labor costs are nearly 1/5 of the price of a new single family home, overall construction cost has risen about $1,500.00 per new house.

Stripping $1,500.00 out of the home builder’s profit line to keep prices affordable represents about a 13% profit reduction for the contractor or developer. Consequently, it seems unlikely builders can absorb the pounding by lumber tariffs much longer. Add the impact of increasing mortgage rates on new home costs, and the notion of the “affordable” new house becomes completely out of reach for young families.