The housing market has been reaching new heights in the past few years, but have shown positive signs of potentially coming down as of late. The housing market has a significant impact on the economy and can even cause recessions, as we witnessed in 2007. With the new administration in the United States, a large topic of discussion are tariffs, but their impact on the housing market is quite large.
According to the National Association of Home Builders, the cost of material needed to build a new home could increase by as much as $10,000. The majority of material, such as softwood lumber and gypsum, are imported from Canada and Mexico. This also affected the Homebuilders S&P Series Trust, as it has dropped 22% since late November as investors are very uncertain about the future. Tariffs can also increase the price of domestic products, so ultimately costs will rise regardless.
I believe this is something that may get overlooked when talking about tariffs. Many talk about the goods imported from countries like China, but the amount of products imported from other North American countries is significant. Just when we thought housing prices could potentially fall, we've encountered a new problem, one that could be preventable. It’ll be very interesting to keep an eye on the housing market and see if it leads to another recession, such as the recession in 2007.
3 comments:
Material costs and international trade can have a significant effect on tariffs. The housing market is a powerful indicator of economic health, and it is crucial to understand all the factors that influence it, including tariffs. Tariffs often get a lot of attention in the context of goods imported from countries like China. Still, the role of Canada and Mexico in supplying building materials is an important aspect that is often overlooked. Softwood lumber and gypsum are vital for home construction, and increasing the costs of these materials could push builders to raise prices, which could increase the overall cost of housing. If construction becomes more expensive, the demand for new homes could drop. If demand for new homes drops, investors must be wary of the future impact of tariffs. For example, that uncertainty is a genuine concern for the housing industry. Even if some materials are sourced locally, price hikes from international trade restrictions could still spill over into the broader economy, causing inflation in construction costs. Overall, there is always a delicate balance between protecting domestic industries and ensuring economic growth in key sectors like housing.
A lot of sectors will be impacted in the same way. These countries specifically Canada also announced tariffs on US goods as well. I wonder how this will impact their economy .
Tariffs can definitely add unexpected costs to the construction of new homes. It is also important to take into consideration the effects it can have on the broader housing market. Hopefully there was a lesson learned from 2007 and we can avoid another recession.
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