Tariffs, Mortgage Rates, And High Housing Costs Have Caused Builders To Change Strategy On New Home Construction

Tariffs, elevated mortgage rates, and the cost of maintaining a home amid soaring insurance and energy costs have caused pessimism amongst the home builders tasked with adding housing inventory.

The information comes from the National Association of Home Builders NAHB/Wells Fargo Housing Market Index, which tracks builders’ confidence in single-family homes based on a monthly survey. February marked the lowest confidence level in five months.

Tariffs

According to NAHB, 7% of all goods used in new residential construction originate from a foreign nation. “With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs,” NAHB Chief Economist Robert Dietz said on its website.

Don't Miss:

• CEO of Integris gathered a team of senior investment managers who have $34.22 billion in combined owned and managed assets in the West Coast — here’s how to invest in their private credit fund that targets 12% annual interest rate.
• Coinbase’s latest promo gets you up to $200 in crypto (Seriously!) — Here's everything you need to know to take advantage of this offer.

NAHB Chairman Carl Harris sent a letter to President Donald Trump urging him to exempt “critical construction materials” from his tariff policies.

“Imposing additional tariffs on these imports will lead to higher material costs, which will ultimately be passed on to home buyers in the form of increased housing prices,” he said in the letter dated Jan. 31.

CoreLogic, a real-estate data company, estimates that the higher costs of building materials could add between $17,000 and $22,000 to the cost of building an averagely priced newly constructed home, which is currently about $422,000.

Trending: Unlock the hidden potential of commercial real estate — This platform allows individuals to invest in commercial real estate offering a 12% target yield with a bonus 1% return boost today!

Interest Rates

Lower interest rates could have made the Trump tariffs easier to digest. However, despite optimism last year for a series of interest rate cuts, stubborn inflation has caused the Fed to keep rates where they are, which is currently just below 7%, too high to move the needle on home buying. 

“It will take people longer to buy homes as they wrestle with affordability,” Holden Lewis, home and mortgage expert at NerdWallet told MarketWatch. “As homes linger on the market, the inventory of for-sale homes will keep rising. This increase in supply will diminish upward pressure on prices. Home prices will rise this spring, but not as swiftly as they rose in the past.”

See Also: Commercial real estate has historically outperformed the stock market, and this platform allows individuals to invest in commercial real estate with as little as $5,000 offering a 12% target yield with a bonus 1% return boost today!

Insurance

Compounding the effect of tariffs and interest rates is the soaring cost of homeowners insurance, particularly in disaster-prone states, as most recently seen with the LA wildfires. According to figures released by the US Treasury Department for 2018-2022, insurance premiums have risen sharply across the country, with people living in the greatest climate-driven risks experiencing the steepest rises. Those in the top 20% of riskiest places for such perils paid, on average, 82% more than those in the 20% lowest climate risk zip codes. 

This year, Bankrate showed that the national average cost of home insurance is $2,258 per year for a policy with a $300,000 dwelling limit. —amounting to about $188 per month, a marked increase on the preceding two years.

The Wall Street Journal calculated that insurance and taxes make up more than half of the monthly mortgage payment for 9% of single-family mortgages, up from less than 4% at the end of 2014. Adding tariffs and increased construction and home prices to the mix makes homeownership more difficult than ever for many Americans.

Wondering if your investments can get you to a $5,000,000 nest egg? Speak to a financial advisor today. SmartAsset’s free tool matches you up with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.

Looking For Higher-Yield Opportunities In A Shifting Market?

The changing interest rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For instance, the Ascent Income Fund from EquityMultiple targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-focused investors. First-time investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000. Benzinga Readers: Earn a 1% return boost on your first EquityMultiple investment when you sign up here (accredited investors only).

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings.