Key takeaways
- Tariffs are taxes on imported goods to make foreign products more expensive and encourage people to buy locally.
- The new tariffs begin at 10% on all imports, with additional rates applied to specific countries and construction materials, including steel and lumber.
- As construction costs rise due to tariffs, home prices could go up, and mortgage rates may follow.
- Real estate agents need to keep clients informed about tariff changes, help them plan for rising costs, and guide them on when to lock in rates or explore financing options.
On April 2, President Donald Trump announced a broad set of tariffs1, including a 10% baseline tariff on all imports and additional tariffs on specific countries. This move sent shockwaves through the housing market, raising questions about what comes next.
With tariffs targeting imported materials such as steel and lumber, builders are facing rising costs, which are quickly passed on to buyers in the form of higher home prices. At the same time, inflation resulting from these tariffs could drive mortgage rates higher, making homeownership even less affordable for many.
For homebuyers, investors, and real estate professionals, the stakes are high. As tariffs continue to shape the market, understanding the impact on mortgage rates and housing affordability is crucial, now more than ever. In this article, I’ll break down how these tariff-driven changes are affecting home prices and mortgage rates and what you can do to navigate these shifting conditions.
What are tariffs, and why do they matter?
Governments impose tariffs, which are taxes on imported goods, to make foreign products more expensive and give local businesses a competitive advantage. The intention is to encourage consumers to buy domestic products instead of cheaper imported alternatives.
But here’s the catch: this price increase can have a ripple effect that reaches beyond the retailer and into your wallet, especially when it comes to homebuilding materials. For homebuyers and investors, this means paying more for construction costs and essential materials, such as steel, lumber, and even appliances.
As these costs rise, so do the prices of new homes, making it harder for potential buyers to afford their dream home. Even investors can feel the pinch, as higher construction expenses can reduce potential profits on new developments or real estate flips.
How tariffs could affect mortgage rates
Tariffs can impact mortgage rates in various ways, presenting both opportunities and challenges for homebuyers and investors.
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Implications of tariffs — and what it means for agents and brokers
The impact of the tariffs on the housing sector has been multifaceted. While some mortgage rates initially dipped following Trump’s announcement, the overall uncertainty has caused homebuyers and investors to be more cautious. This hesitation has slowed home sales and led to a more reserved approach in the market.
Key implications for homebuyers and investors
- Fewer affordable options for homebuyers: As construction costs rise, builders are raising home prices to cover the higher costs. According to the March 2025 National Association of Home Builders/Wells Fargo Housing Market Index, builders estimate that the recent tariff changes could increase the price of a new home by an average of $9,2002. This could lead to fewer options for buyers.
- Delayed purchases: As the cost of living increases, many homebuyers may delay purchasing, which can contribute to market stagnation and reduced inventory.
- Impact on new homes: For investors, the effects of tariffs extend beyond construction costs. While higher material prices strain new developments, there’s also the risk of delayed projects, as builders may struggle to secure affordable supplies.
- Global supply chain disruptions: If tariffs disrupt global supply chains, the cost of goods could rise, impacting everything from property maintenance to tenant amenities. This broader economic shift could make it more challenging for investors to maintain consistent cash flow and achieve long-term returns.
What do these implications mean for agents and brokers?
The impacts of tariffs are creating both challenges and opportunities for agents and brokers. Here’s how these changes affect real estate professionals and what they can do to help their clients:
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Navigating market hesitation:
With homebuyers and investors adopting a more cautious approach, real estate agents should prioritize building trust and offering clear guidance.
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Advising on housing affordability:
Agents can help clients understand how to navigate affordability challenges best. For example, highlighting government programs for first-time homebuyers or directing investor clients to regions with lower exposure to tariff impacts can be valuable.
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Guiding investors on project delays and costs:
Investors should be informed about potential delays in new construction and higher operating costs.
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Assisting clients with long-term planning:
Agents can provide clients with long-term strategies for buying, selling, or investing in real estate. This includes securing fixed-rate mortgages to shield against rising interest rates or helping clients lock in deals before prices increase further.
How homebuyers and investors can navigate the challenges of tariffs in the housing market
As tariffs continue to rise and potentially extend through 2026 and beyond, the housing market could face more pressure, especially with higher construction costs and mortgage rates. Here are some strategies to minimize the impact of tariffs on your homebuying and investing plans:
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Lock in mortgage rates early:
With potential interest rate hikes due to inflation, securing a fixed-rate mortgage can save you money should tariffs persist long-term.
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Consider alternative construction materials:
To keep construction costs down, use domestically sourced materials that are not subject to tariffs or import duties.
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Diversify investment locations:
Look into cities or regions less affected by tariff-induced price increases to find more affordable opportunities.
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Stay informed on policy changes:
Monitor trade policies and tariffs to anticipate market shifts and adjust your strategies accordingly.
Frequently asked questions (FAQs)
How will tariffs affect interest rates?
Tariffs can increase prices, potentially leading to inflation. If inflation rises, the Federal Reserve may raise interest rates to control it, which could also lead to higher mortgage rates.
What happens to a mortgage when interest rates rise?
When interest rates rise, your monthly mortgage payments also increase. This means it’ll cost more to borrow money, making homebuying more expensive for new buyers and raising costs for anyone with an adjustable-rate mortgage.
Who increases mortgage rates?
Mortgage rates are influenced by the Federal Reserve, which sets benchmark interest rates to control inflation and economic growth. While they don’t set the rates directly, the Fed raises or lowers interest rates to control the economy, impacting the rates banks offer on mortgages.
Your take
Tariffs are reshaping the housing market in ways that can affect everyone, from first-time homebuyers to seasoned investors. Staying up-to-date and adaptable is essential for successfully navigating these changes. How are you adjusting your strategies in light of these recent tariff developments? Let us know in the comments!
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