When news about trade tariffs hits the headlines, conversations about inflation and market uncertainty aren’t far behind. For the housing market, tariffs can play a significant but often misunderstood role in shaping construction costs, home prices, and even mortgage rates.

As a real estate professional, understanding these connections helps you provide clarity and reassurance to clients who may be confused by conflicting reports.

What Are Tariffs—and Who Really Pays for Them?

Tariffs are taxes on imported goods, designed to raise the price of foreign products and give domestic manufacturers a competitive edge. While they are imposed on imports, the cost is typically passed along through the supply chain, ultimately reaching the consumer.

For example, if tariffs are placed on imported steel or lumber, builders and manufacturers must pay more for those materials. Those increased costs then flow into the price of homes, cars, and other goods that rely on imported components.

The Ripple Effect on Housing

Tariffs can affect nearly every corner of the housing market, from construction to financing:

• New construction costs rise. Lumber, metals, and appliances all become more expensive when tariffs are in play, pushing builders to raise new home prices to offset their costs.
  
• Homeowners’ insurance may increase. As rebuilding costs climb, insurance premiums often rise to reflect the higher potential replacement value of homes.
  
• Buyers get priced out. Higher new construction prices can make affordability even more challenging, particularly for first-time homebuyers.
  
• Pre-owned home demand grows. When new builds become too costly, demand often shifts toward existing homes—driving up resale prices.
  
• Rental markets tighten. Buyers who delay purchases may turn to renting, increasing rental demand and pushing lease prices higher.
  

These push-and-pull dynamics create instability in pricing and demand, making the market more volatile until conditions stabilize.

Financing and Interest Rate Impacts

Tariffs can also affect the broader economy, especially when they raise costs and inflation. If inflation picks up, the Federal Reserve may choose to maintain or increase interest rates to keep prices in check.

Higher mortgage rates, in turn, reduce buyer purchasing power and cool demand. Eventually, as demand slows, the Fed may lower rates again to achieve what economists call a “soft landing,” balancing inflation control with continued economic growth.

How Agents Can Guide Clients Through Market Fluctuations

Tariffs and other global trade decisions are far beyond any buyer’s or seller’s control, but agents can help clients make wise, timely choices within current conditions. Here’s how:

1. Educate and reassure. Help clients understand that short-term price shifts are part of regular market cycles.
   
2. Stay local. Monitor construction activity, inventory levels, and comparable sales in your specific markets to provide context that national headlines can’t.
   
3. Encourage preparation. Advise buyers to secure mortgage preapproval early and sellers to stay ready for opportunities that may arise as market dynamics change.
   
4. Partner with trusted lenders. Strong relationships with lenders and mortgage professionals, such as Encompass Lending Group, can help your clients stay informed about changing rates and financing options.
   

In any environment, buyers and sellers benefit from having a knowledgeable, proactive agent who can help them navigate uncertainty with confidence.

Stay Ahead of Market Trends with Fathom Realty

At Fathom Realty, we believe knowledge is power and preparation is everything. Our agents are equipped with the latest data, tools, and insights to help clients make informed decisions in any market condition.

If you’re ready to grow your business with a brokerage that invests in your success and keeps you at the forefront of market intelligence, join Fathom Realty today. 

Learn more at fathomcareers.com