Plans for record-setting tariffs retain some breaks for lumber and have lowered mortgage rates, but they’ve increased uncertainty about the housing market’s future and hurt homebuilders’ shares.
While President Trump’s base 10% tariff with additional duties for many countries does protect some home materials like steel, aluminum, copper and softwood lumber, there could be more changes in the future and some countries are taking countermeasures.
Builders’ shares lost as much as 5 to 10% of their value on the day by late morning, according to a Seeking Alpha report, which also noted that trade investigations into lumber and copper could mean they face other duties later.
Mortgage-related stocks were mixed.
Mortgage insurers with credit sensitivities and some companies with commercial exposures like title firms were weaker, while originators showed stronger performance based on the immediate rate outlook, said Bose George, managing director, Keefe, Bruyette & Woods.
“Some of those names are holding up reasonably well, but it’s varied,” he said.
The implications for rates
What the tariffs mean for the housing finance market in the short-term is uncertainty. While that is a challenge, it also has an upside, said Melissa Cohn, regional vice president at William Raveis Mortgage.
“The biggest problem a homebuyer will have today is really understanding what the future is going to hold,” she said. “We don’t know how long these tariffs will last for. They were only announced yesterday, and they actually haven’t gone into effect yet.”
When the crystal ball is hazy, investors tend to get risk averse and buy bonds conservatively in ways that lower interest rates.
“For right now, mortgage bonds, the flight to safety and the 10-year Treasury are the beneficiaries of a really depressed stock market,” said Barry Habib, founder and CEO, Highway.ai, in a daily update.
Consumers have cited low rates, not tariffs, as being the main consideration in the borrowing activity Cohn’s seen recently, but she cautions both consumers and mortgage professionals not to necessarily think they’re going to last.
“Tariffs could be inflationary long term, and that would push rates back up again,” Cohn warned.
While financing costs have initially fallen and could be inflationary long term, what happens in between and at the road remains to be seen.
“There are a few forces pushing mortgage rates in different directions,” said Chen Zhao, head of economics at real-estate brokerage Redfin, in a report on the implications of recent tariffs.
“Mortgage rates fell following the announcement and will remain volatile as more details emerge and negotiations take place ahead of April 9, when the tariffs will go into effect,” she predicted.
Although rates have been lower on a net basis, there’s been quite a bit of variation in what different mortgage companies have been offering consumers, Cohn said.
“Some are going to be concerned about the volatility in the economy and the tariffs, and others are thinking it’s the beginning of the spring selling season and they need to fill their quotas for the year, so they’re going to be more aggressive,” she said.
Lender competition has been particularly intense in the nonqualified mortgage market for borrowers who can’t qualify for lower-cost more traditional home loans because they need to do things like prove income with bank statements, Cohn said.
Whether the current low rates mean now is a good time to buy for consumers depends on how well equipped they are to handle current rate, home price or economic uncertainties, she said.
“If you have financial security, don’t have to take money out of the stock market for a down payment, have savings and find a house that you love, now is a good time to buy because you’ll be able to take advantage of lower interest rates in the near term,” said Cohn.
Building material conditions vary
As the slump in the builder stocks suggests, there’s also the consideration that waiting could be a risk if higher cost of materials boosts home prices, but there’s also the possibility the tariffs could be effective or not as tough on materials as expected.
The impact on materials and supply is nuanced, said Selma Hepp, chief economist at Cotality, noting that lumber price issues have been a long-running concern. U.S. production has improved over time, and the supply-demand mix has shifted, she also said.
“There’s been a persistent push towards more domestic supply of lumber,” she said. “To me, what seems to be the biggest one is the cost of appliances, especially with homes being more computerized. That’s the biggest component we’re worried about.”
Roofs, which rely on oil as a key material, could become more favorably priced from a push to develop more domestic production in this area, Hepp said.
While there’s been talk about the commercial market being exposed to tariffs due to increased use of steel and aluminum there, there’s also been a slowdown in demand in sectors like multifamily.
“What I heard from some of the commercial real estate economists is that construction has been pulled back,” she said.
Canada provides around one-third of U.S. lumber, and Chile is the larger provider of copper to the United States, according to Seeking Alpha. China and Mexico are two other countries that play a key role in materials used for building and home goods in the U.S.
