Two big issues that President Trump campaigned on have the potential to create a massive impact on the housing market: tariffs and mass deportations. Many experts believe these two policies will lead to higher home prices, exacerbating today’s already-tough homebuying market. The conversation around these proposals is constantly shifting, so let’s break down the possibilities of what tariffs and mass deportations could mean for home values and housing overall.
How could tariffs affect the housing market?
Trump has proposed many different tariff scenarios from his time as a candidate through until now, including a 10 percent universal tariff and varying tariffs on goods from specific countries. The scenarios are constantly changing, with new tariffs being imposed on Canada, Mexico and China — and sometimes then being altered almost immediately (as was the case with a 25 percent tariff on Mexico).
A tariff on Canada isn’t a fee paid by the Canadian government, but rather, a tax paid by a company for bringing a Canadian product into the U.S. That additional cost is often passed on to the consumer.
What exactly is a tariff? “Tariffs are taxes collected by the federal government on companies importing goods,” says Mark Hamrick, senior economic analyst at Bankrate. That means a tariff on Canada isn’t a fee paid by the Canadian government, but rather, a tax paid by a company for bringing a Canadian product into the United States.
And how exactly does that affect housing? For starters, think of homebuilding. Much of the lumber used to build new homes in the U.S. comes from, you guessed it, Canada. So, if there’s a 25 percent tariff on imported goods from Canada and an American homebuilding company wants to buy $200,000 of Canadian lumber, they’ll need to pay an additional $50,000 to import that lumber. They can then choose to pass some — or all — of that additional cost on to the consumer, says Hamrick, causing home prices to jump.
Construction materials
“Any tariffs implemented on construction materials, especially if they are difficult to substitute away from by importing from other countries, would likely have an inflationary effect, making building and renovating homes more expensive,” says Chen Zhao, senior manager of economics at Redfin.
The National Association of Home Builders (NAHB) offered specifics in a February 1 statement: “More than 70 percent of the imports of two essential materials that home builders rely on — softwood lumber and gypsum (used for drywall) — come from Canada and Mexico, respectively,” said NAHB chairman Carl Harris. “Tariffs on lumber and other building materials increase the cost of construction and discourage new development, and consumers end up paying for the tariffs in the form of higher home prices.”
Another portion of the tariff game to consider is the potential response from other countries. For instance, if the U.S. levies a tariff on goods imported from Mexico, Mexico could do the same to goods imported from the United States — and in fact has already vowed to do so — further complicating an already uncertain situation.
Mortgage rates
Along with higher new-construction home prices and renovation costs, tariffs could constrain affordability even more by resulting in higher mortgage rates. “As [tariffs] lead to higher prices and higher inflation, that could affect both short-term interest rates, like those set by the Federal Reserve, and long-term rates, which are related to mortgage rates,” says Hamrick.
How could deportations affect the housing market?
Along with tariffs, the issue of mass deportation could have an outsize impact on housing. But when and how remain uncertain.
“While immigration reform certainly seems like a high priority for President Trump, we still don’t know what this will look like,” says Zhao. “He did take multiple actions on day one to slow migration across the U.S. border, but more extreme deportation scenarios haven’t been implemented yet.”
If Trump’s administration implements the level of mass deportations he campaigned on, it is likely to have a very damaging effect on the housing market — not to mention the economy as a whole.
“Any restrictions that slow migration or deport immigrants is likely to result in higher construction costs, since immigrants make up roughly 30 percent of the construction labor force,” Zhao says. “This would in turn further strain housing supply and push up prices.”
The NAHB projects that America will need about 2.2 million new skilled construction workers in the next three years to overcome the current housing deficit.
“Deportations could negatively affect the supply of labor, including for the construction industry,” says Hamrick. After all, “immigrants also work, consume and pay taxes, contributing to economic growth. If they are lessened or no longer present in the U.S., that diminishes economic activity.”
What could the government do to offset rising prices?
We’ve seen how these policies could negatively impact the housing market, causing prices to rise. But is there anything the federal government could do to try to mitigate these rising home prices?
According to Hamrick, one way the government could address supply issues and high housing costs is to invest in building and renovating affordable housing. Another way would be to provide tax incentives and subsidies to homebuyers.
“The administration could provide targeted subsidies or tax credits for first-time homebuyers, as well as low-income families, aiming to make housing more affordable,” says Hamrick. “Some paths could include tax breaks for home purchases and down payment assistance.”
Of note: Providing incentives to purchase homes could result in even higher demand, straining an already low supply of housing. That’s where another aspect of the administration’s policies could have an impact: deregulation.
On day one of his presidency, Trump signed an executive order to lower housing costs, citing regulatory costs as a prime factor. “President Trump understands that America is facing a housing affordability crisis, and the only way out of this crisis is to remove barriers like unnecessary and costly regulations that are raising housing costs and preventing builders from building more attainable, affordable housing,” the NAHB’s Harris said in a statement.
However, some of the regulations that could be dismantled include those by the Environmental Protection Agency (EPA), which could have a much larger economic and public-health impact.
In the end, while much ink has been spilled on what could happen due to the new administration’s policies, what actually will happen is still fluid. “Questions involving tariffs and deportations and their specific impacts are difficult to answer because we know very little about the specifics,” says Hamrick. “In other words, we don’t know exactly how this is going to work out.”
Homebuying tips for uncertain times
There are a few smart moves homebuyers can make regardless of the political or economic climate, even when prices are high and the future is uncertain. If you are looking to buy a home despite the times, here are a few basic tips to follow:
- Shop around for the best rate: Different mortgage lenders can offer very different rates, and comparison shopping to make sure you get the best deal you can is crucial. A lower rate can save you thousands over the course of your loan.
- Check your credit score: The higher your credit score, the lower the rate you’re likely to be eligible for. If yours is on the low side, consider taking some time to pay down your bills and build up your score before you begin your house hunt.
- Rethink your desired location: Real estate is a very local game, and housing prices can vary widely from one town to the next, or even one neighborhood to the next. Consider expanding your geographic boundaries a bit to see if you can get a better deal just outside your ideal location, rather than right in the heart of it.
- Consider a condo: Single-family homes — freestanding houses on their own lots of land — typically cost more than a condo or townhome. Often quite a bit more: According to data from Redfin, the median price of a single-family home in December 2024 was $443,370, while for a townhouse it was just $377,611, and condos and co-ops were even lower at $366,100. This option gets you on the homeownership ladder for much less money, and you’re still building equity just as you would with a freestanding house.
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