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Mexican Tariffs Would Hurt Housing Affordability/Renovation/Remodel

For home builds and remodeling projects, these tariffs are even forcing contractors to add in escalation clauses for projects that are being scheduled for next year, because they don’t know how high prices are going to rise. Home values have risen in recent years, which has given homeowners the cash to improve their investment by renovating their home through a general contractor.

This estimate spike in prices and potential for more to come has caused homeowners to want their projects done faster, before any escalation clauses can increase their budget. The tariffs are therefore putting pressure on the industry to work quickly and find other means of cutting building costs to remain within budget.

Adding to the tariffs on Canadian lumber, imported steel and aluminum, this new round of tariffs on Chinese goods will include wall material, floorboards, light fixtures, cabinets and countertops, heating and cooling equipment, tile for bathrooms and back splashes, and more. Most mosaic, glass and patterned tile are not made in the U.S., as well as the cost of ceramic, natural stone, glass materials, and more. Industry experts estimate that import duties on these items will go up at least 15 to 20 percent, which will in turn force costs on them all to follow suit.

 While vehicles may cost thousands more with the tariffs on steel, housing costs are harder to pinpoint. What is known is that the combined tariffs on everything from building materials to appliances will increase the overall cost of new homes. The true impact of this tariff won’t be seen until the next wave of home construction begins next year, when builders will be forced to pay for the higher material costs of Canadian lumber for construction jobs that are already contracted.

The steel and aluminum tariffs will affect new home prices if the cost of those materials increases within the U.S. This effect will be more muted, since homes are typically built more with wood than metal. Lumber accounts for one-third of the average cost of building a new home, while steel and aluminum contribute just 0.5 percent to one percent of the home’s total cost.

With the new and existing tariffs, apartment buildings and condos will feel the hurt the most because they require significantly more steel than single-family homes. Unfortunately, these material costs may have to be absorbed by buyers and renters.

Overall, the tariffs aim to strengthen the American economy by forcing construction companies to use American goods rather than foreign imports, however this has also raised the actual cost of building a house. This may cause new home construction to plummet in the coming year and fewer renovation projects like kitchen and bathroom remodels as well, but it remains to be seen.

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