W
hen tariffs are mentioned, many think of global trade disputes and distant policy debates. However, their effects hit close to home, particularly when it comes to the cost of building or improving residential property. Tariffs on construction materials have been imposed in the past, but what's different now is the sheer scale and unpredictability.

    The National Association of Home Builders estimates that 10% of materials used in homebuilding are imported, with nearly 75% of lumber coming from Canada and a similar percentage of drywall components coming from Mexico. When these materials are hit with tariffs, builders face significant cost pressures. The NAHB estimates that tariffs could add over $9,200 to the price of an average new single-family home.

    This comes at a precarious time, as the U.S. faces a shortfall of roughly 4 million new homes needed to meet demographic demand. For many prospective buyers, affordability is already stretched thin. Tariffs only widen the gap. Renovation projects are also affected, with higher costs discouraging homeowners from investing in improvements.

    For builders, especially those focused on mid-market or entry-level housing, material cost hikes can be deal breakers. Margins are thin, and uncertainty about sourcing and pricing makes it difficult to plan for future builds. In Southwest Florida, many merchant builders are already holding more completed, unsold inventory due to a tepid pace of sales.

    Tariffs may also impact mortgage rates, which generally track the yield on the 10-year U.S. Treasury note. Foreign investors are increasingly questioning America's status as a reliable safe haven, driving yields and interest rates higher. The weakening dollar has also contributed to this shift.

    The critical role of Canadian buyers in Florida's housing market should not be overlooked. Canadians have been integral to our market for decades, contributing to community vibrancy, tourism, and property tax revenue. However, recent trade tensions have chipped away at that relationship, leaving many Canadians feeling unwelcome.

    As we navigate this new landscape, it's essential to remember that people will always seek the comfort, security, and sense of belonging that a home provides. And here in Florida, we remain one of the most compelling places to find just the right one.