👋👋 Good morning real estate watchers! Today, we are going to talk about...

1. Canada immediately hit back with 25% tariffs on U.S. goods, including appliances and furniture. Which is hilarious, because this means an American who can’t afford lumber to build a house ALSO won’t be able to afford a couch to sit on while they cry about it. It’s like watching two people stab each other with sporks and call it a war.

Let’s go!

TOP STORY

TARIFF TROUBLE

The Trump administration’s recent imposition of a 25% tariff on most Canadian and Mexican imports—and an extra 10% on Chinese products—may soon ripple through America’s real estate market. With construction costs set to climb, both developers and homebuyers could face a tougher environment as the housing market navigates the uncertainty of a trade war.

Yes, America has lots of trees, but turning them into lumber requires sawmills, labor, and time—three things America’s construction industry is already short on. So unless Trump is planning on personally whittling two-by-fours out of an oak tree with a rusty steak knife, we’re going to have a problem.

Softwood lumber is at the heart of the concern, an essential material for framing and siding in home construction. In 2023, the National Association of Home Builders (NAHB) reported that lumber imports reached $8.5 billion, with 70% sourced from Canada. “Tariffs on lumber ultimately hit new homebuyers, as increased costs get passed on through the construction process,” said Nick Erickson, senior director at Housing First Minnesota. Analysts predict these tariffs could add between $3 billion and $4 billion in extra costs to construction materials.

Developers are already grappling with supply chain disruptions. Rising material costs are compounded by an industry-wide shortage of skilled labor—currently estimated at about 300,000 missing workers per month. With natural disasters and climate-related events further straining housing supply, these additional costs could slow new construction projects and exacerbate housing affordability challenges.

The trade dispute is not contained solely within the U.S. borders. Canada, a major supplier of lumber and other building materials, retaliated swiftly. Canadian Prime Minister Justin Trudeau imposed 25% tariffs on $155 billion worth of U.S. goods, ranging from household appliances to furniture and even lumber. “We don’t want to be here, we didn’t ask for this,” Trudeau said, reflecting the growing tensions that now threaten to undermine decades of cross-border trade cooperation.

This trade tension is not only a construction industry headache but also a broader economic concern with direct implications for the real estate market. Rising construction costs typically lead to higher mortgage rates and increased home prices, squeezing affordability further for prospective buyers. “The cost pressures extend beyond raw materials—eventually, developers must recoup these expenses, which means higher prices for consumers,” explained Robert Dietz, chief economist at NAHB.

Moreover, investors in the real estate sector are watching closely. Increased building expenses could depress new project initiations and stall developments, a development that might ripple through residential and commercial sectors alike. Some experts warn that the additional costs could dampen overall market sentiment, potentially slowing the recovery of regions that have already struggled with housing shortages.

Despite America’s vast natural resources—an estimated 300 billion trees—the domestic lumber industry is not in a position to ramp up production quickly enough to meet rising demand. Expanding sawmill capacity and overcoming regulatory hurdles will take time, leaving the real estate market exposed to the effects of imported material cost surges.

As the trade war deepens and global markets respond with increased volatility, homebuyers and developers alike may soon feel the sting of these tariffs. For an industry already contending with a shortage of supply and rising demand, the tariffs present a stark reminder that in today’s interconnected economy, even something as plentiful as America’s trees can’t insulate the housing market from global trade challenges.