How Will New Tariffs Affect The US Housing Market

With the recent news of the administration placing tariffs on imported goods, we all suspect that the cost of living is about to go up.  Considering the past few years of heavy inflation, costs for everyday goods going up has to be bad, right?  Well, the truth is, in the short term, it won’t be great.  What if the pair of shoes you need to buy your kids go from $150 to $375 or that perfect piece of furniture more goes from $500 to $1250?  Needless to say, you probably wouldn’t be able to afford those changes or at the very least, it may take some time to adjust to the inflated prices.

So if prices go way up on goods we consume from other countries, is there any good that could come from that?  Well for starters, it should offer companies offering similar products located in our country an opportunity to grow and sell products for a more reasonable price.  While this sounds great in theory, there are many products we simply can’t or don’t make in our country so this model is likely not sustainable for the long term.  That is, unless something changes with our manufacturing infrastructure and it adapts to fill the supply chain.  What’s more likely to happen is there will be some period of time where we simply don’t use the inflated products.  At the same time, other countries will not be using our products due to them matching or even exceeding our tariffs on US products.  Eventually, this will lead to the most, likely all, the countries involved in the global supply chain to sit down and make a deal that is fair for everyone.  The period of time preceding this might be a little uncomfortable there is no doubt but once all the countries reach a point where they are ready to negotiate, it should return order to pricing and availability of products in short order.

Now, consdering our housing market is at an all time high of unaffordability, this period of being uncomfortable should lead to home prices coming down as both income and cost of living adjust.  If rates stay where they are or go up as some economists are suggesting, a price correction isn’t really much of a question so much as it is an inevitability.  Our markets are cyclical and once they reach a peak, well, the definition of a peak is there is nowhere else to go.  Still, I don’t think Americans should be worried about this “period of uncomfortability” as equity is solid across the vast majority of homeowners. In other words, for those who have to sell due to a job transfer or life circumstance, they should still have plenty of equity even if there is a down turn in prices.  For those who buy in that market, well, you will be buying a lower priced home allowing for more bang for less buck.

So does that mean you should avoid buying now?  The answer is no.  Consider the average American lives in their home for 12-13 years, the likliehood is the market will have cycled back perhaps multiple times by then.  As a good friend of mine says when asked when is a good time to buy….”When its right for you!” Truthfully, almost nobody times the market perfectly, not even the pros in the business can predict that so buying and selling of real estate should happen when life circumstances say it should. That is of course, unless you are an investor which I will speak to in my next blog.  Until then Americans, if now is the time you want to move, go make it happen, you will be all right!  If you want to ride out the economic storm that seems to be coming, that will work too but there will be trade offs just like anything in life.  In our business, you typically Sell High Buy High or Sell Low and Buy Low simply because of the timing of it.  So the next time some one complains about the tariffs, help them see our economy is cyclical and in order for it to go up, it has to come down.  The trick is staying positive through the valleys and vigilant during the peaks.  I hope this information is helpful to someone somewhere!