In 2016, Dodge Date released its Construction Outlook, which predicted single-family construction would see a 20% increase in the following year, while multifamily construction was expected to post a 7% gain after several years in the double-digit increases. Early data from 2017 broadly confirms these projections; however, there’s a major new wrinkle as experts try to forecast growth in the housing market in 2018.
The reason? New steel and lumber tariffs signaled by the Trump administration.
The tariff’s are extremely controversial, to say the least, and it’s extremely difficult to predict how these tariff’s would affect residential construction spending, if they do indeed come to pass.
Here’s what we do know: the administration wants to adopt new steel and aluminum tariffs. The new tariffs would see a 25% increase for steel and a 10% increase for aluminum. The goal of these tariff increases is to bring life back to the American steel industry, where 143,00 workers are currently employed. However, the Wall Street Journal and others have stated the tariffs would ultimately hurt American workers, as well as make housing more expensive for everyday Americans.
The construction industry would likely be hit pretty hard by these tariffs as well, resulting in bad news for renters and potential home buyers. As housing supply continues to diminish, demand is rising more than ever, which could lead to rising rents and housing prices. According to City Lab, roughly half of American steel imports go into construction, with a large part of that steel going into housing.
Senior economist at Zillow, Aaron Terrazas, pointed out just how much prices are going up already.
“Those costs have largely been passed along to consumers, and you’ve seen new home prices touch new highs,” Terrazas said.
According to Market Watch, the price of lumber jumped almost 15%, which would add $6,000 to $10,000 to the cost of a median-priced home. Also, the price of an average multi-family home would increase by $478, per unit.
This is coming at a bad time for renters and potential home buyers, and in many cities affordable housing units are practically disappearing already. The White House may have good intentions to try to help the workers in the steel and lumber industries in the United States, but experts fear their attempt to protect workers just may do more harm than good.