Ongoing Trade War Could Hurt Both Home Buying/Selling and Home Improvement Industries

Millions of Americans could be looking to sell their homes in the next year. But will the ongoing trade war between the United States and China get in their way?

According to a new survey of 1,400 homeowners from personal finance website NerdWallet, as many as 12.1 million homeowners plan to sell their primary residence within 18 months.  Some 44% of those who said that they plan to sell in the next 18 months said recent shifts in the housing market have made them consider selling sooner than they originally planned.  These buyers are concerned that the shift away from a seller’s market could force them to make price concessions and lose some of the gain they would otherwise receive thanks to the break-neck pace of home price appreciation in recent years.  And a prolonged trade war with China is unlikely to help.

The trade war could negatively affect the rental market as well.  Many renters — especially those in high-cost housing markets — devote well-beyond the recommended third of their income to rent. As a result, many of these Americans are forced to live paycheck to paycheck once all of their other necessary expenses are tallied.  “A trade war that results in higher costs of household goods could mean that the going might get tough for low-income renters,” said Holden Lewis, a housing expert at NerdWallet. “If prices rise on clothes and shoes, these renters could find themselves even more financially imperiled.”

A more direct effect of the trade war between the U.S. and China would come vis-à-vis the cost to build new homes or remodel existing ones, industry analysts said. “A trade war directly affects the housing market mostly through the supply chain — the price of sticks and bricks,” says Skylar Olsen, director of economic research at Zillow.

The U.S. imposed tariffs on materials that could ultimately impact the cost of consumer goods such as toys and electronics, but the Office of the U.S. Trade Representative also has levied duties on raw goods used in construction such as aluminum and steel.  Previous tariffs the Trump administration implemented on steel, aluminum and lumber imports did directly increase the cost of a newly-constructed, median-priced home.  Moreover, appliances are one of the most hard-hit categories of products by the most recent tariffs hikes. In that case, it will become much more difficult for homeowners to upgrade their home’s kitchen or laundry room — features that can boost a property’s selling price.

“Consumer confidence appears to be weaker than recognized, particularly with respect to large ticket purchases like housing or remodeling,” said Rob Dietz, chief economist at the National Association of Home Builders.  “Clearly, a trade war increases this uncertainty,” he said. “We estimate that the 25% rate on the existing set of tariffs represent a $2.5 billion annual tax increase for the housing sector in terms of materials used for construction. A trade war will also hurt sectors of the economy, like agriculture, and increase overall consumer wariness.”

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