Written by: Dean Brown
The United States housing market is universally considered a safe entity for investors, buyers, and homeowners looking to sell. Most people typically have a good idea of where the market is heading, or can at least rely on seasonal patterns. While this is still the case, there are certain key policy-driven shifts occurring in the housing market today. These center on fundamental concepts in real estate economics such as mortgage rates, tariffs, and supply costs. This piece will examine if rising mortgage rates have increased the cost of borrowing for prospective homebuyers, creating a barrier to homeownership and contributing to a decline in residential real estate sales. Have these developments, coupled with the potential consequences of recent administrative policies (such as tariffs on building materials that may affect construction labor supply), raised housing construction costs, constrained supply, and further dampened activity in the U.S. housing market?
The 30-year fixed mortgage rate is the fixed interest rate on a home loan to be paid back in 30 years. It is a fundamental function of the housing market, as it directly affects a buyer’s capacity to borrow and commit to the purchase of a home. To start, the 30-year rate has increased within the past year to roughly 6.5% from just under 6% in September of 2024. It still remains above record lows seen in 2021 and 2022 which was just over 3.0% (FRED – OBMMI). Additionally, this has seemingly corresponded with a 4.9% decrease in existing home sales (per seasonally adjusted rate) in January of this year (North Association of Realtors & FRED-EHS). Moreover, home prices have increased nationally in 2025, per the FRED S&P U.S. National Home Price Index. These three statistics can be used to establish a baseline to further analyze the current state of the housing market. They can also be used to compare against other factors such as tariffs and supply changes. While home prices and rates have increased and home sales have declined, what are the underlying reasons?
Controversy has recently arisen due to the advent of the Trump Administration’s tariff implementations. The new administration has placed tariffs on the major supplier of softwood lumber to the United States: Canada. Canada was responsible for 83% of softwood lumber imports into the U.S in 2023. Softwood lumber is pivotal in the construction of homes, and any change in its price can affect the entire supply chain network of homebuilding. Have U.S. suppliers increased costs in anticipation of these tariffs as outsourcing has become more difficult? President Trump announced that there will be a 25% tariff placed on all goods entering the U.S. from Canada and Mexico, officially starting on April 2nd. This is already in addition to the 14.5% lumber tariffs enacted by the U.S. Department of Commerce. This means that tariffs on Canadian lumber will surge 39.5% on April 2nd (North Associaton of HomeBuilders – NAHB).
Listed is a detailed overview of price changes in the lumber indices and in various types of lumber, providing examples of the supply strains occurring: The Random Lengths framing lumber composite climbed 4.8% from last week, and now sits 15.8% higher than a year ago. The structural panel composite price inched up 0.4% week-to-week, Oriented Strand Board and Western Fir plywood prices held steady, and Southern Yellow Pine (SYP) plywood saw a modest 0.8% increase. Most of the big 2024 lumber increases happened in the 2x10s. Western SPF 2×10 rocketed 63.2% year-over-year, while Green Douglas Fir 2×10 jumped 53.6%. The notable outlier was 2×10 SYP, down 3.7% over the same period (NAHB). As evidenced by FRED data recently recorded in March of 2025, these lumber price increases which occurred at the end of 2024 have potentially already raised home prices. Builders want to remain profitable, so these hikes get passed on to consumers, harming housing affordability.
Nevertheless, the National Association of Home Builders is actively pursuing action toward the White House and Congress to remove or delay tariffs on Canadian and other imported goods. For example, NAHB Chief Advocacy Officer Ken Wingert met with Quebec Premier Francois Legault in Washington last month to emphasize the need for a fair trade agreement that lessens tariffs (NAHB). While there is clearly a tradeoff in terms of pricing, the new administration hopes these tariffs will encourage domestic production and ultimately encourage internal supply sourcing. If rates remain stable, trade agreements continue, and domestic sourcing increases, home prices will hopefully decrease for the everyday American.
References:
Federal Reserve Bank of St. Louis. (2025). FRED – CSUSHPISA [Data set]. https://fred.stlouisfed.org/series/CSUSHPISA
Federal Reserve Bank of St. Louis. (2025). FRED – EXHOSLUSM495S [Data set]. https://fred.stlouisfed.org/series/EXHOSLUSM495S
Federal Reserve Bank of St. Louis. (2025). FRED – OBMMIFHA30YF [Data set]. https://fred.stlouisfed.org/series/OBMMIFHA30YF
Global Wood. (2024). Canada’s lumber exports to United States rise 3% in H1. https://www.globalwood.org/news/2024/news_20240807b.htm?utm_source=chatgpt.com
Iannucci, L. (n.d.). Hudson Valley Market Watch: Interest Rates on the Rise. Upstate House. https://upstatehouse.com/hudson-valley-market-watch-interest-rates-on-the-rise/
National Association of Home Builders. (n.d.). Framing lumber prices [Website]. https://www.nahb.org/news-and-economics/housing-economics/national-statistics/framing-lumber-prices
National Association of Home Builders. (2025, March). Canada–Mexico tariffs delayed; higher lumber prices still likely [Blog post]. https://www.nahb.org/blog/2025/03/canada-mexico-tariffs-delayed-higher-lumber-prices-still-likely
National Association of Realtors. (2025). Existing home sales [Website]. https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sale
Picyrl, (2016). New home house building. Public domain stock photos
https://picryl.com/media/new-home-house-architecture-buildings-2e0d93
Vindman, A. (2025, February 5). America burns economic bridges. Why It Matters. https://www.avindman.com/p/trump-burns-economic-bridges