How Trump's tariff uncertainty could impact Arizona home prices
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Homes under construction in Tucson in September 2024. Photo: Rebecca Noble/Bloomberg via Getty Images
In his first weeks back in office, President Trump has enacted — and walked back — tariffs that experts say would have made homebuilding more expensive in Arizona.
Why it matters: The National Association of Home Builders (NAHB) warned that Trump's 25% tariffs on Mexico and Canada would directly increase the cost of building materials — and that those costs would be passed on to buyers.
- According to the association, about 70% of softwood lumber (for framing) and gypsum (for drywall) used to construct single- and multi-family homes in the U.S. are imported from Canada and Mexico, respectively.
The latest: Trump announced Monday he would pause the Mexican and Canadian tariffs for 30 days, a move the homebuilders association welcomed.
Yes, but: Trump's quick-changing tariff policy could be enough to spook developers and exacerbate Arizona's housing shortage and high home prices, Mark Stapp, executive director of the Master of Real Estate Development program at Arizona State University, told Axios.
- Couple the tariff threat with Trump's promise of ramped-up deportation efforts (immigrants make up more than a quarter of the national construction workforce, according to the NAHB), and builders now have to worry about labor and material costs that could surge at any moment.
What they're saying: "The one thing that business hates and the one thing that investors hate is uncertainty," Stapp said.
Threat level: The chaos of the past few weeks could have two main consequences that bode poorly for housing affordability in Arizona:
- Interest rates: Trump's shifting policies make it hard for capital markets to plan and assess risk, which could push rates higher. This hits developers on the front end (pricier construction financing) and consumers on the back end (steeper mortgage rates), Stapp said.
- Development pauses: Some builders may choose to pause plans for new construction until they can understand the new political landscape. Even brief temporary pauses can have long-term impacts on Arizona's housing market, which is already short more than 100,000 homes, he said.
Flashback: Arizona developers have seen the consequences of tariffs and strict immigration enforcement in the not-so-distant past.
- Trump instituted tariffs on Canadian softwood lumber during his first term that President Biden kept intact and increased. They contributed to higher construction costs that homebuilders passed on to buyers.
- Strict immigration enforcement laws enacted in the early 2000s "hobbled the labor market, accelerated residential property price declines, and exacerbated the Great Recession in Arizona," per a report from libertarian think tank the Cato Institute.
The bottom line: "This is not a speculative sentiment. It's one based upon previous experience," Stapp said.