The president’s tariffs could send the price of new homes and remodels soaring by thousands of dollars, but not all economists are convinced by the data.

A new report argues that President Trump’s tariffs could send the price of new homes and remodels soaring by thousands of dollars in 2019, though not every economist is convinced by the findings.

The report from Porch — a company that connects consumers to home improvement professionals — notes that Trump has imposed tariffs on a variety of construction-related products including Canadian lumber, various Chinese goods, and metals from both Europe and North America. Though Trump’s stated objective in imposing the tariffs was to correct what he described as a trade imbalance and create U.S. jobs, the Porch report found that the tariffs could actually drive up the price of new construction by 3.2 percent.

“With a median home sale price in October of $309,700, a 3.2 percent increase in the cost of a home would add about $10,000 just to the initial cost of the median-priced home,” the report states. “With increased home size or upgraded finishes, home buyers should expect costs to grow in accordance.”

Porch also argues in the report that the higher cost of homes will mean buyers have to come up with larger down payments, and will ultimately pay more interest. All told, then, Porch believes homeowners could end up paying an extra $17,000 over the life of their mortgages thanks to the tariffs.

Those costs could soar even higher if interest rates go up this year, which is widely anticipated.

Porch’s report also notes that housing affordability is currently low, with the average American salary being insufficient to afford a median-priced home. When that happens, homeowners tend to remodel rather than move. However, Trump’s tariffs may also drive up the price of the materials homeowners need in order to do renovations.

“Homeowners with plans to remodel should expect a similar increase in costs to new construction home buyers, 3 percent on average,” the report states, “but some projects, like flooring for example, could swing as high as 15 percent.”

The report concludes that the impacts of the tariffs could be even more widespread if they spread to more categories.

Worries that Trump’s tariffs would drive up the cost of construction, and therefore housing, have been ongoing for months.

Mark Perry

However, not every economist was convinced that Porch’s specific projections will actually play out. Mark Perry, an economics professor at the University of Michigan and a scholar at the conservative American Enterprise Institute, told Inman that he was “very skeptical” that the president’s trade policies could tack $17,000 onto the price of a home.

In an email, Perry argued that lumber prices, for example, did go up last spring, but have since fallen by double digit percentage points. So even if those price increases were tariff-related, Perry added, “it was completely reversed during the rest of 2018.”

Perry also said that home prices have fallen in recent months. While softer demand may be contributing to a slower market, Perry noted that, whatever is going on, increased costs related to construction currently “aren’t being reflected in higher new home prices.”

While that conclusion isn’t likely to completely allay nervousness about the tariffs’ impact on real estate, Perry ultimately came to a relatively upbeat conclusion after looking at the most recent data.

“So perhaps the price of building a home,” he concluded, “is actually less expensive today than it was last May.”

Email Jim Dalrymple II

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