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New tariffs may not rattle home builders

Posted by The Aramco Group on Sat, Jun 9, 2018 @ 14:06 PM

The Trump Administration proposed a new series of tariffs this week, namely on steel and aluminum imports. While this could impact home builders who use these materials and in turn pass those costs on to home buyers, some experts say the impact may not be as significant as some previously implemented tariffs.

According to Aaron Terrazas, senior economist at Zillow, the effects of these proposed import taxes would be more muted than the lumber tariffs that were announced earlier this year. Lumber represents nearly a third of the cost associated with new home construction, compared to less than one percent for steel and aluminum.

The construction industry, including home builders, have already faced years of accelerated material prices as well as land and labor shortages. Associated Builders and Contractors, a construction trade association, reports that the price of raw materials are 5.8 percent higher than they were a year ago. This is the steepest year-over-year increase since 2011.

Meanwhile, conforming no-point 30-year fixed mortgage rates are averaging 4.5 percent, 15-year rates are near 4.0 percent and the 5-year ARM is averaging 4.0 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.