Saturday, March 3, 2018

Tariffs Have Become the Wild Card in New Modular Home Construction

Hefty new tariffs on imported steel announced this week by President Donald Trump, on top of a tariff on Canadian lumber imposed late last year, could drive up home prices.

The planned tariffs would tack on 25% to the cost of steel, used in home foundations, floors, and high-rise construction, and 10% for aluminum from foreign suppliers. The controversial tariffs would make good on Trump's campaign promise to give American producers a boost.

The administration is already levying tariffs of more than 20% against Canadian soft lumber producers. About a third of the softwood lumber used in new-home construction comes from Canada. And after devastating hurricanes in Houston and Florida and deadly wildfires in California, there is a big need for that lumber.

Several commercial modular home builders have complained to the Modular Building Institute, a trade group, about their costs going up as a result of the tariffs as well.

"This will affect our prices," says Tom Hardiman, executive director of the institute. The association has yet to do a detailed analysis on just how much pricier modular homes may be.

Not knowing how much steel and lumber will cost makes it difficult for builders to price homes, or for buyers to know just how much they'll be shelling out on their new abodes.

The big question you have to ask is what will the single family home buyer do when faced with another price increase?

Would a 3.9% 30 year mortgage offset price increases from tariffs? One has to wonder what will keep this housing boom going.

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