How Tariffs Will Impact the Housing Market

The housing market is already struggling—and tariffs could be the tipping point. With mortgage rates stuck, affordability at a multi-decade low, and recession whispers in the air, new trade policies may create the perfect storm for homebuyers and sellers alike.

In this post, we’ll explore how tariffs influence inflation, mortgage rates, and ultimately the housing market. If you’re a buyer, seller, investor—or just someone watching the market—you’ll want to understand the road ahead.

What You’ll Learn

• How tariffs impact mortgage rates and inflation
• Why the housing market is so sensitive to rate shifts
• The real-world impact of rate volatility on buyers and sellers
• How to make smart real estate decisions in uncertain times

The Housing Market Is Already on the Edge

Let’s be clear: the housing market is not in crisis, but it’s far from healthy.

• Mortgage rates are hovering between 6.5%–7%.
• Home prices are flat or declining slightly in many markets.
• Affordability is at its worst level in over 30 years.
• Inventory is up ~28% year-over-year in some regions, but still below historical norms.

These headwinds have slowed sales volume and discouraged both buyers and sellers. But now there’s another factor at play: tariffs.

What Are Tariffs—and Why Do They Matter for Housing?

Tariffs are taxes imposed on imported goods. While they may protect domestic industries, they also:

• Increase the cost of materials (like lumber, steel, and appliances)
• Drive inflation higher as companies pass costs to consumers
• Force the Fed to keep rates higher for longer to cool inflation

In other words, tariffs put upward pressure on mortgage rates—and that’s a problem.

\"It's a trade war, not a shooting war. But the impact on the economy can be just as real.\" — Josh Lewis

Tariffs, Inflation & the Fed’s Dilemma

The Fed has one main tool to fight inflation: interest rates.

If inflation stays hot, the Fed delays rate cuts. That means:

• Mortgage rates remain elevated
• Buyers stay sidelined
• Sellers hold onto their 3% loans and don’t list

And tariffs make inflation worse. Take these examples:

• Lumber: Tariffs on Canadian lumber raise construction costs.
• Cars: Auto prices could jump 20% with new trade barriers.
• Energy: Imported electricity and fuel could get taxed.

Each of these filters down into the core CPI, keeping inflation sticky.

\"The Fed is not in a rush. They want to see consistent softening before making moves.\" — Jeb Smith

Mortgage Rate Volatility: The Hidden Killer

Most buyers don’t realize this, but mortgage rates can swing fast—and that swing can crush your buying power.

For example:

• At 7.0%, a $600,000 loan costs $3,990/mo (P&I)
• At 6.0%, that same loan costs $3,599/mo

That’s a $391/month difference—or $140,000 in additional loan capacity at the lower rate.

This is why rate volatility matters. And tariffs create the kind of economic uncertainty that keeps rates elevated and choppy.

\"We have 130+ people on our Rate Watch list. All waiting for that next leg down.\" — Josh Lewis

Inventory Is Up—But Only in Some Markets

You’ll hear headlines like \"inventory is rising\"—but real estate is hyper-local.

📈 Where Inventory is Rising:

• Florida
• Texas
• Southeast metros (e.g., Raleigh, Atlanta, Tampa)

📉 Where It’s Still Tight:

• Southern California
• San Diego
• Most of the West Coast

Even with inventory up 28% nationally, multiple-offer situations are still happening in select neighborhoods. That’s why buyers need to look at zip code-level trends, not national narratives.

\"One property had 17 offers in one day. That’s not a buyer’s market.\" — Jeb Smith

Will a Recession Save Us With Lower Rates?

Recession = lower demand = lower inflation = lower rates. Right?

Not so fast.

Experts like JP Morgan and Morgan Stanley estimate a 30–40% chance of recession in the next 12 months. But the bond market isn’t convinced. The 10-year Treasury isn’t falling yet, which tells us:

• Markets expect mild softening, not collapse
• Any recession may be delayed
• Waiting for rates to fall could take 6–18 months

\"If you’re waiting for a recession to buy, that’s not a real strategy.\" — Josh Lewis

Recessions help housing in one way: they make money cheaper. But they also hurt jobs and confidence. You don’t want to buy just because rates are lower during a downturn.

What Does It Mean for Buyers?

Should You Wait for Rates to Drop?

Only if you:

• Are happy renting for another 1–2 years
• Are betting on timing the bottom
• Don’t need a home for stability, family, or lifestyle

But if you:

• Can afford today’s payments
• Have job security and savings
• Are buying for the long-term

Then buying now can make sense. Especially if:

• You refinance later
• You negotiate seller credits
• You’re buying in an appreciating zip code

\"There’s no FOMO. Just focus on your life, budget, and goals.\" — Josh Lewis

Pro Tip: Be Rate-Ready

Join Josh’s free Rate Watch List and let his team monitor rates for you. They’ll alert you when it makes sense to refi—no need to check every day.

What About Sellers?

If you're a seller, you’re also in a tough spot.

You likely have a 3%–4% mortgage and don’t want to trade up to 7%.

But:

• Well-priced homes still sell quickly
• Multiple offers are still common in prime markets
• If you’re moving for life reasons, it’s better to sell in a soft market than miss the window entirely

So… What Should You Actually Do?

✅ If You’re a Buyer:

• Run numbers with today’s rates
• Focus on long-term affordability
• Buy below your max approval
• Build in room to refinance

✅ If You’re a Seller:

• Price competitively
• Offer concessions if needed
• Don’t expect bidding wars unless your property is dialed-in

This isn’t 2021—but it’s also not a crash.

We’re in what Bill McBride calls “housing purgatory.” That means:

• Flat nominal prices
• Negative real returns (after inflation)
• Choppy data

Which is exactly the kind of market where education beats emotion.

Final Word: Stay Educated, Stay Ready

Tariffs are back, inflation is sticky, and rates are frustrating. But that doesn’t mean opportunity is gone.

Smart buyers are still buying.
Smart sellers are still selling.
And smart homeowners are staying rate-ready.

If you need guidance:
👉 Book a free consult with Josh at theeducatedhomebuyer.com/start/
👉 Join the Rate Watch List to refinance at the right time
👉 Subscribe to The Educated HomeBuyer on YouTube

This market isn’t easy—but the best opportunities never are.