The housing industry is on edge over new tariffs and market turmoil, but any negative impacts have yet to show up in the data.
The March new-home sales report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) shows sales at a seasonally adjusted annual rate of 724,000, up 6% year over year and 7.4% above the revised rate for February.
While the data shows a positive view of the direction of the housing market, it was compiled before President Donald Trump’s April 2 tariff announcement that pushed stocks, bonds and currencies into chaos.
“Housing demand is surprisingly stable given the macro headwinds, and unless rates spike again we expect 2025 to finish with more new home sales than last year,” Zillow senior economist Orphe Divounguy said in a statement.
“Despite economic jitters and a cooling labor market, the spring housing market is more active than last year. Lower mortgage rates compared to last year are helping to keep the momentum alive.”
There’s good news for homebuyers in the report as well. Inventory for new homes hit 503,000 in March, which is 7.9% higher than in March 2024 and up 0.6% from February. There was 8.3 months of supply, down from February but 1.2% above year-ago levels.
Prices also dropped, with the median sale price coming in at $403,600, down 1.9% month over month and 7.5% year over year.
The rise in sales was driven by a strong increase in the South, which had been sagging in recent months. The often volatile Northeast experienced a sharp drop, while the West had a slight decline and the Midwest had a small gain.
What happens in the next new-home sales report is anyone’s guess. The magnitude of Trump’s new global tariff regime shocked the world, and businesses and industries are scrambling to adjust.
The back-and-forth nature of Trump’s approach doesn’t help. He twice paused Canadian and Mexican tariffs mere hours after they took effect, and he did the same with the global tariffs, which are now on a 90-day pause.
More concerning for homebuilders is that he not only allowed the tariffs on China to continue but actually raised them to an astronomical rate of 145%. China is a critical trade partner for homebuilders, who rely on it for a number of building materials and appliances.
The good news for builders is that Trump has struck a softer tone on China this week, suggesting that he might lower the tariff rate by more than half if the two countries can strike a new trade deal.
He’s said similar things about tariffs on other countries, but as of yet there is no indication he has struck a deal with any country.
Even if things improve on the tariff front, more recent housing data suggests that market turmoil and economic uncertainty are causing problems of their own.
Consumer confidence and builder sentiment have both fallen sharply since the start of Trump’s term. And there are signs that some prospective homebuyers are pausing their home searches until they have more clarity.
The new construction report for March showed single-family starts dropping by 9.7% annually, while permits dropped slightly as well.
A dynamic is forming in some markets where sellers are hoping to list and offload their homes before any negative impacts from the tariffs. But a tepid response from buyers presents a disconnect that could stall local housing markets.
Mortgage applications also dropped 12.7% last week as a result of mortgage rates that have been pushed back toward 7%, a result of the bond market sell-off and retreat from the dollar. But mortgage applications remain above 2024 levels.
“In addition to homebuilders’ challenges stemming from potential tariff impacts and rising labor costs, the housing market is facing a repeated challenge from a recent jump in mortgage rates, which are likely to remain volatile and elevated, particularly considering the Federal Reserve’s independence being called into question,” Selma Hepp, chief economist for Cotality, said in a statement.
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