North Texas builders are bracing for the impact of Trump administration tariffs at an already challenging time for the real estate industry.
Sales are slowing due to rising mortgage rates and elevated inventory as developers try to plan for a future that's still very uncertain.
Many companies rely on contractors to get their supply – think lumber yards – and rising costs are passed from them to the builders.
Seth Bodine has been following this story for the Dallas Business Journal and says homebuilders are already starting to feel the pinch.
“They're getting bills or letters from contractors saying, ‘we don't really want to raise prices, we know things are difficult, but we're anticipating these increases,’” Bodine told KERA’s Bekah Morr.
While lumber is exempt from Trump administration tariffs, Bodine said that’s just one of hundreds of materials needed to build a home or structure. It’s not just wood and steel for the frame, but things like HVAC equipment or the hinges on cabinet doors.
“A lot of homebuilders can try to find some cost efficiency by finding alternatives, working with contractors, but there's just some things you can’t avoid,” he said. “We get a lot of things from China, it's our biggest trade partner.”
Below are some excerpts from the interview that have been edited for length and clarity, or you can listen to the whole conversation by clicking the play button above.
Impact on home buyers
Homebuilders are very focused on selling homes right now which is a challenge because of spiking inflation – so prices are higher, mortgages cost more. That means that buyers are hesitant or they just can't buy a home because it's too expensive.
What that means for buyers is that new home builders will often sort of offer incentives like mortgage rate buy-down. So if it's at 7%, maybe they can get it down to 4%. Some of these homebuilders have pitched it as, maybe it's a really good time to buy a home... but that could just be their spin on it, of course.
Commercial real estate
North Texas is full of warehouses. We're talking big logistic centers where trucks unload and load everything from food to supplies. It's a huge hub. So, if these companies are feeling more pressure from tariffs – they have to pay more money, it's thinning their margins – they might not renew a lease. Maybe not right now, but they're certainly not going to expand.
I've heard this with other builders saying, ‘Well, it's not like we're going to stop working but we aren't going to take any big risks either.’ So, the overall message is they're just taking caution.
How immigration plays a role
When it comes to immigration, it's a huge part of the equation when we talk about building a structure. The state labor federation, Texas AFL-CIO, estimates that about 70% of construction workers are foreign born and 50% are undocumented. You start putting that equation together, it's going to make an impact.
Got a tip? Email Rebekah Morr at rmorr@kera.org.
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