New tariffs announced April 2 are reshaping the economic landscape, creating uncertainty just as the spring homebuying season gains momentum. President Donald Trump’s plan includes a 10% base tariff on all imports, with higher rates for specific trade partners.
Economists say the ripple effects could push mortgage rates down temporarily but raise broader concerns about inflation, unemployment, and affordability.
A Mixed Bag for Real Estate
Stock markets dropped sharply after the announcement, as investors pulled money from equities and moved toward safer assets like bonds. This flight to safety brought a short-term benefit to mortgage rates. Mortgage News Daily reported the 30-year fixed rate dropped to 6.63% Thursday morning, down from 6.75% the day before.
Melissa Cohn, regional vice president at William Raveis Mortgage, called it a “mortgage rate roller coaster.”
“The good news for the real estate market is that mortgage rates are plummeting as well,” Cohn said. “The bad news for the real estate market is that significant wealth is being lost in the equities markets, and people will be loath to cash in right now.”
Cohn warned that if tariffs increase consumer prices, inflation could spike and force the Federal Reserve to raise interest rates again. On the other hand, if the economy weakens, the Fed may cut rates to stimulate activity.
Construction Costs Face Pressure
Although Canada and Mexico were left off the list of countries affected by the new tariffs, existing levies still pose challenges for the housing market. These neighboring countries supply essential materials like lumber, lime, and gypsum—all key for construction.
The National Association of Home Builders (NAHB) estimates the average cost of a new home could rise by $9,200 due to ongoing tariffs on appliances and raw materials. NAHB Chairman Buddy Hughes confirmed that cost pressure remains a serious concern.
“Builders have been doing their best to deliver smaller, more affordable inventory to the market to fill in the missing market for first-time homebuyers,” Hughes said. “But additional tariffs, especially potential blanket tariffs against Canada and Mexico, could jeopardize their ability to continue to do so.”
Inflation and Employment Risks Loom
Chen Zhao is the economics team leader at Redfin. He notes that Trump’s tariff strategy does not align with traditional trade logic: “The President is looking for concessions of a different nature or will simply change how the reciprocal rate is determined.”
Zhao says that if tariffs remain, inflation could rise significantly. A 1% increase in tariff rates typically drives up inflation by 0.1 percentage point. Core inflation could reach 4.7%, and unemployment may climb to 5%.
Zhao insists that “no one knows” how long the inflationary impact might last.
Market Data Shows Mixed Trends
Before the tariff announcement, housing data showed modest momentum. Purchase mortgage applications rose 2% week-over-week and 9% from a year ago, according to the Mortgage Bankers Association.
“Overall purchase activity has shown year-over-year growth for more than two months,” said Joel Kan, deputy chief economist at the MBA.
Redfin’s latest market report showed pending sales down 2.3% year-over-year, even as new listings rose 12.7%.
“Some believe we’re at the top of the market and they want to get top dollar for their house,” said Matt Ferris, a Redfin agent in northern Virginia. He noted a surge in D.C.-area listings, driven partly by changes to the federal job requirements and work location policies.
