MW What Trump's reciprocal tariffs mean for home buyers and sellers

By Aarthi Swaminathan

Trump's trade war could come with one silver lining for home buyers

Home buyers and sellers in the U.S. are likely to feel the impact of the tariffs President Donald Trump slapped on every country worldwide Wednesday - but it isn't all that bad.

Economists expect tariffs to increase the cost of building and remodeling homes as the cost of imported building materials go up. At the same time, as consumer prices increase and economic growth slows, mortgage rates could fall - and that could help some home buyers.

The 30-year fixed-rate mortgage typically tracks the yield on the 10-year Treasury note BX:TMUBMUSD10Y. When financial markets sense chaos, they flock to the 10-year note for safety, because it is issued by the U.S. government and is considered virtually risk-free. When the 10-year yield falls, the 30-year mortgage rate falls in tandem.

In September, when the 10-year yield went even lower, the 30-year mortgage rate dropped as well, triggering a surge of mortgage refinances.

Read more (from the archives): Refinances surge 175% from a year ago, as mortgage rates remain at a 2-year low

Following Trump's announcement of his "reciprocal" tariffs, the yield on the 10-year Treasury plunged to the lowest level since October, as of 10 a.m. Eastern time Thursday.

The 30-year mortgage rate, meanwhile, averaged 6.64% on Thursday, according to Freddie Mac (FMCC), which looks at mortgage applications to determine the figure. That's down from 6.65% a week ago and 6.82% a year ago.

A daily survey of mortgage rates by Mortgage News Daily reported a larger, 12-basis-point drop in the 30-year fixed-rate mortgage on Thursday afternoon, to 6.63%. That's the lowest level of 2025.

So what will happen to mortgage rates in the coming weeks and months?

"If President Trump keeps these tariffs in place rather than using them as a short-term bargaining tool, bond yields could see continued downward pressure, bringing mortgage rates down with them," Dan Richards, president of mortgage lender Flyhomes Mortgage, told MarketWatch. "That would be a positive for housing, especially during a spring buying season already showing the highest purchase-application data in years."

At the same time, the housing market may also feel other, more negative impacts of the tariffs such as rising home prices and a hit to economic growth.

Kathy Bostjancic, chief economist at Nationwide, said that the tariffs announced Wednesday were larger and more complex than what she expected.

The Trump administration put a minimum tariff of 10% on imported goods from all countries, and announced additional tariffs on goods from countries that the White House identified as "worst offenders."

An analysis of potential tariff impacts by the real-estate platform Redfin $(RDFN)$ noted that mortgage rates could be volatile in the coming days, with competing forces influencing their trajectory.

"On the one hand, slower economic growth, higher recession odds and a selloff in the stock market would push bonds to rally, causing mortgage rates to fall," Redfin wrote. "On the other hand, higher inflation for longer and the possibility of the Fed keeping the fed-funds rate higher would push mortgage rates higher.

"Whether rates fall or rise depends on whether this bout of inflation is temporary," the brokerage added.

Redfin also foresees higher building costs for new homes, though the amount of that increase will depend on several factors now in flux.

Estimating the impact of the tariffs, Bostjancic said she expects economic growth, as measured by real gross domestic product $(GDP.UK)$ growth, to either climb at roughly the same pace as last year or not grow at all this year.

She added, however, that there is a risk that it could turn negative. "Significant retaliation by our trading partners could tip GDP growth negative and result in a recession," Bostjancic said.

See also: Prospective home buyers are hoping for a recession to bring down housing prices. Does that make sense?

Danielle Hale, chief economist at Realtor.com, a real-estate platform, said that slower economic growth could mean that home buyers lose their purchasing power.

"While lower mortgage rates are likely to benefit home buyers and potentially unlock homeowners, slower economic growth would likely mean slower income growth," Hale explained. Buyers might not have the same level of income to purchase homes should the economy falter.

So lower mortgage rates may not necessarily help financially strapped home buyers.

"Tariffs will likely improve one of the three pillars of housing affordability - mortgage rates - but likely worsen trends in the other two - home prices and income growth," Hale said.

Home builders expect tariffs to push up the cost of a new home. Builders are already seeing manufacturers increase the cost of building materials, such as lumber and drywall and home appliances, which are mostly imported.

In a March survey of builders, the National Association of Home Builders estimated tariffs to increase the cost of building a new home by $9,200.

"For homebuyers, how much more a new home will cost depends on how much of the increased expenses builders pass on," Redfin's economic research lead, Chen Zhao, said. "But it's very likely prices of new homes will increase meaningfully."

As to whether mortgage rates will trend lower in the coming months, experts' opinion is divided on whether it's a win for home buyers.

"The good news for the real estate market is that mortgage rates are plummeting as well. 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," Melissa Cohn, the regional vice president of William Raveis Mortgage, said in a statement.

Richards of Flyhomes, chose to remain positive about the impact of lower rates.

"It's still unclear how the tariffs will impact the job market," he said, but even then, "the trends set in motion on Wednesday are a net positive for housing. If this trajectory holds, 2025 could be the first year since 2021 where housing meaningfully outperforms expectations."

-Aarthi Swaminathan

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April 03, 2025 12:34 ET (16:34 GMT)

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