With President Trump's whiplash-inducing tariff announcements sowing chaos for global trade, what damage will the levies do to the housing market—which was already on life support?
Some warn that we should brace for even higher home prices, while others pray that mortgage rates will plunge. Meanwhile, house flippers, landlords, and other real estate investors are scrambling to overhaul their strategies before they’re stuck paying for “made in China” merchandise that’s doubled in price overnight.
“My immediate worry is the renovation budget,” says Max Cohen of FLHomeBuyers.com. “Kitchens highlight the issue; lots of the affordable cabinet lines are imported from China.” With tariffs for this country currently at 145%, “the materials cost for a kitchen job could easily spike.”
Tariffs are also changing where investors shop for supplies. “We recently had a quote from Home Depot on windows that came in around $50K,” recalls Ryan Dossey at SoldFast.com.“The same materials at a local window supply were $37K. We buy most of our paint and flooring from Sherwin-Williams, an American company headquartered in Ohio.”
As for rentals, tariffs have convinced Cohen to work harder on maintaining systems in his 40 properties to make them last, by “adding things like surge protectors and just plain doing more hands-on work myself.” He also admits that he might be forced to raise rents higher than his annual max increase of 3%. If tenants start moving or stop paying, it may make more sense to sell.
Although worries are rippling throughout the housing market, Brian Davis, who runs a real estate investment club that hosted a workshop this week about tariffs, says he also spots opportunities.
“The two big risks from tariffs are inflation and recession,” Davis explains. “From there, you can frame the problem in more familiar terms: Which investments protect against both inflation and recessions?”
Inflation is the easy one. “Real estate has a long history of outperforming inflation,” he says. However, “Recessions are a harder nut to crack. Many real estate investments, such as office buildings, do poorly in recessions.”
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Yet, certain types tend to fare well during economic downturns. Here are a few that real estate investors are eyeing right now.
Multi-family affordable housing
Cheap rent never goes out of style, which is why government-subsidized affordable housing tends to boast years-long waiting lists and 100% occupancy. Though these investments might take a minor hit on revenue by offering way-below-market rents, they more than make up for it with property tax savings.
Mobile home parks with tenant-owned homes
Although some mobile home parks rent out homes, many simply rent out the land beneath to mobile homeowners. These parks are recession-friendly bets, according to Davis: “It costs an average of $6,500 to move a single-wide home and $11,500 to move a double-wide. If you have a choice between renting a [$500-per-month lot] or paying $6,500 to move your home, which will you pay? Even when feeling pinched, or especially when feeling pinched, mobile home owners will stay put.”
Storage facilities
During the housing crash of 2008, self-storage was the only real estate asset class that rose in value. Why? Because even if a recession forces you to downsize, you still want to keep all your stuff.
Abandoned half-built projects
Since tariffs may force less-capitalized developers to bail on specific projects, this presents a bargain-basement buying opportunity. “We’ve bought three stalled building projects from other investors who couldn’t take on higher material costs, acquiring these properties at discounted prices,” says Erik Wright, founder of New Horizon Home Buyers.
Pre-existing properties
Because tariffs are predicted to jack up the cost of brand-new homes by $9,200, this could be a good thing for homes that squeaked into existence before those pricey lumber levies, driving up demand.
Light fixer-uppers
Massive fixer-uppers may make for entertaining reality TV, but when money is tight, they’re a turnoff for homebuyers and investors alike. Cohen, for one, is “leaning toward lighter rehabs versus full guts.”