Trump tariffs hit local homebuilders and buyers hard

Randy Tucker, Cincinnati Enquirer

In the market for a new home?


The Trump administration's tariffs on building materials could throw a wrench in those plans just as the spring and summer home-sales season begins to heat up.

The average cost to build a new home in Greater Cincinnati is soaring, thanks, in part, to the tariffs imposed by the Trump administration on lumber, steel, aluminum and other building materials.  

Many builders have been forced to pass those cost increases on to customers, often pricing them out of the market for a new home, Realtors interviewed by The Enquirer said. 

A Trump tariff of just over 20% on Canadian softwood lumber alone has already added between $8,000 to $9,000 to the cost to build a new home in Greater Cincinnati, according to Dan Dressman, executive director of the Home Builders Association of Greater Cincinnati.

The tariff on Canadian lumber, which is widely used by home builders for framing and interior features, is just one example of the trade-induced spike in building costs.

Tariffs boost price tag on home construction 

Alan Gerbus, president of Homes by Gerbus Inc. in Colerain Township, said he was recently informed by one of his suppliers that the cost of the plumbing and lighting fixtures he buys from China may be subject to potential price increases.

The notice came shortly after Trump announced early last month that he would increase tariffs from 10% to 25% on about $200 billion in Chinese goods in retaliation for China's unfair trade practices.

The list includes about $10 billion worth of building materials and finished goods from used for new homes and remodeling. The tariff increase took effect May 10.

“Who knows what we’ll be paying for those fixtures three months or six months from now,’’ Gerbus said. "That comes off the bottom line or translates into increased prices (for home buyers). It just adds an additional burden to the industry.’’

Some tariffs now more than a year old

The Trump tariffs on Chinese goods date back to July.

Since then, Andre Frazier, a former Bengals' linebacker and custom homebuilder based in Liberty Township, said his construction costs have risen about 15-20% on materials alone.

Andre Frazier stands in the house he built for HOMERAMA in Lebanon, Ohio. Frazier is a former Bengals and Steelers linebacker who won two Super Bowl championships. 

The situation has forced him into some frank conversations with his customers.

"When I'm talking with a client, I have to explain to them that because of the price of materials and the cost of labor...they're not able to get as much bang for their buck as they once could,'' he said. "I have to tell them I can’t provide them with a 7,000-square foot-home for the same price I could a year ago.''

MORE:Former Bengal Andre Frazier tackles Homerama 

So far, the situation hasn't hurt business for the award-winning Homearama builder who specializes in bigger, more expensive and more profitable homes.

Frazier has four homes under construction, including a $2.8 million house in Hyde Park and three other homes in the Cincinnati area, ranging in price from about $800,000 to $1 million.

He said can't even consider building in the entry-level, $250,000-to-$350,000 price range because he couldn't turn enough of a profit to cover his expenses.

"For a small builder like myself, it’s not possible for me to even consider building in that realm because the material prices are so high,'' he said.

Tariffs hurt builders and home buyers 

For consumers, that's likely to mean a continuation of escalating home prices at the low end of the market, where demand has outstripped supply for years.

MORE:Greater Cincinnati still a seller's market for housing

The inventory of homes for sale in the local area fell nearly 8% in April, compared to the same month last year, according to the latest figures from the Greater Cincinnati Area Board of Realtors,

At the same time, the average home price in Greater Cincinnati jumped to $222,036 - up about 3% from $215,653 in April last year.

Sticker shock has forced some buyers out of the market for new-construction homes and into the market for already existing homes, bidding up the prices on limited inventory.

"I had a couple walk away from a new house because the price they were quoted a year ago was significantly higher when they were ready to close,'' said Donna Deaton, a Realtor at RE/MAX Victory in Liberty Township. "They were just told this is how much it costs now. They said "no" and started looking for the best available property in their price range.''

Tariffs create uncertainty in the building industry

Just the threat of more tariffs has created a new level of uncertainty and concern that builders will be forced to jack up prices even higher.

"I don’t think anybody knows what that impact is going to be yet, but there’s definitely concern,’’ Dressman said.

Still, the Trump tariffs alone aren't completely to blame for the hike in construction costs and home prices,

Rising costs for labor due to a shortage of skilled tradesmen, high land costs and escalating permit fees have been pushing up home prices for years and have had a bigger impact than material costs, Dressman said.

But the existing tariffs and threat of new tariffs "aren't helping,'' he added.

The latest figures from the U.S. Bureau of Labor Statistic's producer price index for inputs to construction industries shows prices for building materials are up across the board.

Nationwide, the cost of goods used in construction jumped in April at the fastest year-over-year rate since 2011, according to the index, which spiked 6.4 percent over the past 12 months.

Earlier this month, the Trump administration agreed to end tariffs imposed last May on steel and aluminum coming from Canada and Mexico, eliminating some of the cost burden on builders.

But the latest round of tariffs on Mexican and Chinese goods could offset those roll-backs, according to David Logan, a tax and trade expert with the National Association of Home Builders.

Logan said the tariffs on China are the equivalent of a $2.5 billion-a-year tax on the entire U.S. home-building industry.

"You can only absorb so much of those cost increases before you're forced to charge people even more for a home,'' said Logan, whose Washington D.C.-based group has called for a repeal of the tariffs.

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