How Tariffs will Hit the U.S. Housing Market

Good morning, Dwellers! Welcome to another edition of Dwellings Digest, a realtor and investor driven newsletter simplifying real estate, exploring the economy-stock-real estate link, adding a fun twist with niche topics and more. Enjoy!

In today’s edition - Eurozone inflation dips to 2.4%, fueling ECB rate cut expectations, while Warren Buffett warns tariffs act as a “hidden tax” that could drive up costs. U.S. housing faces higher prices as tariffs on Canada and Mexico add up to $10K to new home construction. Meanwhile, data centers fuel nonresidential construction growth, and Phoenix’s Encanto at Bell Park offers rare infill housing. Stay ahead with today’s top trends shaping real estate and investment.

Quote of the day - “Real estate is the purest form of economics—where demand meets opportunity.” 

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🏛️ Economic & Market Sentiment

Eurozone Inflation Falls to 2.4%—ECB Rate Cut Looms as Buffett Warns on Tariffs

• Eurozone inflation cooled to 2.4% in February, down from 2.5% in January, with France reporting a low 0.9% rate—fueling expectations for a quarter-point ECB rate cut to 2.5% this Thursday. (Source: Eurostat)

• Eurozone economy stagnated in Q4 2024, with businesses facing uncertainty from Trump’s proposed 25% tariffs and political gridlock in France and Germany, slowing investment and consumer spending. (Source: S&P Global, ECB)

• ECB faces limits on future cuts as core service inflation holds at 3.7%, and top ECB official Isabel Schnabel warns that inflation risks have shifted upward, questioning how aggressively rates can be reduced. (Source: ECB Executive Board)

• Warren Buffett warns tariffs act as a hidden tax, stating that “the tooth fairy doesn’t pay them” and predicting price increases that could fuel inflation, countering Trump’s claims that exporters, not consumers, will bear the cost. (Source: CBS Sunday Morning Interview)

How Does Warren Buffett Think Tariffs Will Affect the U.S. Economy? He Just Called Them an ‘Act of War’.

President Trump says tariffs on Canada and Mexico will begin Tuesday. Here’s what Warren Buffett thinks of the idea.

🎢 Impact on Real Estate

How Tariffs will Hit the U.S. Housing Market

• Tariffs on Canada, Mexico, and China could add $7,500–$10,000 to new home construction costs, with lumber alone contributing $4,900 per home, according to the National Association of Home Builders. (Source: NAHB, Leading Builders of America)

• Canadian lumber prices surged 13% since Trump’s February tariff announcement, with industry experts warning that a 25% tariff will reduce supply, forcing U.S. mills to ramp up production—an effort that could take up to three years. (Source: Forest Economic Advisors)

• Homebuyers may face rising prices for both new and existing homes, as tariffs push up material costs, forcing builders to either downsize home designs or pass costs to buyers—potentially pricing out 106,000 buyers for every $1,000 increase. (Source: Realtor.com, NAHB)

🎙️ RE Spotlight

Data Centers Drive Nonresidential Construction Growth Amid Economic Uncertainty

• Nonresidential construction spending rose 0.1% in January, reaching $1.25 trillion annually, but data centers drove over 75% of the gain, highlighting uneven sector growth. (Source: U.S. Census Bureau, ABC)

• High interest rates and new tariffs threaten future construction, with manufacturing projects facing delays and cancellations, as developers struggle with rising costs. (Source: Associated General Contractors of America)

• Despite economic challenges, contractor confidence remains strong, with 65% of firms expecting increased sales in early 2025, signaling resilience in select construction markets. (Source: ABC Analysis)

Housing production and preservation is key to securing D.C.’s future

• D.C. faces a housing affordability crisis, with only 21% of rental units truly market rate, while the rest are impacted by rent control, subsidies, or inclusionary zoning. (Source: D.C. Policy Center)

• Traditional capital subsidies for affordable housing cost over $530K per unit, making the model financially unsustainable as revenue growth slows. (Source: HPTF Reports, D.C. Policy Center)

• Shifting to rent supplements and inclusionary conversions could create 3,000 affordable units annually for 15 years at a fraction of new construction costs, allowing affordability in high-demand areas. (Source: D.C. Policy Center Analysis)

🏰 RE State Zone

Encanto at Bell Park in Phoenix offers 35 new homes starting in $400,000s

• Encanto at Bell Park brings 35 new single-family homes to Phoenix, with prices starting at $400K and going up to $600K for models ranging from 1,323 to 1,912 square feet—offering a rare infill housing option in a prime location. (Source: Developer Justin Johnson, Cambridge Properties)

• New Phoenix home prices continue to climb, with the median new home price at $504,924 as of January—making Encanto at Bell Park a competitive alternative to condos that are selling for nearly the same price. (Source: RL Brown Housing Reports)

• Designed for walkability and lifestyle convenience, the community sits steps from grocery stores and dining and includes a small park, fire pit, and dog washing station, catering to young professionals and retirees seeking modern, accessible living. (Source: Cambridge Properties)

31-Story Starling Tower to Transform Montrose—Skanska Unveils Retail Leasing Plans

• Skanska USA's long-anticipated Starling tower moves forward, with 30,000 square feet of retail space now available for lease in the planned 31-story mixed-use high-rise at 1001 Westheimer, signaling major growth in Montrose. (Source: Skanska USA, Colliers)

• Montrose continues its transformation with multiple developments, including Radom Capital’s Montrose Collective, the revitalized Tower Theater, and a new high-rise at the former 'Disco Kroger' site, reshaping the area's retail and residential landscape. (Source: Real estate market reports)

• Retailers and restaurants are set to redefine Lower Westheimer, as Skanska aims to curate a tenant mix that complements Montrose’s vibrant scene, featuring street-level patios, green spaces, and dedicated retail parking. (Source: Skanska USA, Colliers)

🏕️ Niche-RE

The Most Stable U.S. Housing Markets

🖼️ Chart-Tastic

Fast Selling Housing Markets - Homes went from listing to pending in under 10 days on average in these markets.

🌍 Dwelling of the Day

And…that's a wrap on this edition!

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