Housing has had a rough stretch since 2020. The pandemic drastically shifted demand patterns, growth in immigration increased demand, and the Federal Reserve was forced to raise interest rates, reducing mortgage availability for large portion of the population. All of this unfolded against the broader backdrop of a market that had generally undersupplied new housing during the fifteen years following the 2008 housing crisis. While housing prices remained elevated, the actual volume of new and existing home sales dropped below that of every preceding five-year period (U.S. Census Bureau). There were signs of recovery at the end of 2024 – inflation was coming down, allowing the Fed to lower rates, and post-pandemic demand patterns had begun to normalize. New housing starts finally began to ramp up in response to a long-underserved market.
The early signs of recovery have been squashed by the hyper-aggressive and volatile trade policy. The average citizen has become nervous over the past few weeks, anticipating higher inflation and, from there, a limitation of the Federal Reserve’s options for addressing the high cost of housing. New supply has been stifled to some degree, as many of the materials for housing come from our trading partners, especially Canada. Canadian soft lumber made up roughly 20–30% of the wood used for housing in the United States. We can expect that number to be under pressure, raising the cost of new housing.
With pressure on both the demand and supply sides, we expect some level of housing price stability going forward. Built-up demand from the pandemic period continues to weigh on the market, even amid headwinds, so the downside is limited. Once there is better visibility in trade policy, we can expect to see a more fluid market.