Affordability remains a major hurdle for US homebuyers – and it could be about to become an even bigger challenge
Mortgage brokers concerned about the rising costs of new home construction materials now have a new concern: new duties on Canadian softwood lumber.
The US Commerce Department is doubling duties on Canadian softwood lumber to 34.45%, which, combined with new tariffs on other homebuilding materials, could cause house prices to soar.
However, unlike tariffs which have a political undertone, the new duties on Canadian softwood lumber are strictly mathematical, according to one industry expert.
Russ Taylor (pictured top), owner of wood market analysis firm Russ Taylor Global, said the new duties were expected, although he thought they might be slightly lower.
“I thought it was going to be around a total of 30%,” Taylor told Mortgage Professional America. “We knew roughly what it was going to be six months ago because we heard early reports from people doing calculations. So, it’s not really a surprise. It’s just a part of US trade law.”
Taylor said the duties fall into two categories: countervailing and anti-dumping. Countervailing duties are anti-subsidy duties imposed on materials subsidized by a foreign government. Anti-dumping duties are placed on materials priced below market value to undercut the domestic market.
“There’s no politics, it’s just facts, calculations, and implementation,” Taylor said. “Then a year later, you do the same thing again. The only thing that can circumvent these duties would be a trade law.”
The last trade law was the 2006 US-Canada softwood lumber trade agreement, which expired on October 12, 2015. Taylor believed a new agreement was unlikely anytime soon.
Tariffs on other materials causing price increases
In addition to new duties on Canadian softwood, the Trump administration has enacted 25% tariffs on steel and aluminum, critical materials in homebuilding and commercial construction. The administration has threatened even higher tariffs on China, where 22% of imported building materials in US home construction come from.
Santiago Bueno (pictured below), co-founder and CEO of Latii, a cross-border construction materials marketplace, said they have serious concerns about increased prices on home materials.
“We are especially alarmed by the executive order expanding steel and aluminum tariffs to include derivative products such as windows and doors,” Bueno told Mortgage Professional America. “This effectively imposes a 25% duty on essential building components.”
Bueno said the tariffs were causing price markups on items already among the priciest in new home builds.
“Windows and doors already rank among the most expensive line items in custom home construction, sometimes exceeding 10% of material costs,” Bueno said. “The new tariff will impact both importers and domestic manufacturers who rely on global supply chains.”
George Carrillo, CEO of the Hispanic Construction Council, warned new U.S. tariffs could destabilize construction and mortgage markets, citing rising costs, workforce strain, and unclear economic strategy as threats to confidence and affordability.https://t.co/80Gju4baB5
— Mortgage Professional America Magazine (@MPAMagazineUS) April 4, 2025
The increase in prices on building materials, combined with shortfalls in housing supplies, could cause new home construction prices to increase again, Bueno said.
“With building material prices up 34% since December 2020 and the housing market facing a 3.7-million-unit shortfall as of Q3 2024, further cost increases risk deepening the nation’s housing affordability crisis."
Section 232 investigation could lead to the next major tariff
For now, the Trump administration has paused tariffs on imports of softwood lumber pending an investigation – but is expected to eventually push ahead with those measures. The administration announced March 1 a Section 232 investigation, which it said would “assess the national security risks arising from the United States’ increasing dependence on imported timber, lumber, and derivative products like paper, furniture, and cabinetry.”
The Secretary of Commerce is supposed to submit a report on this investigation within 270 days of the announcement.
Taylor notes that the goal is to get the United States’ softwood production to account for 95% of domestic consumption. While he disagrees with his US counterparts, who believe that getting to 95% is possible, he states that either way, ramping up production will require time and investment.
“But the issue is, who’s going to invest in new mills if you don’t know what the trade policy is going to be?” Taylor said. “You want to build a new mill with the idea that, in a 15-year window, you’ll get a return on investment. But if the rules are always changing, who’s going to invest in a new mill with all these wild tariffs going on?”
According to Taylor, brokers working with customers looking to build new homes could see house prices jump in the short term due to possible tariffs on imported home materials.
“[Around] 80% of the gypsum board comes from Mexico,” Taylor said. “If that’s subject to a tariff, that’s going to affect the home builder. And 24% of the softwood lumber comes from Canada. Then you have the framing lumber, the OSB, and other value-added products like pulp, paper, and newsprint.
“The US has a high consumption rate from Canada. Higher than 30%. If all these products are subject to tariffs, if they come from Canada alone, that’s going to increase the cost to the consumer.”
With the results of the Section 232 investigation potentially a few months away, Taylor believes this might be a quiet time until that report drops, and potentially new tariffs are implemented.
However, Taylor can see the Trump administration's end goal as it tries to make deals with these companies that have been recently hit with tariffs or are threatened by future tariffs.
“I don’t think he cares about the number. It’s just a way to get into the negotiation,” Taylor said. “And I think it’s working to his credit. I think he’s getting some countries’ attention pretty quickly. I see there’s an endgame here. I wasn’t sure what it was at first, but I’m starting to see a little bit more of where [Trump] is trying to go. But there are implications of this sort of approach that will be felt by future American governments, because now there is a lack of trust.”
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