Proposed tariffs on Mexico by President Donald Trump could have an impact on the U.S. economy, especially the housing market.
“Prices for homes could go even higher,” said CNBC reporter Diana Olick. “Mexico supplies a lot of materials to build large apartment buildings and single family homes.”
A new report by CNBC states that Mexico is the fifth-highest supplier of concrete in the U.S., totaling $110 million in 2018. Mexico also accounts for 11% of all U.S. steel imports.
The report added that home prices could rise if the proposed 5% tariff on all Mexican imports, which could increase over time, is handed down.
The Federal Housing Finance Agency (FHFA) reported last month that home prices rose 1.1% in Q1 2019 from Q4 2018, and 5.1% year-over year, according to the most recent Home Price Index.
“House prices have risen consistently over the last 31 quarters," said Dr. William Doerner, FHFA Supervisory Economist. “Although price growth is still positive, the upward pace is softening across the country, especially among states with the largest supplies of housing."
Home prices rose in all 50 states, according to the FHFA, however, according to First American’s Real Home Price Index (RHPI), affordability also increased in this time, up for the first time since 2016 in March. Additionally, First American notes that real home prices, or home prices adjusted for inflation, have fallen despite nominal growth.
“In March, two main components of the RHPI swung in favor of increased affordability—continued strong household income growth and declining mortgage rates,” said First American Chief Economist Mark Fleming. “Nationally, affordability improved on a year-over-year basis for the first time since 2016.”
Mortgage rates have been steadily declining over the past few months, and Freddie Mac’s latest Primary Mortgage Market Survey reported rates for 30-year fixed rate mortgages dropped below 4% for the first time since January 2018.
Freddie Mac reports that 30-year fixed-rate mortgage (FRM) averaged 3.99% for the week ending on May 30. Last year, the 30-year FRM average 4.56%.