“How’s business?” I asked Chris last week.
Chris builds houses here in Florida. He’s adding a small deck to my place as I write.
Big, new houses are popping up everywhere – only to get snatched up as soon as they’re for sale. Realtors tell me, “There is no supply.”
But all I’ve got is anecdotal evidence. I am not the expert. I am not down in the trenches.
The U.S. imposed a 21% tariff on lumber imports in November. And more recently it imposed tariffs on steel.
I wanted to ask someone with “boots on the ground” how the tariffs on steel and lumber are affecting the housing market here in Florida. So I asked Chris.
Here’s what I found out…
I’ve written a lot about the bull market in Florida housing. As longtime readers know, Florida real estate near the coast makes up the biggest part of my personal investment portfolio.
Housing here still looks like a great deal today… But I want to know what’s coming next.
And if you want to know what’s coming next, you don’t ask the realtor. They are at the end of the chain. Instead, you want to find out what’s happening early in the chain.
For example, if you learned that consumer-electronics giant Apple (AAPL) ordered 50% fewer chips for its iPhones, then you could guess that Apple is worried about iPhone sales next year.
Chris is early in the chain. He actually builds the houses – the parts of them you’ll never see. He mostly does “framing” – so he orders a lot of wood and steel.
He is down in the trenches. And last week, he told me his business is booming…
“It’s going crazy,” he said. “I take about 100 phone calls a day. And my business partner is bidding on jobs almost all day long.”
“What about the tariffs?” I asked. “Did that affect your business?”
“Oh, I about had a heart attack,” he said. “We had bids out for jobs, and jobs that we’d won. And I had to go back to those builders and tell them I needed to raise the price on the job by 20%, because my materials cost was skyrocketing.
“They were stressful calls to make,” he continued. “But in the end, each builder ultimately said, ‘All right, let’s do it.’ I was worried. But it told me the housing market is strong.”
Prices for building materials are rising – you bet. Aaron Terrazas, the senior economist at leading real estate website Zillow, recently commented on this too…
“These costs have largely been passed along to consumers,” Terrazas said in a story on MarketWatch.com. He explained that tariffs have added $6,000 to $10,000 to the cost of a median-priced home.
All this gives me at least two takeaways today…
- Tariffs have definitely raised housing costs… They have forced the cost of a new home higher.
- The housing market is incredibly strong… It swallowed the higher costs and hardly slowed down. (It didn’t slow down at all for Chris.)
That means real estate is still a good deal right now.
Yes, house prices have gone up for years. Yes, tariffs have driven house prices even higher.
Regardless, the housing market is still extremely strong, with no supply and lots of demand. That combination means higher house prices are still ahead of us… at least here on the Florida coast.
Good investing,
Steve
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Source: Daily Wealth