“The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent on a seasonally adjusted basis in March, after rising 0.2 percent in February, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.4 percent before seasonal adjustment.”
Will home sales pick up at all this year? It could happen. Because inflation is declining at the moment, thanks to the tariff chaos. That’s because economic growth is slowing as the supply bottlenecks increase for autos, auto parts, construction materials and just about everything else that is imported.
This will ultimately drive-up prices, unless ultimately resolved, or we have a recession.
Fed Chair Powell said recently that the tariffs are causing too much uncertainty for the Fed to act one way or the other now, which is reflected in the sudden drop in the Consumer Price Index inflation in the above graph. There is the fear of recession in the air, which is discouraging home buyers as well.
It’s also keeping much needed new home construction on the sidelines. “Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” said NAHB Chief Economist Robert Dietz. “The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariff
Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,324,000. This is 11.4 percent below the revised February estimate of 1,494,000 but is 1.9 percent above the March 2024 rate of 1,299,000.
Housing should be aided by moderating consumer inflation but fixed mortgage rates are still hovering close to 7 percent. Housing construction is attempting to fill the supply void. But prices won’t improve because of the tariffs on Canadian lumber and metals such as aluminum, for starters.
Meanwhile housing costs continue to go up. Newsweek reports that between March 2024 and March 2025, the biggest year-over-year price jumps were reported in the cost of natural gas (up 147.6 percent), copper wire and cable (up 13.4 percent), softwood lumber (up 12.6 percent) and construction sand, gravel and crushed stone (up 8.3 percent).
Who can still afford to buy a home? The NAR's 2025 Home Buyers and Sellers Generational Trends report found that the combined share of younger boomers (ages 60–69) and older boomers (ages 70–78) rose to 42% of all home buyers in the past year. Millennials dropped to 29% of all buyers – down notably from 38% a year ago. Generation X buyers (ages 45–59) held steady at 24%.
So first-time, entry-level homebuyers are being left out of the market at present. Home sales would pick up if the Fed Governors would realize how lower rates would energize buyers. I believe the Fed could lower rates in June, just in case the supply bottlenecks really begin to grind activity to a halt. Everyone seems to be waiting to see what President Trump’s grand plan may be, other than to intimidate every other country on the planet (which won’t work).
So, the tariffs are making home buying even less affordable. It looks like we will have to wait until the Fed begins to cut interest rates again and we see lower mortgage rates.
With the crazies in charge, who knows when?
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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