Trump Tariffs Could Slow US Housing Market in 2025

Donald Trump’s recently unveiled tariff plans have sparked a stock market meltdown and stoked fears of a looming recession, which experts said would further slow down an already “comatose” U.S. housing market.

On Monday, the S&P 500 share index fell nearly 3 percent after a tumultuous week during which Trump first announced sweeping 25 percent tariffs on imports from Canada and Mexico and then paused them for a month for most products coming from the two countries. On the same day, the Nasdaq share index dropped by an even worse 4 percent.

Realtor.com senior economist Joel Berner told Newsweek that the recent nosedive in the stock market could slow down the housing market even further, “as prospective buyers are watching some of their wealth that they might be using for a down payment on a new home evaporate.”

Why It Matters

The U.S. housing market is already facing an affordability crisis as a result of years of skyrocketing prices, pent-up demand, a historic shortage of inventory, and high mortgage rates.

As many aspiring homebuyers have found themselves pushed to the sidelines of the market, U.S. sellers are being forced to slash their asking prices and homes for sale are spending an increasing amount of time on listing websites before going under contract.

This slowdown of the housing market could only be exacerbated by a recession, Berner said. “Price reductions and time on market are already elevated in 2025 as the market has started to rebalance, and buyers having less money in their pockets and more trepidation about making a major purchase will only accelerate these trends,” he told Newsweek.

Will The U.S. Plunge Into A Recession In 2025?

While the likelihood of the U.S. entering a recession this year has increased, there is no certainty that this is the direction the country is headed towards—especially as the U.S. economy still shows signs of great resilience.

According to the latest data released by Bureau of Labor Statistics (BLS) on Wednesday, inflation eased more than expected in February, with the Consumer Price Index (CPI) up 2.8 percent from a year earlier and up 0.2 percent from January. While nonfarm payrolls increased by less than expected at a seasonally adjusted 151,000 in February, both the unemployment rate, at 4.1 percent, and the number of unemployed people, at 7.1 million, “changed little in February,” the bureau reported.

“Recent employment figures don’t point to a recession upcoming, but as the Trump administration continues to fight a trade war, we may see softer employment figures coming up as businesses find that their international sales slow down and the cost of imported inputs increase,” Berner said.

“The stock market is not the economy, but it does represent an outlook on business performance that we know is subject to trade policy. The underlying labor market remains strong for now, but is not impervious to the effects of tariffs.”

Greg McBride, chief financial analyst for Bankrate, told Newsweek that even as the odds of a recession have increased, they are still low. “The economy is coming from a position of strength—low unemployment and solid growth—that does provide some cushion from a deeper downturn,” he said.

Daniel Hornung, former deputy director at the National Economic Council, agrees that “given the underlying strength of the labor market and the American consumer, there is no reason other than policy uncertainty that the U.S. economy would enter into a recession.”

This uncertainty, however, has been growing in recent weeks as a result of Trump’s whirlwind of policy changes, increasing the risk of an economic slowdown or recession. “But it is too early to know,” McBride said.

Steve Hanke, a professor of applied economics at Johns Hopkins and author of the forthcoming book Making Money Work, told Newsweek, “a U.S. slowdown and eventual recession are baked in the cake.”

“The stock of money is lower than it was in the summer of 2022, and the rate of growth in the money supply remains anemic—only growing at 3.9 percent per year,” he explained. “That’s well below ‘Hanke’s Golden Growth Rate’ of 6 percent per year, a rate consistent with hitting the Fed’s inflation target of 2 percent per year,” Hanke added. “Since 1913, the U.S. money supply has only contracted four times, and each contraction has been followed by a recession.”

What makes the current monetary contraction particularly foreboding is that the Trump administration is “tariff-happy,” Hanke said. “Remember that the monetary contractions of 1929-1933, which led to the Great Depression, were aggravated by the Smoot-Hawley tariffs.”

What Impact Would A Recession Have on the U.S. Housing Market?

The consensus among experts is that even as a recession would not shake the U.S. housing market to the point of causing a crash, it would not be good news either.

“The housing market has been near comatose due to high home prices, high mortgage rates, and a limited inventory of homes available for sale,” McBride said. “A recession wouldn’t help. When unemployment rises and incomes are less predictable, that doesn’t give prospective buyers the confidence to go out and buy homes,” he said.

“The housing market never smiles on a recession,” Hanke told Newsweek.

“During a recession, it’s hard to see many bright spots in housing. And if that’s not bad enough, about 8 percent of the materials used to construct a home are imported,” he said. “Trump’s tariffs will tax these construction materials and could add another $10,000 to the cost of building an average house in the U.S.”

The U.S. imports about 30 percent of the softwood lumber it uses in home construction, according to the National Association of Home Builders (NAHB); much of this material comes from Canada, and it is likely to become more expensive because of tariffs against the U.S. neighbor.

Hornung said that if a recession were to occur, it would likely set the country’s housing affordability challenges “back even further by drying up the lending and projected demand that is necessary to build housing.”

Last month, the NAHB’s Housing Market Index, or HMI, showed that confidence among homebuilders was plunging as the Trump administration’s plans of mass deportations and tariffs against Canada and Mexico threatened to hit the construction sector hard.

According to Dr. Wayne Winegarden, an economist at the Pacific Research Institute, a recession will worsen affordability by reducing household’s incomes and diminishing the number of houses and apartments sold. “The adverse impacts will be felt more acutely in areas that are already less affordable such as the Los Angeles and San Francisco areas,” he told Newsweek.

Lower Mortgage Rates, But Little Relief

A recession would lead to lower mortgage rates, as long as inflation did not surge at the same time, experts said. But Americans who have seen their purchasing power eroded by high mortgage rates in recent years would not particularly benefit from it.

“When the economy is in bad shape, not a lot of people are looking to buy homes. Some of the periods we’ve seen really low mortgage rates we also saw really low home sales because if the economy stinks, nobody wants to buy a house,” McBride said.

Before chaos unfolded in the stock market this week, a majority of experts expected mortgage rates to remain between 6 percent and 7 percent in 2025 and 2026.

Can Buyers At Least Look Forward To Lower Prices?

No matter how hard one searches for the silver lining in a looming recession, experts warn that there isn’t one—not even cheaper homes.

“Falling home prices would not be an upside,” McBride said.

“If home prices were falling in a meaningful way, we wouldn’t be celebrating this as good news for the 2-3 million first-time homebuyers, we’d see it as a disaster for the 85 million homeowners who have a large chunk of their wealth tied up in home equity.”

A recession, however, could create motivated sellers, the economist explained, “and because of sluggish activity, well-qualified buyers would have more homes to select from and more room to negotiate without fierce competition from other buyers.”