This year, the National Association of Home Builders’ Remodeling Market Index revealed that in the fourth quarter of 2017, the RMI reached 60 for the second time since 2001.
Although the demand for home renovation has continued to increase in 2018, recently imposed tariffs are expected to reduce affordability for homeowners seeking renovations, according to an article written by Diana Olick for CNBC.
As of today, President Donald Trump has imposed a 10% tariff on $200 billion of Chinese imports. The Chinese are expected to retaliate with a 5 to 10% tariff on $60 billion of U.S. exports, according to Capital Economics.
According to Olick, NAHB claims that about $10 billion worth of Chinese products are exclusive to home building and remodeling.
Furthermore, the tariff starts at 10% and could potentially increase by 25% by the end of 2018. The NAHB notes this could be the equivalent of a $2.5 billion tax increase on the industry, according to the article.
From the article:
Contractor Justin Sullivan manages home renovation projects in the Washington, D.C. area and says costs are going up so much so fast that he is doing something he has never done in his more than a decade in the remodeling business.
"Clients and contractors are having to set contracts with escalation clauses for projects that are being scheduled for six months from now, largely because we're not sure how far prices are going to go north," said Sullivan.
Sullivan says it is a quick education for new clients, who were already fighting to get projects scheduled, given the high demand and labor shortage. Higher home values have given homeowners more ready cash and more incentive to improve their investment. Now his clients have one more worry.
Last year, the homebuilding industry took a tremendous blow when Trump imposed tariffs on Canadian softwood lumber.
Since then, homebuilders have struggled to stay afloat in market navigating affordability concerns.
“The prices of land, labor and lumber continue to spike, and while builders have largely proven able so far to deliver homes at prices that are accessible to many buyers, buyers will ultimately bear the brunt of those rising builder costs,” Zillow Senior Economist Aaron Terrazas said.
For the remainder of the year, homeowners looking to renovate homes may have to dig a little deeper into their pockets.