MTPR

Tariffs Driving Up Prices For New Montana Homes

Nov 26, 2018

We’re taking a look at housing prices in Montana. Looking first at the market for new homes, they’re getting more expensive.

"The tariff combined with natural disaster just made the cost of lumber rise sharply,” says Ryan Frey, the president of the Missoula Building Industry Association.

The tariff he’s talking about is a 20-percent tariff on Canadian softwood imposed by President Trump last December. 

“I think the numbers stayed about a $7,000 increase to the cost of a national average-sized home. This is on the back of some pretty major hurricane stuff, which always brings pricing up for sheet goods, say plywood; we’ve seen dramatic price increases in that, though it’s come down a little bit recently."

I talked to Frey at a job site his company, Saddle Mountain Construction, is working on, a new multi-family housing project in Missoula’s Slant Street neighborhood. 

“Yeah, we’ve got two foundations in and two more to go in the back section, so we’ll be putting in four houses fairly close together right here on this lot,” Frey says. 

It’s a bitterly cold, drizzly fall morning. We seek the shelter of Frey’s work truck to talk more.

“New construction, in general, is not getting asking price. There’s some negotiation. We’ve seen a leveling out in the top end. We’ll see if that trickles down, further,” Frey says.

Leveling out at the top end means the most expensive new homes aren't selling like they used to. And it’s not just tariffs on Canadian lumber. The Trump administration also levied tariffs on billions of dollars of Chinese imports this year. 

A recent National Association of Homebuilders report finds roughly $10 billion worth of goods vital to the residential construction industry will be subject to those tariffs this year and next. The Association says that equates to a $2.5 billion, industry-wide cost increase to builders.

“All the costs will get passed on to the consumer," Frey says. "I mean, we’re a bunch of small developers employing a lot of people. But, you can’t really eat too many costs because we have to survive, and our families have to survive too.”

Those tariffs hit finish products, such as certain kinds of flooring, particularly hard says Dave Prosper, manager of Pierce Flooring and Design Center in Missoula.

“Probably over 80 percent of that product is made in China.”

Dave Prosper of Pierce Flooring and Design Center in Missoula, Montana.
Credit Edward O'Brien / MTPR

Prosper’s talking about one of the flooring industry’s hottest products. Insiders call it W.P.C. It imitates hardwood or tile and features a waterproof core. He says tariffs have already jacked-up W.P.C. prices. Another tariff-related price hike is expected by year’s end. 

“In some cases, we are looking at a 25 to 30-percent increase in the cost of that product due to the tariffs,” Prosper says. 

That’s not a unilateral decision on Pierce Flooring’s behalf. Prosper says the entire flooring industry is being forced to dramatically raise prices on popular Chinese-made hard flooring products.

“It’s a huge increase is right. And if you’re looking at a thousand square feet of product, all of a sudden, you’re going from, let’s say, $4,000 to a $5,000 increase. In some cases, people are going to have to rethink their product selection and maybe not go with some of these products affected by tariff and go more with conventional type of product that’s manufactured here in the United States or is not affected by the tariff."

But contractor Ryan Frey says it’s difficult, if not downright impossible to get around China’s massive manufacturing footprint.

“So I’ve seen our suppliers trying to find different places where they can get product, but China’s such a huge manufacturing hub, it’s unavoidable. We can’t just say ‘no Chinese products,’ or otherwise the cost is going to go dramatically higher.”

He predicts tariffs and rising interest rates will slow the pace of new home construction in Montana next year. Mortgage giant Freddie Mac reported on Weds., Nov. 21 the rate on 30-year fixed-rate mortgages was up nearly 1 percent from last year, and is now at 4.81 percent.