April 25, 2017 11:05 pm

Softwood lumber tariff could hike U.S. single-family home prices by $1,236: study

The White House denies its trade actions toward Canada are politically motivated, but as Jackson Proskow reports, U.S. President Donald Trump's recent statements suggest otherwise.


The average price of an single-family home in the United States could jump by $1,236 due to U.S. President Donald Trump‘s tariff on Canadian softwood lumber exports.

That’s according to the National Association of Home Builders (NAHB), which acts on behalf of the building industry across the United States, in an economic analysis that it published on Tuesday.

“NAHB respectfully disagrees with comments made by Commerce Secretary [Wilbur] Ross that the tariffs on Canadian lumber imports into the U.S. will have little effect on the cost of housing,” NAHB chair Granger MacDonald said in a statement.

“While Ross cannot cite specific consequence regarding this punitive tariff, we can.”

Workers pile logs at a softwood lumber sawmill in Saguenay, Que., on Nov. 14, 2008.

THE CANADIAN PRESS/Jacques Boissinot

The NAHB’s calculation doesn’t necessarily reflect exactly how much they think the average single-family home price could go up thanks to the tariff.

Instead, the $1,236 figure reflects the effect of the increased price that homebuilders would have to pay for lumber.

“It’s an analytical number used to generate the economic impact number,” NAHB chief economist Robert Dietz told Global News.

READ MORE: Donald Trump announces 20 per cent tariff on Canadian softwood lumber

The NAHB used similar methodology to estimate the increased cost of an average-priced multi-family home at $424.

It also estimated that investment in single-family homes could drop by $945.1 million, and by $146.1 million in multi-family structures.

But the NAHB has another estimate that shows the potential for home price increases: how much they’ve gone up this year due to a lumber price hike that already happened this year.

Lumber prices have already grown by 22 per cent since January, and it’s happened as producers have anticipated the new tariff, the NAHB noted.

A worker uses a forklift to move lumber at Delta Cedar Products in Delta, B.C., on Friday January 6, 2017.


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Those increases have already added almost $3,600 to the price of a new single-family home, it said in a news release.

Dietz estimated that every time a U.S. home price increases by $1,000, it keeps approximately 150,000 households from being able to qualify for a mortgage.

That means as many as 450,000 households have already been priced out of a mortgage this year. It could be as many as half a million if home prices keep climbing, Dietz said.

READ MORE: Justin Trudeau tells Donald Trump he will ‘vigorously defend’ Canadian lumber

The NAHB isn’t the only party concerned about home prices going up as a result of the tariff.

“U.S. homeowners will pay a price” as the cost of lumber hits its highest levels following the financial crisis, wrote Derek Holt, VP and head of Capital Markets Economics at Scotiabank.

And home prices aren’t the only reason to be concerned, BMO economist Alex Koustas said in a Tuesday note.

Construction workers work on a new home being built in Oakville, Ont., on Monday, July 23, 2012.


Renovations, furniture and consumer goods account for the “lion’s share” of lumber consumption, he said; homebuilding only amounts to about a third.

Dietz couldn’t provide any data about renovations or furniture.

But he summarized the potential impacts of the tariff as follows:

“Anything, whether it be framing, appliances, furniture or other components in the home that involve softwood lumber, millwork, will be more expensive as a result of the tariff,” he said.

Not everyone is so concerned about the tariff’s impact on home prices.

Harry Nelson, an assistant professor in UBC’s Faculty of Forestry, doesn’t think it will be very significant.

“When it comes to the cost of a home, I don’t think that registers on most people’s radar screens,” he told Global News.

“We’re looking at 1.5 per cent or something. On the margins it matters, but overall, it’s not a major driver of home prices, nor is it going to lead to some kind of downtick in terms of overall housing demand.”

© 2017 Global News, a division of Corus Entertainment Inc.

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