Trump’s tar­iffs up Cal­i­for­nia new home costs by $20K-30K

The Fresno Bee (Sunday) - - Insight - BY KATE IRBY [email protected]

President Don­ald Trump’s tar­iffs have cre­ated the “per­fect storm” at the wrong mo­ment for the hous­ing in­dus­try, Cal­i­for­nia builders say.

The Cal­i­for­nia Build­ing In­dus­try As­so­ci­a­tion es­ti­mates tar­iffs have driven up the cost of an av­er­a­ge­size new home by $20,000 to $30,000.

That comes from tar­iffs ap­pli­ances, cer­tain counter tops and other mis­cel­la­neous items that “at the end of the day, re­ally add up,” ac­cord­ing to Den­nis Fitz­patrick, owner of Fitz­patrick Homes in Modesto.

The in­dus­try was al­ready strug­gling, par­tic­u­larly in Cal­i­for­nia, be­cause of in­creased costs. They face ris­ing fees from lo­cal gov­ern­ments and a short­age of space and la­bor to build. The added cost and un­cer­tainty of tar­iffs have pushed it that much fur­ther, builders say.

“This cre­ated the per­fect storm of the wrong kind,” said David Lo­gan, di­rec­tor of Tax and Trade Pol­icy at the Na­tional As­so­ci­a­tion of Home Builders. “All the stars aligned for the worst outcome.”

The tar­iffs against China in­creased from 10 per­cent to 25 per­cent in May on about 500 items in­volved in hous­ing, such as ap­pli­ances, nails, light­ing, lam­i­nate, tile, cab­i­nets and other com­mon fin­ishes in hous­ing made from alu­minum, steel and lum­ber.

The home builders as­so­ci­a­tion es­ti­mates the tar­iffs will ul­ti­mately cost home buy­ers $2.5 bil­lion per year na­tion­wide. Fac­ing those costs, builders such as Fitz­patrick have to find other ma­te­ri­als to use in homes or pass the charges di­rectly on to their cus­tomers — those look­ing to build or ren­o­vate their homes.

Trump has billed the tar­iffs as nec­es­sary to fight unfair ac­tions by China, in­clud­ing in­tel­lec­tual prop­erty theft. He con­sis­tently says that China is pay­ing the tar­iffs, though ex­perts agree that consumers are the ones who end up pay­ing for tar­iffs.

While the tar­iffs are not the most cost pro­hib­i­tive part of build­ing a home, par­tic­u­larly in Cal­i­for­nia, they can price some fam­i­lies out of the mar­ket.

Dan Dun­moyer, president of the Cal­i­for­nia Build­ing In­dus­try As­so­ci­a­tion, said in­creas­ing the cost of $500,000 home in the state by even $10,000 would price out thou­sands of fam­i­lies. The me­dian price of a home in Cal­i­for­nia in June was $611,000 ac­cord­ing to state data.

“So it is a tip­ping point for those fam­i­lies,” Dun­moyer said. “But so many other things have pushed it up to that point,” he added, cit­ing the ex­pen

sive and un­reg­u­lated com­mu­nity fees as­sessed by lo­cal gov­ern­ments.

New tar­iffs are go­ing into ef­fect this week. They don’t tar­get hous­ing prod­ucts, but the builders worry that the costs to consumers will make it more dif­fi­cult for peo­ple to save up money for a down pay­ment.

Lo­gan says the longterm ef­fects of these tar­iffs could choke off new con­struc­tion, and they’re lead­ing builders to fo­cus on cater­ing to peo­ple with higher in­comes or en­cour­ag­ing those with moder­ate in­comes to build with less space.

“I’ve heard of in­stances when projects have had to stop be­cause of pric­ing changes in the the mid­dle of a project,” Lo­gan said.

Fitz­patrick said his com­pany has stopped of­fer­ing some prod­ucts, such as quartz, be­cause of the tar­iffs. If cus­tomers ask for it, Fitz­patrick said the com­pany warns them it will cost them a lot more.

His com­pany stopped buy­ing cab­i­nets from China, which nearly dou­bled in price, and in­stead started buy­ing them from Mex­ico. Trump has said the tar­iffs would en­cour­age the buy­ing of more Amer­i­can-made prod­ucts.

Al­ready, the in­fla­tion­ary ten­den­cies of tar­iffs have meant that many dis­trib­u­tors will in­crease costs be­fore a tar­iff has gone into ef­fect, Fitz­patrick said. If a project will take a year or more, dis­trib­u­tors an­tic­i­pate a tar­iff might hap­pen and there­fore in­crease costs to cover that pos­si­bil­ity.

“Then you’re try­ing to get loans when you don’t know what the cost will be in a few months,” Fitz­patrick said. “I’d say the un­cer­tainty is cost­ing more than the ac­tual tar­iffs.”

ANDY AL­FARO aal­[email protected]­bee.com

Con­struc­tion at a new Flor­sheim hous­ing de­vel­op­ment off Lin­coln Oak Drive in Modesto, Calif. is pic­tured on Wednesday, Jan. 17, 2018.

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