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| Each week, the Silicon Valley Association of Realtors (SILVAR) shares local housing data, sales trends, expert insights and other real estate-related topics. This week, the association provides insights from local economist Oscar Wei on how tariffs could impact the real estate market. |
While global economic growth is projected to continue through 2025, one local economist believes that the housing market could face troubled waters.
Oscar Wei, a deputy chief economist for the California Association of Realtors, said economic uncertainty stemming from inflation and tariffs may cause turbulence and a slowdown in the housing market. Exacerbating these factors are significant disruptions from potential trade policies.
“If tariffs are implemented as proposed, we could see a substantial impact on the economy within the next year,” Wei cautioned. “Right now, we don’t have a schedule, so it’s hard to know how tariffs will be implemented.”
President Donald Trump was scheduled to announce a set of sweeping new tariffs, or taxes on imports from other countries, on the afternoon of April 2, which he has named “Liberation Day.”
Wei emphasized the uncertainty surrounding the timing and scope of these tariffs could have a huge impact on the U.S. and the global economy, especially if a trade war ensues. Canada and Mexico are major trading partners with the U.S., particularly in the construction and real estate sectors. Tariffs could raise prices and disrupt the supply chain for essential building materials such as steel, lumber and concrete, causing an overall slowdown in the real estate market. These factors could ultimately drive up U.S. consumer prices, potentially adding over $1,200 annually to the average household’s expenses.
Wei said we may not see the immediate impact of tariffs, but geopolitical tensions and financial market risks could present challenges in the next 12 months. In response, central banks may be more cautious as a mitigation strategy.
“Banks would probably lower rates if the economy slows down,” he said.
Given these uncertainties, the U.S. Gross Domestic Product is expected to slow to 2.3% in 2025 and 2.2% in 2026. China’s GDP is predicted to slow from 4.5% to 4.1% in 2026, while India’s GDP could grow from 5.9% to 6% next year. GDP is a comprehensive measure of a country’s economic activity and growth.
Economists reportedly expect the U.S. dollar to strengthen against most foreign countries in 2025. This would increase the cost of investing in U.S. property, further reducing demand from overseas buyers, Wei said. Already in 2024, the share of international buyers dropped to the lowest in California since 2020.
“Wage growth has to be strong to make up for the increasing costs of living” Wei said.
Over the last 40 years, the home price-to-income ratio has increased to record highs in the United States, he added.
While wage growth is slowing and interest rates remain high, the California housing market faces unique challenges due to the lack of affordable homeowner’s insurance and low inventory.
Despite these uncertainties, Wei expressed cautious optimism about the state’s housing market.
“So far in California, we’ve seen a slight increase in home sales, about .4%. It’s not a dramatic start, but lower mortgage rates and tight housing supply should keep home prices growing. Still, uncertainty in trade policy could cause housing market volatility.”
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.
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