Would you buy something today if you had justifiable concerns that it may cost 10% less next month? Swings of this size are exceedingly rare in real estate, but with tariffs, many suppliers, importers and manufacturers are worried that if they purchase something now with a 20% tariff and that it's negotiated down to 10% a few weeks/months from now, it could erode all their profit or worse.
Here are some thoughts on how this could play out:
1. Add 10, 20, 30% or more to the cost of something and chances are you will pass this cost (or part or the bulk of it) to the consumer. That could trigger inflation.
2. Yesterday we saw that there was a surge in imports prior to the April 2nd tariffs announcement. Companies were stocking up either to have lower priced goods/components (that maybe they can charge extra for?) before the tariffs kicked in. Now, the cost of many of those goods/components that cost 5, 10, 20, 30% more could be offset by these up front purchases without the higher tariffs till tariff deals are negotiated and finalized. This could negate/absorb some or all of the tariff costs.
3. In 2022, imports to the US accounted for about 15.6% of the U.S. gross domestic product. The other 84.4% is not imported, ie: the vast majority. So while GDP dipped in the first quarter prior to April 2nd, might the impact on prices be less than some assume?
4. Politicians have every motivation to negotiate tariff deals Fast. The volume of bad sentiment and fear is growing rapidly. That is the ultimate motivator for politicians to speed up negotiations.
Markets, investors and business owners hate uncertainty. Most times it leads the majority of them to pause, to hesitate. Or cut costs. Layoffs (UPS is laying off 20,000 people) to boost profitability. Or raise prices (remember the Covid excuse used for everything?)
Then there are those who view a hesitation nation as one filled with opportunity. While UPS lays off people, Amazon is spending $4 billion to beef up delivery services to smaller US towns (already the largest delivery service in the US). Yes, often in these moments lie some of the best buying opportunities. While many will hesitate, others will recall recent history to be reminded that during moments of fear lies opportunity. Especially now when the fear of the impact of higher tariffs to raise prices combined with general inflation would under almost all circumstances convince anyone that once things calm down, home prices will not be coming down and if they do come down, for the most part those dips will be small and temporary.
Those who theorize a big dip in home values is coming may be right only if there is a surge in job losses. Good luck getting a mortgage without a job! You may need even more luck then to find a rental.
