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By Heather Stone, Senior Correspondent
American house prices are expected to increase by 3.5% in 2025, which marks the slowest annual growth rate in more than ten years. This projection, based on a wide overview of housing analysts, reflects a housing market that struggles with affordability problems, increased mortgage interest and newly imposed rates for important building materials.
Although in the first instance lower mortgage interest rates were expected to offer any exemption, recent policy decisions reform the housing views. President Donald Trump has announced a significant increase in rates for steel and aluminum import, so that they are doubled to 50%. These rates increase alarms in the construction and real estate sectors, because they are expected to blow up the construction costs and slow down the development of new houses, especially in the affordable housing segment.
Construction costs rise
Rates on steel and aluminum have a direct influence on the costs of building houses. Estimates in the industry suggest that the raised rates can add around $ 10,900 to the costs of building a typical single -family home. Essential materials such as steel beams, aluminum façade cladding and roof components are all more expensive, which in turn raises the total project costs.
The prices for steel and aluminum have already risen in response to the rates. For example, aluminum premiums for American buyers were sharp, while steel prices also registered remarkable profits. These material costs increases are passed on to the Supply Chain, which leads to more expensive projects for housing.
Impact on the housing stock
The increase in construction costs is expected to hinder the new home development. Almost nine out of ten housing analysts investigated indicated that the rates will probably lower the number of built houses or force developers to construct smaller units to maintain profitability.
This challenge makes existing problems on the housing market. The construction expenditure in the housing sector has fallen for successive months, driven by reduced investments in single -family homes. Builders are already struggling with high loan costs and a surplus of unsold inventory, and the new rates are likely to worsen these difficulties.
Affordable housing projects are particularly vulnerable. Developers in this segment work with tight margins, and even modest increases in material costs can derail planned projects. As a result, communities that already have to deal with housing shortages see, fewer new units can come online, so that the market is further tense.
Mortgage interest and affordability of buyers
Although the interest rates of the Federal Reserve are expected later in the year, the mortgage interest rate remains high. The current average rate for a fixed mortgage of 30 years is almost 7%, considerably above the record lows that are seen during the pandemic. This increase in rates has limited the purchasing power of potential home buyers, in particular first buyers.
Affordability remains a crucial care. Fewer analysts now believe that the conditions for first buyers will improve the following year, with expectations for improvement that falls considerably compared to previous surveys. The combination of increased house prices, increased mortgage interest and higher construction costs has created a difficult environment for buyers at entry level.
Wider economic care
The rates also influence a broader economic sentiment. Entrepreneurs throughout the country have expressed their concern about the potential for disruptions of the supply chain as a result of trade policy. Many fear that the increased costs for raw materials will lead to higher prices for consumers and reduced competitiveness for American products.
In addition to housing, the rise in the prices of the building material is expected to influence the market for repair and renovation market for home. Higher costs for repairs can lead to increased premiums for home insurance policies. Analysts predict that the home insurance rates can increase by no less than 11% by the end of 2025, which contributes to the financial tribe among homeowners.
Look forward
Although an increase in house prices by 3.5% suggests a cooling market compared to previous years, the combination of macro -economic factors and policy decisions creates a complex environment. The extra burden of building rates can lead to long -term shifts in how and where houses are being built, and can change the pace of housing in the United States.
As market participants adapt to these evolving circumstances, policy makers and market leaders must consider strategies to support the affordability and supply of homes. Monitoring of economic trends and the adjustment of policy accordingly will be crucial to guarantee a balanced and accessible housing market for all Americans.
