Tariffs, Rising Costs, and the Future of Vermont Real Estate

By New England Landmark Realty LTD

Vermont's housing market is already grappling with a tight inventory, high mortgage rates, and affordability challenges. New tariffs on building materials from Canada and Mexico could further escalate home prices and construction costs. If you're a homebuyer, builder, or homeowner in Vermont, buckle up—these policy shifts could directly impact your bottom line.

Tariffs: A Hidden Tax on Homeowners

The Trump administration's latest round of 25% tariffs on Canadian and Mexican imports—including key construction materials like lumber, steel, and aluminum—could be a game-changer for Vermont's housing market.

Why does this matter? Canada and Mexico account for 25% of U.S. building material imports. Like much of New England, Vermont relies heavily on these materials for new construction and home renovations. With construction costs up 30% since 2021, another price hike could slow down residential building projects and push home prices even higher.

We've seen this play out before. In 2018, tariffs on Canadian softwood lumber led to an 80% spike in lumber prices and added nearly $9,000 to the cost of a single-family home. This time, homebuilders are sounding the alarm that tariffs could stall construction projects, worsen affordability, and make Vermont's housing crisis even more severe.

Higher Costs, Fewer Homes, More Competition

Vermont's inventory has been inching upward but is still historically low. As of late January, active listings stood at 634,979 nationwide, compared to 936,263 in 2015. This means buyers still compete for fewer homes—especially in high-demand areas like Burlington, Stowe, and Montpelier.

The new construction was supposed to be the pressure valve. However, some projects could be delayed or canceled, with builders facing higher material costs and labor shortages. Fewer new homes will hit the market, driving up prices for existing homes.

If you're a buyer, you might be paying even more for a house. If you're a homeowner, this could increase your property value—but it also means home improvements will cost more. Are you thinking about a new roof or a home addition? Expect to shell out extra cash.

Mortgage Rates Hold Steady—For Now

While tariffs dominate headlines, mortgage rates have remained relatively stable. Last week, the 10-year yield closed at 4.54%, keeping mortgage rates in the 7.25%-5.75% range for 2025. However, any economic fallout from tariffs—such as inflation or job losses—could increase rates.

On the bright side, mortgage spreads have improved since 2023, meaning rates are lower than they could be. If spreads had remained at last year's levels, we'd be looking at 8% mortgage rates today. However, if the spreads improve further, rates could dip closer to 6%, fueling a more substantial housing recovery.

Key Takeaways for Vermont Homebuyers and Homeowners

  1. Home Prices Are Likely to Rise – Tariffs on building materials could increase construction costs, making new homes more expensive and increasing competition for existing homes.
  2. Renovation Costs Will Climb – If you plan home improvements, expect higher prices on lumber, steel, and other materials.
  3. Inventory Remains Tight – While housing supply is improving, it's still below pre-pandemic levels, and tariffs could slow down new home construction.
  4. Mortgage Rates Are Stable (For Now) – While mortgage rates hold steady, economic uncertainty could change that. If spreads improve, we could see rates dip below 6%.
  5. Builders May Slow New Projects – Rising material costs and labor shortages may lead to fewer new homes being built, intensifying the housing crunch.

What's Next?

The real estate market is a moving target, and these tariffs could reshape Vermont's housing landscape over the coming months. Whether buying, selling, or building, staying informed is key.

For buyers: Act strategically—if rates drop or inventory improves, be ready to move.

For homeowners: Consider renovations now before material costs rise further.

For investors, Watch for shifts in demand. Higher prices could drive more interest in multi-family or rental properties.

Need Expert Guidance?

Vermont real estate is changing fast, and navigating these shifts requires local expertise. Tony Walton and his team at NELandmark.com are here to help. Whether you're buying, selling, or just trying to make sense of the market, call us at 802-253-4711. Let's find the best strategy for you in 2025.