As new U.S. tariffs and economic shifts take hold, one sector is feeling the heat more than most: housing.
From rising mortgage rates to soaring construction costs and tightening housing inventory, the dream of owning a home is becoming more expensive—and more difficult. Whether you’re planning to buy a home, build new construction, or just trying to make sense of today’s housing market, here’s what you need to know.
Why Mortgage Rates Are Rising in 2025
If you’ve been watching the market, you’ve probably noticed that mortgage rates have been steadily increasing. Two major forces are behind the trend:
1. Government Spending Is Pushing Rates Higher
The U.S. government is increasing its deficit spending—adding up to an estimated $1 trillion per year. To cover this, the Treasury releases more 10-year bonds, which mortgage rates are tied to. As bond yields rise, so do interest rates on home loans.
2. Baby Boomers Are Retiring in Large Numbers
Nearly two-thirds of Baby Boomers have now left the workforce. As they shift their investments into safer assets like Treasury bonds, less capital is available for lending. This reduces liquidity in the market and drives up borrowing costs across the board—including for mortgages.
Building a Home? Expect Higher Costs in 2025
Thinking of building a house? Prepare for rising costs on two fronts:
Labor Shortages Due to Immigration Policies
Proposed plans to deport millions of undocumented workers—many of whom are in construction—are expected to cause a significant shortage in skilled labor. Fewer workers mean higher wages and longer construction timelines.
Tariffs on Building Materials
Materials like steel, aluminum, copper, and lumber are all seeing price hikes due to new tariffs and trade restrictions. These essential resources are critical for construction, so their rising costs directly impact the final price of a new home.
Homeowners Insurance Premiums Are Also Increasing
It’s not just home prices on the rise—insurance premiums are spiking too. Rebuilding a home or repairing damage now costs significantly more due to both material and labor shortages. Some experts predict a 20–30% increase in home insurance premiums in the coming year.
Why Baby Boomers Staying Put Is Hurting the Market
Unlike previous generations, Baby Boomers are aging in place rather than downsizing or moving into assisted living. This means fewer homes are being listed, and inventory is shrinking, leaving younger buyers to fight over a limited supply of homes.
What This Means for Millennial and Gen Z Buyers
If you’re a Millennial or Gen Z homebuyer, you’re up against the toughest housing market in decades. Here’s what you’re facing:
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Fewer homes for sale
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Higher costs for new builds
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Increased insurance premiums
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Rising mortgage rates
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Slower wage growth compared to housing prices
Bottom line: Homes are becoming less affordable, especially for first-time buyers.
Is There a Silver Lining for Current Homeowners?
Yes. If you already own your home, inflation actually works in your favor:
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Your fixed-rate mortgage stays the same, even as the dollar weakens.
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Your home value may rise thanks to high demand and low supply.
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You gain equity simply by staying put in a rising market.
The Bigger Picture: Housing Inequality Is Growing
These trends are creating a wider gap between those who already own homes and those still trying to break into the market. Established homeowners are poised to benefit, while new buyers face increasing barriers to entry.
Unless there’s a major policy shift or economic stabilization, the housing market will continue to fuel financial inequality in America.
Final Thoughts: Stay Informed, Stay Ahead
Understanding how tariffs, economic policy, and demographic shifts affect real estate is more important than ever. Whether you’re buying, building, or just watching the market, staying informed is the first step to making smart decisions.
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