Lower Mortgage Rates: Can They Offset Tariffs?

real estate agent showing house to potential buyer
  • Mortgage rates dropped from over 7% in 2023 to around 6.5% early in 2024. This made buyers more interested.
  • Taxes on imports made building materials cost 20% more, which makes homes less affordable.
  • When mortgage rates went down by 0.25%, mortgage applications jumped up 12% in February 2024.
  • There are still not many homes for sale in Las Vegas, even though more people want to buy because rates are lower.
  • Lower mortgage rates help a little with the problem of homes being too expensive because of rising prices and taxes on imports.

Taxes on imports are making things cost more in many areas. People are worried about how this will affect the housing market, especially in places like Las Vegas. But, someone who studies housing markets, Logan Mohtashami, says there is something that can help: lower mortgage rates. This article looks at how taxes on imports and interest rates work together. It talks about what this means for people buying, selling, and investing in homes in Las Vegas.

cargo containers and wooden building materials

What Are Taxes on Imports and Why Do They Matter for Real Estate?

Taxes on imports are taxes that governments put on goods and materials that come from other countries. The main reason for these taxes is to help businesses in their own country compete with businesses from other countries. But, when these taxes are put on important things used to build houses — like wood from Canada, and aluminum and steel from China — the prices go up. This affects the whole housing market.

In housing, the things that get taxed the most are often things needed to build houses: nails for roofs, wallboard, materials to keep houses warm or cold, and steel for buildings. A group called the National Association of Home Builders (NAHB) says that taxes on materials from China and Canada have made building costs go up by more than 20% for some things. This really changes how much building projects cost. These extra costs can make a new house cost tens of thousands of dollars more. This means fewer regular people can afford to buy a house.

What makes this worse is that these extra costs usually don’t stay just as extra costs. Builders add them to the price buyers pay, or they make the houses less fancy to save money. In the end, taxes on imports make houses cost more. This is already a problem in Las Vegas, where paychecks are not going up as fast as home prices.

incomplete house frame with rising material costs

How Taxes on Imports Make Prices Go Up and Hurt Housing Affordability

Taxes on imports do more than just make new houses cost more. They make prices go up in general, in different ways. Materials cost more, workers cost more as more work needs to be done, and people end up paying more for things they use at home, like furniture and appliances. Many of these things also cost more because of taxes on imports.

This rise in prices hurts the housing market in many ways:

  • Building new homes slows down because builders have trouble making money.
  • Prices of existing homes go up because there are fewer new homes to compete with them.
  • Rent prices go up because people who can’t buy homes have to rent instead.
  • Cost to fix up homes gets higher, especially for investors who want to improve properties.

In places like Las Vegas, where homes are already hard to afford, these rising prices push even more people to rent. This puts even more pressure on the rental system. And if not enough new, affordable homes are built, having a place to live quickly becomes something only people with good timing and money can have, not just something everyone needs.

Lower Mortgage Rates: A Way to Help With High Costs

When prices are going up because of taxes on imports, one way to make things better is to change money rules — specifically, to lower interest rates. Lower mortgage rates make monthly payments smaller. This makes it less expensive to borrow money, even if home prices are high.

Logan Mohtashami, from HousingWire, makes a good point. He says that while taxes on imports make things cost more, lower mortgage rates can help balance things out by making it easier for people to buy homes. Basically, if borrowing money costs less, people can pay a little more for a house without their monthly payments going up too much.

For example, if mortgage rates go down from 7% to 6%, the monthly payment for a $400,000 home can go down by more than $250. This amount each month can be a big deal in whether someone can get a loan or not — especially for people buying their first home who don’t have a lot of money saved for a down payment. In a larger sense, lower mortgage rates make it easier for people to buy homes. This helps the housing market and the economy overall.

Rates can’t completely get rid of the higher material costs from taxes on imports. But, they can keep people buying homes when the market might otherwise slow down too much.

real estate agent reviewing rate chart with homebuyer

2024 Mortgage Rate Trends – Where Are We Now?

To understand what’s happening, it helps to look at what mortgage rates have been doing recently. In early 2024, mortgage rates started to go down. They had been very high in 2023, going over 7.25% for a 30-year loan.

Several things are making rates change:

  • What the Federal Reserve is doing: The Federal Reserve had been raising interest rates to fight rising prices for almost two years. Now, they are suggesting they might lower rates later in 2024 and in 2025.
  • Prices are not going up as fast: Prices kept rising in 2022 and 2023, which made rates go up. But now, paychecks are not increasing as quickly, people are not spending as much, and the cost of some materials is going down. This is helping to bring rising prices closer to the Fed’s goal of 2%.
  • World economy is uncertain: There are problems around the world, like political issues, less factory work in China, and signs that the U.S. economy is not growing as fast. This is making leaders think about lowering rates to help the economy.

Because of these things, mortgage rates are expected to stay somewhat low — between 6.0% and 6.5% — for the rest of 2024. This gives people who couldn’t buy homes before a chance to buy now. It also helps people who own homes to refinance their loans or move.

happy couple viewing home listing on laptop

Mortgage Rates Help Buyer Activity

Lower mortgage rates not only help people who already have loans save money on interest. They also make people want to buy homes again. This is often called the “rate stimulus effect.” When it costs less to borrow money, people who were waiting to buy homes start looking again, and the market picks up speed.

February 2024 is a good example. When mortgage rates went down by just 0.25%, a group called the Mortgage Bankers Association said that applications for mortgages went up by 12% in one week. That’s a huge jump from a small change in rates. It shows how much the housing market depends on how much it costs to borrow money.

Why does this happen so much? Because many buyers can only spend a certain amount each month. If prices go up, they can’t just spend more. But when rates go down, that same monthly amount can cover a larger loan. Or, people can buy a home sooner with less money saved because they can get a loan for a home they can afford.

Logan Mohtashami points out that 2023 was the slowest year for home sales in 30 years. But, what happened in early 2024 shows that changing rates is important for keeping the housing market steady. Without these changes, rising prices and taxes on imports could really hurt the housing market.

aerial view of Las Vegas suburbs

Las Vegas Housing Market: Uniquely Vulnerable or Resilient?

Las Vegas is a housing market that changes quickly. But it also has some things that make it special. The city depends a lot on jobs in service industries, tourists, and money from investments. This makes it likely to change quickly when things in real estate change.

When the economy slows down, demand can disappear fast. But when borrowing money gets easier, Las Vegas also gets a lot of buyers — especially investors from California and other expensive states looking for better deals. This makes the city both able to bounce back and quick to react to changes.

Someone who knows Las Vegas real estate, Steve Hawks, says, “Las Vegas reacts faster than almost any market. When rates go up, things stop. When they go down, buyers come back fast.”

People looking to buy in Las Vegas in 2024 see two things:

  • Rates are better than last year — making homes more affordable again.
  • There are still not many homes for sale — so it’s getting competitive again.

These two things are making the Las Vegas housing market very busy right now. Buyers need to act fast when they find something they like. Sellers might want to sell now while things are good for them.

construction site in desert with limited building activity

Tax Impact on Las Vegas Home Construction and Supply

Material costs have gone up a lot because of higher taxes on imports, especially on things from Canada and China. These places are important sources for many of the materials used to build houses today. Builders in Las Vegas say that many materials cost 15–30% more than they did before the new taxes.

These higher prices are slowing down building and making builders rethink their plans. Some are putting off building whole neighborhoods. Others are making houses less fancy or smaller to keep prices at a level buyers can afford.

This lack of homes is a big problem in Las Vegas because more people keep moving there — from California, Arizona, and even other countries. This problem makes home prices go up, not just for new houses, but for all homes, because there are not enough homes for sale.

For both buyers and renters, this means there is a lot of competition and not many choices. This makes it even harder for people to afford housing in one of the fastest-growing areas in the Southwest.

Homebuyers’ Dilemma: Act Now or Wait for Rates to Drop Further?

The big question is: Should buyers buy now or wait to see if interest rates get even lower?

People have different ideas, and the best thing to do depends on each person:

  • Your money situation: If you are already approved for a loan, have a job, and can pay the current rates, waiting might not help much.
  • Where you want to buy: In places like Las Vegas, where prices are going up and there are not many homes for sale, waiting could mean missing out on homes that are available now.
  • Rates can change: Even though rates are expected to keep going down, they can go back up if the economy changes or the Federal Reserve makes announcements.

Steve Hawks says that the best thing to do is be practical, not try to guess what will happen: “Buy the home that works for you. Waiting for a slightly better rate could mean you miss out on the right home — and you can always get a new loan later if rates go down.”

This makes sense because most people get new loans within 3–7 years after buying a home. So, the first rate is important, but not the only thing to think about.

investor holding calculator near rental property

Real Estate Investments in a Tax-Laden Economy

For investors, taxes on imports make things both harder and potentially better.

On the bad side, higher building and fixing costs make projects more expensive. This can reduce profits, especially for investors who buy houses to quickly fix and sell, because they need to be fast and keep costs low. But, because there are fewer homes for sale and more people want to rent, there is a chance for investors who want to buy and rent out properties.

Low mortgage rates also make things better for investors. Getting loans at around 6% for a long time means they know what their loan payments will be. And as rent prices go up in places like Las Vegas, they can make more money from rent.

Also, homes that already exist become more valuable because it costs more to build new ones. This is a side effect of the taxes on imports that make building harder. This increase in value can mean long-term profits for people who own homes already.

The Federal Reserve’s Role in Dealing With Both Taxes and Rates

The Federal Reserve is in charge of managing the economy and trying to balance rising prices with economic growth. Taxes on imports make this more complicated. On one hand, they make some prices go up, which makes the Fed want to keep interest rates higher. On the other hand, they slow down the economy, which makes the Fed want to lower rates.

In its updates about money rules in 2024, the Fed has talked more about how problems with getting supplies and taxes on imports are making prices rise. These are things that are not changed by just raising or lowering interest rates. This has made the Fed take a more careful approach. They are suggesting they will likely lower interest rates soon.

As investors and regular people look to 2025, how the Fed deals with rising prices and world trade problems will affect everything from how affordable loans are to whether building projects are possible.

federal reserve building with cloudy sky

What Should Buyers and Sellers in Las Vegas Do Now?

People buying and selling in Las Vegas need to understand a housing market that is changing in complex ways.

If you’re buying:

  • Get approved for a loan and watch mortgage rates every day.
  • Think about all the costs of owning a home, not just the price.
  • Look for new homes for sale or homes that are coming back on the market soon, and act quickly.

If you’re selling:

  • Take advantage of the fact that there are not many homes for sale and that lower rates are bringing buyers back.
  • Price your home competitively to get multiple offers.
  • Move quickly — lower rates will not guarantee things stay good forever.

Hawks says: “Trying to guess what interest rates will do can make you miss out. If you can afford the home and you like where it is, go ahead and buy it. Rates don’t buy homes — people do.”

Final Thoughts: Balancing Things Out in Unsure Times

Lower mortgage rates are helping to make up for the problem of homes being too expensive because of taxes on imports and rising prices in general. These lower rates can’t fix all the cost problems caused by trade rules. But, they stop people from feeling too negative and help keep the housing market working.

Las Vegas, which changes quickly when rates change, shows this clearly. It shows how much people in the market react to even small changes in interest rates — and how quickly things can get out of balance between homes for sale and people wanting to buy.

Whether you are buying, selling, or investing, it’s important to understand how lower mortgage rates and higher building costs are working against each other. Now, more than ever, being ready financially, staying informed, and working with local experts can make a big difference between being frustrated and finding a good opportunity.

Citations