Next time you walk into Lowe’s or Home Depot, take a few minutes to look around and see how many stocked items used for building materials and repairs are made in China. Perhaps you’ll then appreciate the challenge that home builders, renovation specialists, repair people and iBuyers face when trying to “make a buck” in light of the latest tariff situation with the US and China.
Focusing specifically on iBuyers, many products iBuyers need to paint, repair and sometimes renovate houses they buy to flip are now more expensive. The National Association of Home Builders (NAHB) says, according to Kathleen Howley writing for HousingWire, “tariffs will boost housing construction and renovation costs by $25B.
Mike DelPrete, a real estate strategist who focuses on the iBuying market, said, “In iBuying, it’s razor-thin margins anyway, so any sort of ripple in the pond has the potential to disrupt.”
Though some of the largest iBuyers are generating profits from other parts of their businesses, such as attracting mortgage customers, DelPrete went on to say, “…if you’re…buying and selling thousands of homes a month, higher costs have a potential impact…” on any business’s bottom line.
According to the NAHB, construction imports from China that were imported as of May 13, 2019, now carry a 25% tariff on concrete, nails, screws, ceramic tiles, asphalt roofing shingles, light fixtures, kitchen cabinets, circular saw blades, stainless steel used for appliances and various types of raw materials. US Customs and Border Patrol agents collect the tariffs from American importers, not from China, when the goods enter the US. American importers. In turn, American importers then pass along the tariff costs to distributors of those imports who then pass along those costs to the consumer.
“To be clear, tariffs are taxes paid by American businesses and consumers, not by China,” said David French, senior vice president of government relations with the National Retail Federation.
Certainly iBuyers will do the same as all business will do… pass along tariff costs for construction imports to potential buyers of their flipped houses if they are to make any profit at all.