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As the frigid winds of winter have seized the second month of the year, they serve as a chilling metaphor for the deep freeze that continues to grip our local real estate market—where sellers remain scarce, buyers face relentless headwinds, and the long-awaited thaw continues to tease us from what seems to be an ever-distant future.
The supply shortage: a crisis years in the making
Beneath this icy market reality lies a deep structural issue—one reflected in the stark numbers that define Monroe County’s housing crisis. It’s hard to believe that five years into this deep freeze, Monroe County’s housing supply remains alarmingly scarce, with only 135 single-family homes priced above $200,000 on the market (a calculation based on the multiple listing service).
To put the current market in perspective, the real estate research app Reventure reports that there were 1,561 single-family homes available for sale in Monroe County in January 2017; last month, there were 400. This scarcity isn’t unique to our region; in fact, it mirrors a national trend where demand continues to outstrip supply.
The lock-in effect and lagging new construction
At its essence, the U.S. housing crisis can be described as overwhelming demand confronting chronically insufficient supply. This shortage stems from two primary factors: first, the “lock-in effect,” which has kept existing homeowners from selling; and second, a construction sector failing to keep pace with demand.
The lock-in effect can be solved either because mortgage rates fall or because of the changing needs of families. The 1,200-square-foot starter home that was perfect for a newlywed couple no longer makes sense after five years of marriage and the addition of several children. Conversely, as children head off to college and the home becomes quieter, parents may find it practical to downsize, reducing the financial burdens of a larger residence.
Unfortunately, lower borrowing costs remain elusive, trapped in the uncertainty of economic policy and inflation concerns—challenges that we’ll dive into in a moment.
The other major driver of the housing crisis—one that has only become more concerning amid recent developments—is the insufficient pace of new housing starts. According to Freddie Mac, in the third quarter of 2024 the U.S. faced a shortfall of 3.7 million housing units. That’s nearly a 50 percent increase since 2018. Yet, despite this pressing shortage, only 1.36 million new housing starts were reported for 2024, which is down from the 1.42 million reported for 2023. This is a fraction of what is needed.
Trump’s housing policies: a mixed bag
Recognizing the dire consequences of this deficit, President Donald Trump signed an executive order on his first day in office that urges a range of actions intended to increase housing supply and affordability. Days later, however, he imposed a 25 percent tariff on imports from Canada and Mexico—a move seemingly at odds with his stated goal.
U.S. housing construction depends heavily on imported materials. The National Association of Homebuilders reports that 70 percent of sawmill and wood products imported in 2023 came from Canada. Similarly, 71 percent of lime and gypsum products came from Mexico. With tariffs in place, construction material costs drive up both new home builds and renovation projects. These increased costs could further discourage housing starts, exacerbating the already dire inventory shortage.
Economic uncertainty and the road ahead
Beyond supply constraints, economic policies also play a crucial role in shaping the housing market. In the summer of 2022, the U.S. Consumer Price Index peaked at 9.1 percent before declining to 2.6 percent by December 2024. However, according to the Federal Reserve Bank of Boston, the proposed tariffs on China, Canada and Mexico threaten to push inflation 0.5 to 0.8 percentage point higher next year. This resurgence in inflation could keep mortgage rates elevated, further discouraging potential buyers and stalling new construction.
Additionally, anticipated deficit spending, stricter immigration policies, and the extension of tax cuts favoring the wealthy may compound these challenges, potentially leading to even higher borrowing costs and a more sluggish housing market.
A prolonged trade war could also dampen our nation’s gross domestic product. The Conference Board estimates that proposed tariffs on products coming from China, Canada and Mexico could reduce GDP by 0.9 percentage point, a significant reduction from the Board’s 2.3 percent forecast for 2025. An economic slowdown would lead to job losses, further weakening housing demand as consumer confidence and purchasing power decline.
Then again, the president’s trade wars could simply be a calculated move to gain leverage over our trading partners. When faced with economic pressure, Colombia quickly agreed to repatriate citizens who had entered the U.S. illegally and the threat of tariffs was removed. And Canada and Mexico agreed to enhanced border security in an effort to stem the flow of fentanyl into the United States. As a result, the president delayed enforcement of his border tax strategy for 30 days.
The president then expanded his threatened tariff war on Super Bowl Sunday, announcing a 25 percent tariff on all steel and aluminum imports—not just those from Canada and Mexico.
Whatever his endgame, one thing is certain: no one, including Donald Trump, wants a prolonged and painful trade war. But until this dispute is fully resolved, affordability will remain out of reach for many and the housing market will remain frozen in uncertainty.
Mark Siwiec is CEO/broker with Elysian Homes.
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