US Housing Market Faces Challenges in 2025

According to Fitch Ratings, the US housing market is expected to experience a slowdown in growth in 2025. This projection is primarily due to the increasing cost pressures from higher tariffs and restrictive immigration policies.

Impact of Trade Protectionism and Labor Shortages

Trade protectionism is anticipated to raise the prices of essential construction materials. Meanwhile, labor shortages, worsened by immigration restrictions, are likely to increase labor costs. "Foreign born, non-citizen workers represent an overwhelming share of key specialty construction occupations, and immigration restrictions are likely to raise labor costs," Fitch highlighted.

Current Market Trends and Future Outlook

In February 2025, housing starts saw a 2.9% decline compared to the previous year. Although home inventory has improved, it remains below pre-pandemic levels. This shortage is a result of years of insufficient construction and limited existing home supply. The outlook for 2025 suggests flat to declining activity in the housing sector as these pressures continue to mount.