Shock and Awe

When I posted the below letter on xTwitter from the National Association of Home Builders to the President in which the builders stated concerns regarding tariffs on Canada and Mexico, I had no idea the debate that would ensue and the ire that would erupt.

Bringing down the cost of housing will require a coordinated effort to remove obstacles to construction, be they regulatory, labor or supply-chain related. The National Association of Home Builders (NAHB) stands ready to work with you to accomplish these goals. However, we have serious concerns that proposed 25% tariffs on Candada and Mexico will have the opposite effect, by slowing down the domestic residential construction industry (my emphasis).

The comments to my post on xTwitter ranged from those that insisted we should be buying American to those that believed this would make homes even more unaffordable. What I did not expect was just how angry people are at the builders. From poor quality to price gouging, the builders do not have a lot of friends. Many also posted this headline in reply to point out how quickly the tables have turned:

Builders had cheered the promise of lighter regulations, but will those potential cost savings be enough to offset price increases for lumber and other supplies if Canada and Mexico do not acquiesce? In a post on Truth Social this morning, the President stated “make your products in the USA and there are no tariffs” and asked, “will there be some pain?” The answer was “yes, maybe (and maybe not).”

Unfortunately for the builders, higher tariffs are not the only headwind they are facing. Notably, although labor was mentioned as important in their letter to the President, the builders did not expressly address what could be a sea change for their industry if threats of large-scale deportation become a reality. Since raids began last week, social media posts have circulated and multiplied like locusts showing new-build sites in Texas, Georgia and Florida bereft of laborers. Awareness seems to be dawning as to just how much housing construction could be impacted. Fear alone has kept many immigrant laborers from reporting to work according to anecdata from xTwitter.

As most of you know I’ve driven over 10K miles in the past two years to do boots-on-the-ground assessments of what is truly happening in cities across America. During that time, I saw thousands of crews and can tell you definitively that the new construction boom has been built on the backs of immigrants. What I cannot tell you is how many were considered “legally authorized” to work in the United States. After visiting and reporting on Colony Ridge - a new-build site outside of Houston turned immigrant camp and foreclosure mill - I tried my best to write about this issue which is just so divisive. Because I always try to start with data though I found it very difficult to form a true assessment of the situation. Until recently, it was very hard to find numbers that made any sense, and I struggled with how to tell this complicated story.

Social media has made it more difficult for us to see gray instead of black and white. As humans we often take cognitive shortcuts, but it seems it has become impossible for the majority of us to perceive that many things can be true at once. For instance, it can be true that cheap, immigrant labor erodes our purchasing power while also true that many of the 40,000 residents in Colony Ridge are being taken advantage of and mistreated as developers of the site make bank. The majority of those that died in the plastics plant in Unicoi, TN were immigrants. I’ve also heard from first responders that immigrants made up a large portion of the missing in these Appalachian mountains as relatives and communities were scared to report or elicit aid from authorities. The issue is messy and complicated. What I saw in Colony Ridge though was shocking. I have traveled the world, and Colony Ridge was definitively not “first-world.” Storage containers as shelter, burned-out buildings, shanties, packs of wild dogs, standing water, loose power lines…When we first arrived, the site was a ghost town. As 5pm rolled around though a long line of cars started pulling into the subdivision. It was clear that those that lived in Colony Ridge worked.

According to the Pew Research Center, the immigrant share of the U.S. population is the highest since 1910. However, we have yet to reach the heights of the peak in 1890.

Regardless of where you stand on this issue, I think there are few now who would argue that there is no issue. The August jobs report for instance showed that native-born Americans lost 1.3 million jobs since August of 2023 while foreign-born workers gained more than 1.2 million jobs. Some have posited that letting immigration run wild was an intentional play to mitigate a wage-price spiral. Whatever the cause of the increase in immigration, we most certainly have to deal with the effects as the builders are now learning.

The shock and awe of the past two weeks have been disconcerting to say the least as I’ve tried to finalize my forecast for 2025. Jaded as I am having worked for a former politician, I have to be honest that I did not expect that any special interest group might find itself on the outs this quickly - especially the builders. Nonetheless I also know we are in early innings and often what is performed in public is not actually what is happening in private, so caution is warranted.

What does all the hullabaloo mean for housing in 2025? Will these tariff tantrums and deportations make housing more unaffordable? Will sales fall even further, or in a shocking twist, rebound? For today’s post we will focus on what’s ahead for 2025 as well as a deep dive into December results with city rankings. A look under the covers of the aggregate sales numbers reveals some surprising strength in key areas who have a message for 2025 - seller motivation is morphing into distress.

Let’s begin…