How Tariffs Are Impacting the Los Angeles Housing Market in 2025

Recently, it seems like everyone’s asking the same thing: Is the housing market about to crash? With alarming headlines flooding social media and the news, fear is spreading fast—and for good reason. A recent report from Clever Real Estate reveals that 70% of Americans are concerned about a housing crash in 2025.

While a full-blown collapse may not be on the horizon, several warning signs are worth watching.

While challenges exist—like tariffs and inflation—homeowners today are in a much stronger position. Here’s what the latest data reveals and why panic may be premature.

American Homeowners Are Sitting on Equity

New data from the Census and ATTOM shows a striking stat: more than two-thirds of homeowners either own their home outright or have over 50% equity. Here's the breakdown:

• 39.3% of U.S. homeowners own their homes free and clear

• 29.3% have mortgages but with over 50% equity

• Just 31.4% have less than 50% equity

While tariffs may drive up construction and renovation costs, the majority of U.S. homeowners are in a solid equity position and unlikely to feel the immediate pressure—unless home values drop sharply. For now, the real risk lies with buyers and investors navigating rising prices in an already expensive market.

Tariffs Are Driving Up Homebuilding Costs

Builders are ringing alarm bells. According to the March 2025 NAHB/Wells Fargo Housing Market Index, tariff hikes could add nearly $9,200 to the price of a new home. Here’s why:

• Tariffs on essential building materials like lumber, steel, aluminum, drywall, appliances, and copper are increasing costs.

• Around 7% of the materials used in new residential construction are imported—meaning tariffs hit where it hurts.

• These rising costs are expected to be passed on to buyers, squeezing affordability even further.

If you’re building or buying new construction, expect price increases and longer project timelines due to strained supply chains and rising material costs.

Investor Confidence in U.S. Bonds Is Cracking—Here’s Why

Government bonds have long been considered one of the safest places to invest, especially in a stable economy like the United States. When markets get shaky, investors typically move their money out of volatile stocks and into U.S. Treasury bonds.

But that’s not what happened when the latest round of tariffs took effect on April 5. Instead of flocking to bonds, investors began dumping them. Why? Confidence in U.S. economic leadership is fading—fast.

Yields Surge Amid Bond Sell-Off

When President Trump doubled down on aggressive tariff policies, it triggered a wave of fear across global markets. Investors no longer saw U.S. government bonds as the safe haven they once were. The result?

• The 10-year Treasury yield jumped from 3.9% to 4.5%

• The 30-year yield nearly hit 5%

Keep in mind, even a 0.2% move in either direction is considered major in the bond world. These swings were dramatic—and telling.

Loss of Trust in U.S. Leadership

At the core of the sell-off is deeper concern: investors no longer trust U.S. leadership. Trump’s erratic behavior, public threats to fire Federal Reserve Chair Jerome Powell, and his willingness to undermine institutions, the judiciary, even American allies—have shaken global faith in the U.S. system.

While Americans may be divided on Trump’s actions, the international investor community is clear: this is not a stable environment. 

The Dollar Is Falling, and the Future Feels Unstable

As investors pull out of U.S. bonds and seek safer ground elsewhere, the U.S. dollar is losing value. And with threats of interference at the Federal Reserve, concerns are growing that interest rates may be manipulated to serve political ends.

If Powell were removed and replaced by a loyalist, markets fear rates would be artificially lowered. But economics is a delicate machine—tamper with one piece, and the whole thing can collapse.

Mortgage Rates Are High—But Could Go Higher

As of April 17, 2025, the average 30-year fixed mortgage rate sits at 6.83%—below the 7% threshold for the 13th week in a row. Compared to last year’s 7.1%, rates have improved, and it’s showing:

• Mortgage application activity is up 13% year-over-year, signaling a healthier spring buying season.

• While higher than pre-pandemic levels, rates have stabilized, giving buyers some room to plan.

While mortgage rates have dipped slightly from last year and buyer activity is rebounding, the outlook remains fragile. If tensions with China intensify and they respond by offloading U.S. bonds, it could spike Treasury yields—forcing interest rates even higher and potentially derailing the housing market’s recovery.

Housing Affordability Is Getting Worse

As construction and renovation costs rise, those increases are passed down to consumers. That means higher home prices and rising rents, especially in areas with limited housing supply. 

Los Angeles Real Estate Market Amidst Tariffs

In Los Angeles market 37% of homes sold above asking price, the market has not seen a significant slowdown. Buyer demand remains strong, fueled by limited inventory and resilient pricing. Homes that are well-priced and located in desirable neighborhoods with strong school districts are selling fast—often with multiple bids.

Another factor driving demand is buyer displacement: families who lost their homes in recent fires in Altadena, Pasadena, and the Palisades are actively purchasing replacement properties. With limited inventory across Los Angeles, especially in prime locations, well-positioned homes are moving quickly.

Even amid tariff-related uncertainty, demand remains strong, and the best properties are still selling fast—often above asking.

Bottom Line:

While we may not be facing a housing crash for now, the road ahead looks rocky. Between inflation, tariffs, and shifting interest rates, affordability remains a top concern for both buyers and renters in 2025. Staying informed—and working with a trusted real estate advisor—can help you navigate the challenges and opportunities ahead.