Ongoing California wildfires, freezing weather in the south, and President Donald Trump’s inauguration have made headlines in recent days. These topics—and others—also provided a foundation for the Jan. 22, 2025, Walker Webcast. During the hour-long event, Zelman & Associates’ CEO Ivy Zelman and Walker & Dunlop’s Chairman and CEO Willy Walker discussed politics, nature and affordability as it pertains to housing.

The Political View

A large concern has been the inflationary prospects of President Trump’s proposed tariffs on lumber from Canada and concrete from Mexico. Zelman said that in talking with industry contacts, this could boost the cost of goods and possibly home prices by 4% to 6%. “That doesn’t necessarily mean they’ll be able to pass that along to the consumer,” she said. Builders are incentivizing to improve absorption and, in turn, are pushing (costs) back to suppliers in regard to building materials. This could curtail supplies, though home prices might not be in trouble. However, “if the builder does take that price increase, it means more upward pressure on home prices, which stretches affordability,” Zelman said. “I think it’s a lose-lose, either way.”

While tariffs could be problematic, Zelman said she’s more concerned about labor. Many of the major builders don’t have undocumented workers on the payroll, nor do the trades. However, “they sub out so much of their work, and it just kind of trickles down,” Zelman observed. “I think there’s a bit too much complacency among the industry as it relates to the risk of deportation. I think it could be impacted more than people are anticipating, especially in light of an already aging workforce.”

Discussions About Supply

Zelman acknowledged that the publicly traded homebuilders are behaving prudently when it comes to new supply. “We’re anticipating growth in the new home market to be 5% per year in 2025 and 2026,” she said. Part of the reason for the modest outlook is due to issues like entitlements. Furthermore, “they already have a lot of spec on the ground,” Zelman explained. “They started a lot more homes in 2024 and didn’t move them as fast as they would have liked, so they’re actually dialing back on starts.”

Walker also brought up existing home inventory and how lock-in interest rates of under 5% are keeping American homeowners in place rather than in the market. Zelman acknowledged that the lock-in impact will keep existing turnover below historic trends.

But additional factors could increase existing home inventory. Zelman suggested that a move from a more expensive market to an affordable one could be at play. Rising property taxes and insurance costs are “causing many people to rethink ownership in certain parts of the country,” Zelman said.

Furthermore, lifestyle changes could also be involved. Zelman said that people might be empty nesters, might not need as much space or might want to take advantage of the equity in their homes. “We’re seeing some of that now, where they’re at a life inflection point where they need to move,” she added.

The Wildfire Issue

Zelman and Walker discussed the destruction of homes in California and whether it would have a national impact. Zelman suggested that the impact likely won’t be national. “The speed of rebuild will be slow, especially in areas like the Palisades, which are more likely custom homes,” she said. “I don’t think a massive production homebuilder will come in and rebuild there.”

However, there’s been a near-term benefit for area rentals. “We’re definitely seeing inflation, not only in single-family rental and multifamily prices but for-sale prices,” Zelman said, adding that such prices aren’t sustainable and will moderate.

The concern here, other than the terrible loss of property and lives, is insurance. Specifically, the cost of insurance and the ability to even get it. According to Zelman, homeowner’s insurance isn’t being renewed for friends of hers who live in Newport Beach and Orange County. While the state’s Fair Plan is an alternative, the maximum payout is $3 million, which might not be enough for many of the homes.

“I think there are more people that are reconsidering whether they want to stay in areas that are at risk, whether it be fires or floods,” Zelman said. “That’s going to cause some outbound migration.”

On-demand replays of the January 22 Walker Webcast are available through the Walker Webcast channels on YouTube, Spotify and Apple. Subscribe to get invites, replays and articles for new Walker Webcast episodes every week.