Key Highlights

  • Biden proposing $15,000 first-time homebuyer tax credit that could be immediately accessible and serve as down payment
  • Federal Housing Authority (FHA)could reduce its monthly insurance premiums
  • Mortgage rates slowly rising

Newly inaugurated President Joe R. Biden is focusing his housing policies on affordability.  Here are the policies most important to Biden’s housing proposals:

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  • $15,000 first-time homebuyer tax credit
  • Urging big banks to return to FHA lending
  • Encouraging new construction in both single- and multifamily housing
  • Strengthening Community Reinvestment Act designed to assist low- and moderate- income areas

These are tall orders to apply to this country’s present-day housing market.  Currently, the supply of homes for sale has plunged -40% compared to one year ago, according to realtor.com, and competition among homebuyers to purchase those houseshas brought typical “days on the market” totals down to only 66 days, compared to 80 DOM last year at this time. Additionally, home prices, according to CoreLogic,have increased faster than at any other time in the last 6 years.  In just one month, November to December 2020, home prices, spurred by nearly record-low interest rates and pandemic-demand for larger suburban homes, increased more than +8%.

Biden’s proposed $15,000 first-time buyers (defined as buyers who have not purchased a home in three years) tax credit could be immediately accessed then serve as a down payment on a home.  (First-time buyers, according to the National Association of REALTORS®,represented 32% of all buyers in November.)

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Both homebuyers AND homebuilders would definitely take advantage of Biden’s proposed $15,000 tax credit if this tax credit passes through Congress.  We’ll have to wait and see on that.  We’ll also have to wait and see whether or not Biden’s more “flexible and inclusive” migration proposals will pass through Congress.  If migration policies ease, the homebuilding industry will likely have more documented and undocumented construction workers available to build new houses while simultaneously reducing labor costs.

To expand financing opportunities for more homebuyers, Biden’s proposals to more actively engage and increase FHA AND big bank and non-big bank lending to low-income homeowners would help expand access to available credit and more affordable mortgage lending.  (Since big banks are bound to comply with the Community Reinvestment Act (CRA), big banks, though not non-big banks, are obligated to reinvest funds from communities from which they take deposits. Biden wants to strengthen the CRA by making non-banks to comply with CRA policies.)

While pushing for more high-density multifamily home construction to expand more affordable housing opportunities, Biden will have to walk a fine line between easing some regulatory and zoning restrictions and not degrading the environment.  And Biden will have to walk a fine line between building a sustained economic recovery and a lessened economic relief role for the Federal Reservekeeping interest rates at near record lows.

David Stevens, a former FHA commissioner and former CEO of the Mortgage Bankers Association, said that he doesn’t anticipate a major surge in interest rates.  He and other economists are forecasting the standard 30-year fixed mortgage rate to be in the ballpark of mid-3% rather than December’s record low of 2.76%.

Of course, we cannot anticipate how the full Congress will weigh in on Biden’s housing proposals but in the meantime, we can be assured that the new administration will push for more affordability via its proposals that could affect tax credit, lending, migratory labor and trade policies as they all relate to housing.

Thanks to CNBC.

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