Additional help could be on the way for first-time homebuyers.
As a candidate, President Joe Biden proposed the First Down Payment Homebuyer Tax Credit, which could be significant in aiding potential first-time homebuyers. For starters, the credit could be used to cover all or a considerable share of a buyer’s down payment. With home prices rising ever higher, any down payment assistance is welcomed when a family is looking to buy.
For years, aspiring minority and millennial homebuyers have struggled unsuccessfully to save enough for a down payment. Sky-high student loan payments along with ever-increasing childcare costs and other urgent needs have made the goal of buying that first home elusive for too many Americans. Add to that the financial hardships brought upon us by the COVID-19 pandemic, which has hit minorities and lower-wage workers particularly hard. These demographics especially would immediately benefit from the Biden proposal.
Down payment assistance – in this case, up to $15,000 – could make all the difference in helping hopeful buyers get a foot in the door. And making the credit advanceable would mean buyers could access the funds upon closing rather than having to wait until next year when their tax return is filed and the refund arrives.
That said, policies to increase the supply of homes are equally important. As we take a look at the
current housing market and mortgage data, we see an upward trend. For instance, existing-homes sales
totaled 5.64 million in 2020 – their highest level since 2006, before the Great Recession – with mortgage
rates at all-time lows. But while demand is high, supply is registering at a 50-year low. This means home
prices will continue to soar unless more residential units can be created. So, tax and other incentives that
increase supply are equally important in order to keep home prices affordable.
Information compiled by the National Association of Realtors