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President Joe Biden has laid out a plan to address the nation’s affordable housing issues, including new tax breaks for first-time home buyers and “starter home” sellers. However, experts have different opinions on this proposal.
“We know that housing costs are very important to you,” Biden said in his State of the Union address Thursday night.
“If inflation continues to fall, mortgage rates will also come down. But we’re not waiting.”
“Starter home” sales credit system for home buyers
Biden is proposing a “mortgage relief credit” of $5,000 a year for two years for middle-class first-time homebuyers. This is equivalent to lowering mortgage rates on median-priced homes by 1.5 percentage points over two years. According to a summary released by the White House on Thursday.
The administration is also seeking one-year loans of up to $10,000 for middle-class families who sell a “starter home” to another owner-occupier. They define starter homes as properties that are below the median price in the seller’s county.
U.S. President Joe Biden delivers the State of the Union address in the House of Representatives at the U.S. Capitol on March 7, 2024 in Washington, DC.
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“Many homeowners have mortgage rates that are lower than current rates,” the White House said. “This ‘lock-in’ effect makes homeowners reluctant to sell or give up their low interest rates, even in situations where their current home no longer suits their household’s needs. Masu.”
But experts say it’s difficult to predict whether Biden’s proposal will advance, especially in an election year with a divided Congress.
Interest rates remain near “highest levels in decades”
Redfin reports that 2023 was the least affordable year for homebuyers in more than a decade due to rising home prices and mortgage rates.
According to the report, in 2023, a person with a median income of $78,642 in the United States would spend 41.4% of their income on purchasing a home with a median price of $408,806, up from 38.7% in 2022. ing.
Although interest rates have fallen from their peak in 2023, the average interest rate on a 30-year fixed-rate mortgage is still hovering around 7% as of March 7th.
“Mortgage rates are nearing their highest levels in decades.” Keith Gumbinger, vice president of mortgage website HSH, says:
“Unless [Biden’s proposed credit] “While it counts as qualifying income, it doesn’t actually make it easier for homebuyers to qualify for a mortgage,” he said.
A “housing supply crisis” is occurring.
Of course, rising mortgage rates are just one piece of this country’s affordable housing puzzle.
“The housing supply crisis has actually gotten worse since the Great Recession,” said Janeke Ratcliffe, vice president of housing finance policy and leader of the Housing Finance Policy Center at the Urban Institute.
In fact, the housing supply crisis has deepened since the Great Recession.
Janique Ratcliffe
Deputy Director, Housing Finance Policy, Urban Research Institute
Since the economic crisis, there has been a “perfect storm” of problems in the country’s housing supply, including a decline in new home construction, he said.
“What the market doesn’t need today is more demand,” Gumbinger said. “There’s a lot of demand, but there’s not enough supply.”
Still, Ratcliffe said he was pleased to see the emphasis on housing affordability in the State of the Union address. “I think this is a great starting point,” she said.
