Money for Nothing… Biden’s Plan Sounds Good, but Won’t Solve the Affordability Issue for First-Time Buyers
On March 4th, I watched the State of The Union address from President Biden, as well as the Republican response, which I believe there has been enough discussion about. While most of the President’s speech seemed to sound like a Democratic Party rally, there was one part that I thought was very interesting to the housing industry and the possibility of helping first time buyers with homeownership regarding affordability. The President mapped out how the average first time buyer would save close to $400 per month on their mortgage payment! That sounds terrific and should certainly help more first time homebuyers qualify for their new home. This sort of “subsidy” for the first two years would be like getting a mortgage with a rate about 1.5% lower than current market rates. Unfortunately, the “Devil is in the Details”.
In this case, President Biden was actually talking about the $5000 per year tax credit for first time home buyers for the first two years that they own their home. In the world of politics, this is translated to $433 per month for the first two years. But, that is not how it will work. While the $5000 “tax credit” would be nice, it does not reduce the first-time home buyer’s payment. It simply saves them in taxes paid on their Federal Tax Returns. It does not help the first-time home buyer qualify for their new home as it is not a Government Payment Subsidy; it is a tax credit. In previous articles, I’ve explained how the increase in both home prices and interest rates has made it difficult for many potential first-time homebuyers to enter the market. This combination has rendered housing unaffordable for a significant number of people.
Perhaps the President, the House and Senate can actually get to know the real issues with the lack of affordability for first time home buyers and truly come up with a plan that does subsidize their payments for two to three years. A tax credit? Really? What happens to that tax credit if tax rates go up? $400 per month Government payment subsidy for two years will certainly help our affordability issues for our first time buyers. Perhaps both sides of the aisle can come up with a plan that will actually help our first time buyers and not blind us with headlines that only cost the average tax payer more money on a program that does not solve the problem they are trying to fix.
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Thursday, March 14, 2024
