Biden’s Proposed Tax Credit Could Drive up Home Pricesadmin
President Elect Joe Biden has proposed a $15,000 tax credit to help first-time homebuyers purchase a property. The proposed First Down Payment Tax Credit is meant to help families offset the costs of homebuying. Buyers will receive the tax credit when they make the purchase instead of waiting to receive the assistance when they file taxes the following year.
The National Association of Realtors Chief Economist Lawrence Yun responded to the proposed tax plan by saying that the $15,000 tax credit is good news since it can go a long way in terms of helping first-time homebuyers and minority households. However, this is only one part of the solution.
Although this plan seems like a good path to take to increase homeownership in America, there are also dangers to the tax credit.
“The full story is that stimulating the demand just by itself is insufficient,” Yun said. “The $15,000 will certainly help the possibility for the potential first-time buyers, but the only way to make that impactful is to ensure that we have sufficient supply available as we go into 2021.”
Yun fears that Biden’s proposed tax credit will add more fuel to the housing demand without addressing the lack of supply. Which could result in home prices accelerating much higher; partly negating some of the benefits of the $15,000 tax credit.
Currently we are experiencing a historic home shortage and record-low mortgage rates are pushing prices to new heights. The housing supply shortage continues to get tighter as not enough homes are being built to face the demand from buyers.
“If we add further stimulus to the demand without addressing the supply… it will simply bump up the prices even higher.”
As we move forward into the new year it is important to be cautious that this tax credit could drive home prices higher. If you are wanting to get ahead of this tax plan now is the time to act.
Contact us today to discuss your options for a home purchase.