Biden to propose $5,000 credit for first-time home buyers.
President Biden is set to introduce a series of new housing initiatives during Thursday's State of the Union address, including tax credits aimed at alleviating high mortgage rates for first-time homebuyers and incentivizing homeowners to move out of starter homes and list them on the market.
Under the proposals, middle-class, first-time buyers would receive $5,000 per year for two years. This subsidy would effectively reduce a buyer's mortgage rate by more than 1.5 percentage points for two years on the median-priced home, according to the White House.
Additionally, Biden will urge Congress to provide a one-year credit of up to $10,000 for families selling their starter homes, as long as their properties fall below the median price in their county. This measure aims to unfreeze a segment of the market where many homeowners are holding onto low mortgages of 2 or 3 percent, avoiding purchasing a new home with a significantly higher rate.
These initiatives build upon the administration's previous actions to increase home construction, address high rents, and assist first-generation buyers in securing down payments. The housing market remains one of the most challenging aspects of the economy, and it continues to be a significant issue for voters in the upcoming election.
David Dworkin, president and CEO of the National Housing Conference and a former Treasury Department official, described the plan as the most significant set of housing recommendations in a State of the Union address in over 50 years.
Dworkin emphasized that the administration's commitment to building and preserving 2 million homes is its most consequential housing plan. He noted that this effort would significantly impact the current housing shortage, which is largely driven by a lack of supply.
The housing market faces challenges on multiple fronts, including a shortage of millions of homes due to decades of underinvestment. Rents have also surged during the pandemic, becoming a key driver of inflation. Additionally, the Federal Reserve's efforts to curb inflation have led to an increase in mortgage rates, further hindering many potential buyers.
Looking ahead, Biden's initiatives will be tested in the unique post-pandemic market, where hundreds of thousands of new units were completed last year. However, much of this construction caters to the higher end of the market, raising concerns among housing experts about the dwindling supply of affordable options. White House officials argue that many of their efforts target affordable housing and aim to expand choices for middle-class buyers.
