President’s Plan to Lower Housing Costs

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The Biden administration has issued an important proposal to reduce housing costs and enable more Americans to purchase a home. These are the highlights of the plan:
  • First-time homebuyers would get a tax credit of $5,000 a year for two years. This is the equivalent of reducing the mortgage rate by more than 1.5 percentage points for two years on the median home.
  • A one-year $10,000 tax credit to sellers who sell their “starter-home” to another owner occupant. A starter-home is defined as a home that is below the area’s median home price in the country.
  • A $25,000 down payment assistance program for first-generation homebuyers.
  • Lowering closing costs for refinances by waiving the requirement for lender’s title insurance on certain refinances
  • Lowering the closing costs for home mortgages by empowering the Consumer Financial Protection Bureau to curtail anti-competitive closing costs imposed by lenders

Our take
We welcome this proposal by The White House. Housing is anywhere between 15%-18% of the economy, so bolstering this sector is an unalloyed good in our minds. We also love the fact that this proposal isn’t using heavy “command and control” methods to achieve its goals. Instead, it’s using price incentives to motivate market participants. That’s smart. The final details still need to be worked out, but if this proposal becomes law – and that’s a big IF given how polarized and partisan Congress has become – it could positively benefit a lot of potential homebuyers.

 

James and David, The Blueprint

March 8,2024