Thursday, June 13, 2024

Biden set to propose $5K tax credit for first-time buyers

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The President will reveal a set of new housing initiatives during the State of the Union address on Thursday that will include a tax credit of $5,000 per year for two years to first-time homebuyers and a one-year tax credit of up to $10,000 to households that sell their starter home.

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President Biden will reveal a set of new housing initiatives during the State of the Union address on Thursday, the White House announced, which will include tax credits to help ease high mortgage rates for first-time homebuyers, as well as encourage current homeowners to put their starter homes up on the market.

Through the proposed program, “middle-class, first-time homebuyers” will receive an annual tax credit of $5,000 per year for two years. That credit adds up to lowering the mortgage rate by more than 1.5 percentage points on a median-priced home, the White House said, which has the power to aid more than 3.5 million middle-class potential buyers in purchasing their first home over the next two years. The announcement did not specify how “middle-class homebuyers” would be defined.

Biden will also ask Congress to pass legislation that will provide a one-year tax credit of up to $10,000 to households that sell their starter home if that home is below the median home price in their county, with the hopes that the incentive will free up more affordable inventory.

Much of that median-priced inventory has been in deadlock, with buyers who purchased during the pandemic unwilling to relinquish 2 percent and 3 percent mortgage rates in the process of transacting for a new home.

Previously, the Biden administration tackled initiatives to build more homes, cut down on high rents and assist first-generation homebuyers with down payments.

Barriers to homeownership, including high mortgage rates, high home and rental prices and low inventory, remain a struggle for many Americans and will be a key issue during the 2024 election.

“This plan is the most consequential set of housing recommendations in a State of a Union in over 50 years, and I say that because I’ve looked them all up,” David Dworkin, president and CEO of the National Housing Conference and a former Treasury Department official, told The Washington Post.

However, there is also the threat that new tax credits may generate more market demand and serve to push home prices up even further, some market experts say.

“This would probably have very limited impact on housing prices — increasing the number of buyers will, generally speaking, increase home prices for everyone,” Kyle Pomerleu, a senior fellow at the think tank American Enterprise Institute, told The Washington Post. “It’s pretty straightforward.”

Email Lillian Dickerson

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