The news over the weekend that former Vice President Joe Biden is now president-elect elicited positive reactions from several real estate leaders who saw the upside for the housing market.
Biden’s housing proposals include a $15,000 first-time homebuyer tax credit and he will focus on fair housing and affordable housing issues. He is also likely to appoint a new head of the Federal Housing Finance Agency.
The National Association of Realtors Chief Economist Lawrence Yun told HousingWire 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, that’s only one part of the solution.
“But that’s not the full story, the full story is that stimulating the demand just by itself I think is insufficient,” Yun said. “Right now the housing market is facing a significant housing shortage. So if we add further stimulus to the demand without addressing the supply… it will simply bump up the prices even higher.”
Yun said that the ongoing housing supply shortage is getting worse and not enough homes are being built to face the demand.
“We simply have not been building a sufficient amount of homes,” Yun said. “We also need to address the supply side, how do we bring more supply? It’s going to take some time, but just adding more fuel to the housing demand without addressing the supply would just simply mean that home prices could accelerate much higher and partly negating some of the benefits of the $15,000 tax credit.”
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Whether or not a home can be purchased is a pocketbook issue, Yun said, and the homebuyer tax credit will have less impact than if there was a tax credit that is also trying to stimulate more housing construction.
“The challenges are [for] people who are renters, and just simply getting frustrated that their American Dream is getting out of hand,” Yun said. “That $15,000 will certainly help the possibility for the potential first-time buyers, and the only way to make that impactful is to ensure that we have sufficient supply available as we go into 2021.”
Keller Williams Chief Economist Ruben Gonzalez saw forbearance as a critical issue for the Biden administration in 2021. Forbearance terms moving forward will need to be addressed as the deadlines created in the CARES Act will be approaching, which includes providing aid to those still unemployed, Gonzalez said.
“A new federally led approach to regaining control of the spread of COVID-19 also seems imminent in January, and successfully getting the pandemic under control in 2021 will be a key to getting the economy back to full capacity,” Gonzalez said.
Biden has also said that he wants to distribute $640 billion in funds toward housing over the span of 10 years to address issues such as redlining, increasing housing supply, increasing energy efficiency and more.
“It’s too soon to comment on new tax policy given the likelihood of a Republican-led Senate; however, if we do see new tax policy and new environmental policy attached to it, we may see tax benefits allowing homeowners to improve their homes’ energy efficiency again under President Biden,” Gonzalez said.
Ken H. Johnson, a real estate economist at Florida Atlantic University, told HousingWire that a Biden presidency would come with a bigger stimulus and that there might also be more money spent on the concept of safety.
“[A stimulus] is very important if we want to sustain this market,” Johnson said. “You’re going to need the stimulus or our rates will rise. If tomorrow they came out and said ‘no stimulus,’ you would see rates rise.”
Johnson said he has faith that there won’t be a housing crash. Record-low rates would keep the housing market from crashing because “we’re near the peak of the housing cycle, and it should be peaking and perhaps going flat… this late-cycle run-up has been happening because we’ve been seeing these near-record low rates.
“There will remain a desire to own as long as interest rates stay low,” Johnson said. “Interest rates will stay low as long as there’s a forthcoming financial stimulus.”
Prior to the election results coming out, HousingWire spoke with Jeff Holzmann, the CEO of IIRR Management Services, a real estate crowdfunding firm. Holzmann said that important things to come out of this election will be an additional stimulus package, which will directly impact renters.
“The reality is that the first CARES Act was monumental in terms of assisting the economy, and in terms of assisting residents that are renting, especially in the multifamily category,” Holzmann said.
In terms of forbearances offered by Fannie Mae and Freddie Mac, Holzmann said that it’s a good thing that the GSEs are “providing capital and providing some relaxed measures to make sure that the people don’t [get] crushed and fail under the pressure of COVID.”