President-elect Joe Biden’s proposed tax credit for first time homebuyers aims to assist with an initial down payment, but brings with it the possibility of stretching the housing market even thinner. Inventory remains at a historic low and the overall market continues to feel the effects as home prices increase more than 15%. Adding even more buyers into the mix could hurt first-time buyers by further pushing up home prices and increasing demand, says The Washington Post. Biden’s permanent, refundable tax credit for first-time buyers, called the First Down Payment Tax Credit, would credit buyers $15,000.
We asked David Howell, a real estate industry expert and executive vice president and chief information officer of McEnearney Associates in Washington, to discuss the implications of the possible first-time home buyer tax credit.
Q: Biden’s proposed tax credit of $15,000 for first-time home buyers includes a provision making it permanent rather than short-term and “advanceable” — meaning that they would receive the tax credit right away when they buy a home rather than waiting to file a tax return. He sees it as a form of down-payment assistance. How does the amount and the “advanceable” element compare to earlier first-time buyer tax credits?
A: I think it’s a matter of intention. Earlier first-time buyer tax credits were intended to stimulate a moribund housing market. And it worked — briefly — because it had an expiration date. This time, the intention is to help those who have had a hard time getting their foot in the homeownership door.