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Biden calls for housing tax credits

by Brad Cartier, posted in Newsletter

President Joe Biden delivered the State of the Union address last week, and there were some interesting takeaways for real estate watchers. Chris Clow of HousingWire reports that the White House outlined several key initiatives worth noting:

  • A $10,000 tax credit for first-time homebuyers and people who sell their starter homes; the construction and renovation of more than 2 million additional homes; and cost reductions for renters. 
  • Lower homebuying and refinancing closing costs and crack down on corporate actions that “rip off renters.” 
  • Mortgage relief credit to provide “middle-class first-time homebuyers with an annual tax credit of $5,000 a year for two years.” 

According to Clow, this relief credit “would act as an equivalent to reducing the mortgage rate by more than 1.5% on a median-priced home for two years,” helping an estimated 3.5 million middle-class families purchase their first home.

Rachel Siegel and Jeff Stein of the Washington Post report on the tax credits, noting that Biden will ask Congress to approve a one-year, up to $10,000 credit for families selling their first homes, provided these homes are priced below their county’s median. This strategy aims to stimulate a stagnant market segment, addressing the reluctance of homeowners to upgrade due to the substantial increase in mortgage rates from their current 2 or 3 percent. 

“Biden will also call for an expansion of the low-income housing tax credit to build or preserve 1.2 million more affordable rental units. He is also proposing a new neighborhood homes tax credit, the first tax provision to build or renovate affordable homes. And Biden will unveil a new $20 billion competitive grant fund as part of his budget, expected next week, which would support the construction of affordable multifamily rental units and remove barriers to housing development.”

Carl Harris, chairman of the National Association of Home Builders (NAHB) attended the State of the Union address and issued the following statement regarding President Biden’s remarks:

“NAHB commends President Biden for acknowledging that homeownership and housing are critical to a strong and prosperous nation and that quick action must be taken to aggressively increase the supply of attainable, affordable housing by building 2 million more homes. With a nationwide housing shortage of roughly 1.5 million housing units, boosting the supply of housing is the only way to tame inflation, achieve a measure of price stability in the for-sale and rental markets, and ease the nation’s housing affordability crisis.”

Swapna Venugopal Ramaswamy of USA TODAY comments on the speech, highlighting that the tax credits are designed to spur housing activity. About 85% of current mortgage holders are paying rates under 5%, anchoring them to their homes they may otherwise sell.

Jobs report and rate cuts

Lydia DePillis of the New York Times reported on February jobs data, which showed overall positive economic signs. Employers added 275,000 jobs in February, another month that exceeded expectations. One worrisome sign is the minor increase in the general unemployment rate to 3.9% since the beginning of the year.

Source: NYT (March 2024)

Sarah Marx of HousingWire reports on the jobs data, highlighting that despite a slowing labor market, the U.S. economy added 275,000 jobs in February, surpassing the previous year’s monthly average of 230,000 jobs and outdoing January’s revised increase of 229,000. According to Marx, this development, which pushed the unemployment rate to 3.9%—the highest since January 2022 but still under the 4% total employment threshold—is unlikely to prompt the Federal Reserve to consider rate cuts at its upcoming meeting.

Ann Saphir and Howard Schneider of Reuters comment on the no-rate hike discussion, outlining that “Fed policymakers next meet March 19-20, and are nearly universally expected to keep the policy rate in the current 5.25%-5.5% range, where it has been since last July. Powell said this week that range is likely to be the peak and is putting downward pressure on price pressures.”

Jing Fu of the NAHB highlights that wage growth slowed slightly in February. On an annual basis, wages grew 4.3% in February, down from a 4.4% increase in January. This is 0.5% lower than last year but wage growth is still positive if matched by productivity growth, according to Fu, but still may be a sign of lingering inflation.

Jobs data

Source: NAHB (March 2024) 

Market declines

ATTOM Data Solutions released its Special Housing Risk Report for Q4 2023, showing county-level housing markets more vulnerable to price declines based on home affordability and delinquent mortgages. The report highlights that California, New Jersey, and Illinois have the highest number of markets most at risk, particularly around New York City, Chicago, and inland California. In contrast, the least vulnerable markets are primarily located in the South and Midwest. Rob Barber, CEO at ATTOM, comments:

“Fault lines running through the foundation of the U.S. housing market continue to appear in different parts of the country, with some areas remaining more or less vulnerable than others…As always, this is not a warning sign for homeowners to run out and sell, or rush to buy, in any specific market. The housing market remains strong throughout most of the country despite some recent small downturns. Rather, this report again spotlights areas that appear more or less exposed to a market fall, should that start to happen, based on key measures.”

Alisa Wolfson of MarketWatch reports on markets that have seen price declines based on National Association of Realtors (NAR) data, highlighting that although we’ve seen broad home price increases, there are 14% of markets saw prices decrease in Q4 2023.

Declining markets

Source: MarketWatch (March 2024)

Wolfson quotes Hannah Jones, economic research analyst at, as saying:

“After seeing relentless demand and skyrocketing prices, areas in the Sunbelt are finally seeing inventory recover and prices adjust…The Florida metros of Naples-Immokalee-Marco Island, Punta Gorda and North Port Sarasota-Bradenton saw inventory levels climb more than 50% year-over-year and even as much as 125% in Punta Gorda, in the fourth quarter of 2023. As inventory built up in many of these areas, buyers bought more affordable homes and sellers likely softened prices in order to attract buyer demand.”

Finally, Sami Sparber and Asher Price of Axios highlight where luxury home prices have significantly declined. Austin, TX, experienced the largest national drop in luxury home sales prices, with the average price of a luxury home in the area falling to $1.69 million in the fourth quarter of 2023, marking an 8.6% decrease from the previous year.

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