Biden looks to give a big boost to homebuyers and builders

On Jan 19, 2021

A contractor frames a house under construction in Lehi, Utah, U.S., on Wednesday, Dec. 16, 2020. Private residential construction in the U.S. rose 2.7% in November.

George Frey | Bloomberg | Getty Images

Anyone looking to buy a home today is likely frustrated by sky-high prices and slim pickings. But President-elect Joe Biden, who takes office Wednesday, will aim to ease those issues as he gears up to implement his plans for the housing market.

From home financing to home construction, Biden’s plans are focused on affordability. Here are some policies he could push for:

$15,000 first-time homebuyer tax credit
Urging big banks to get back into FHA lending
Encouraging new construction of both single- and multifamily housing
Strengthening the Community Reinvestment Act, which is intended to help low- and moderate-income areas

In December, the number of homes for sale plummeted nearly 40% compared with December 2019, according to realtor.com. Competition for what was on the market was fierce, with the typical home selling in just 66 days, two weeks faster than the year before.

“Looking forward, we could see new [inventory] lows in the next couple of months as buyers remain relatively active, but a surge of new COVID cases may slow the number of sellers entering the market,” said Danielle Hale, chief economist at realtor.com.

Home prices are also rising at the fastest pace in six years, according to CoreLogic, more than 8% higher in November year over year, driven by record-low interest rates and pandemic-driven demand from buyers looking for larger, suburban homes.

Several proposals from the Biden housing plan could take the pressure off both home prices and the supply of houses for sale, with changes potentially coming to both lending and the home construction markets.

Tax break for first-time homebuyers

Biden is proposing a $15,000 first-time homebuyer tax credit, which could be accessed immediately by the buyer, thereby serving as down payment assistance. High home prices, along with strict lending standards, have made it difficult for young buyers to come up with the cash needed to secure a mortgage.

First-time buyers, defined as those who have not purchased a home in at least three years, made up 32% of all November homebuyers, according to the National Association of Realtors. Historically, that share is closer to 40%.

The tax credit could exacerbate the inventory shortage, by juicing demand even more. But the nation’s homebuilders, who have had a difficult time keeping up with demand, could also get a boost from Biden. They have been hampered by the high costs of land, labor, materials and regulations.

The Trump administration’s restrictive immigration policies exacerbated an already severe labor shortage for builders, as many documented and undocumented construction workers had left the industry during the last housing crisis. As the construction industry flourished again, some workers were still afraid or unable to come back into the U.S.

In addition,…