11/09/2020
A $15,000 First Time Homebuyer Credit likely to be offered in hopefully 2021 (mentioned in Joe Biden's campaign commitments) -- this helped many people buy homes back in 2008-2010 with the $8,000 credit offered in the American Recovery and Reinvestment Act of 2009. The goal will be to address affordability and barriers of lower income Americans to home ownership which is known to be the greatest way to build wealth and a retirement nest egg. But how would this type of stimulus help in 2021 for Tampa Bay homebuyers?
The challenge for buyers in the St. Petersburg area will be FINDING homes in decent shape at a price they can afford using FHA financing (not sure if they would require FHA but that is what we had available in in 2008-2010 as many banks were failing). I see three other factors that will affect the success of this proposal: a) interest rates and current fed policy -- much lower interest rates = ability to afford more expensive home coupled with aggressive fed policy on inflation b) increase in residential inventory due to covid-19 unemployment crisis/small business failure fallout creating more bank owned properties due to foreclosure (it will take time for foreclosures and short sales to work their way through the system but there is actually a system in place to handle large volume because of the Great Recession) and c) selling of homes owned by baby boomers due to downsizing/medical needs and/or end of life. Inventory will need to increase double or even triple what it is now for this first time homebuyer incentive to be effective. This incentive was very much needed back in 2008 when half of the homes in a given neighborhood were for sale - we needed stimulus to encourage more buyers.
Times are different now w/ homeowner equity at all time highs. Buyers will face new competition from a) institutional buyers either looking to buy directly from homeowners offering a quick close in exchange for equity - these homes never make it to market and many are in need of updating (which tend to be the best priced homes for first time buyers) and are flipped for profit and b) institutional buyers/hedge funds/REITs looking to buy and hold properties in order to lease them out capturing profit from the very high rental prices (if there is a foreclosure crisis, then the high rental rates may stay high from these former homeowners who now need to rent) and d) lack of move-up home inventory for those wanting to sell starter homes AND price of move-up home vs amount of equity in current home + locked in low interest rates push motivation to sell down.
Post Covid-19 trends suggest further growth and retreat to the suburbs as families crave more space and possibly as a result of work-from-home permanent adoption by many businesses which would allow people to live farther away from their job and be able to avoid horrible daily commutes. Locally, Riverview/Apollo Beach/ Wimauma/ Parrish/Ruskin/Manatee County/SE Pasco should continue to see moderate pricing and lower priced new construction expand.
In a buyers market, this policy makes sense but I'm not sure it will help affordability in a seller's market...nor will it help an emerging luxury buyer's market. Good news is that due to supply/demand and current equity levels, if there IS a foreclosure crisis in the future, we have a greater buffer available to keep VALUES of homes from dropping --- PRICING (list price) would be affected but not necessarily current home values. Less aggressive value increases (appreciation) should be expected (could approach zero) which puts new buyers at a disadvantage - in this scenario, the stimulus would be good in order to provide a buffer for top-market buyers. These buyers should plan to hold onto their homes longer.
A Joe Biden presidency will potentially impact the personal finances of millions of Americans, from taxes, college tuition, health care and housing.
