3 MIN READ
Published July 22, 2024
The housing market has been on a wild ride since the pandemic, with home prices climbing and a limited number of homes for sale. President Biden has proposed several ideas to address these issues, and the outcome of the upcoming election could significantly affect home prices and mortgage rates.
High Home Prices and Mortgage Rates Here to Stay?
According to the Federal Reserve Bank of St. Louis, the median home price in the U.S. was $420,800 in the first quarter of 2024. This is an increase from $355,000 in the first quarter of 2021, when Biden took office. Mortgage rates have also risen. As of July 11, 2024, the average rate for a 30-year fixed mortgage was 6.89%, compared to 2.65% on January 7, 2021.
Steven Parangi, the owner of Alpine Mortgage, explains that these increases aren't solely Biden's fault. "The housing market has had a severe shortage of homes, which was made worse by the pandemic," he says. "Mortgage rates have gone up because the Federal Reserve is trying to control inflation. Many homeowners don't want to sell because they have low-interest rates, which limits the number of homes available."
Biden's Plans Could Backfire
In his 2024 State of the Union Address, Biden suggested giving Americans a $400 monthly tax credit for two years to help with mortgage payments. However, Michael Ryan, a financial expert and owner of Michael Ryan Money, thinks this might not solve the real problems. "Biden’s $400 monthly tax credit is just a short-term fix," he says. "It might help some buyers temporarily, but it could also push home prices even higher by giving people more money to spend on houses."
Parangi shares a similar view. "These tax credits might make homeownership slightly more affordable in the short term, but without increasing the number of homes available, it could make prices rise even more."
Biden also proposed a $5,000 annual mortgage tax relief credit for middle-class first-time homebuyers for two years. This plan might also boost demand without increasing supply, leading to higher prices.
A Broader Solution is Needed
"The housing market is complicated, and there’s no easy fix," says Ryan. Parangi suggests several steps to make buying a home more accessible:
- Encourage New Home Construction:
Offer tax breaks to builders to increase the number of homes available and lower prices.
- Keep Inflation Stable:
Create policies to keep inflation low, which can help reduce mortgage rates.
- Expand Affordable Housing Programs:
Provide more programs for first-time homebuyers to help them purchase homes.
- Invest in Infrastructure:
Develop underused areas to make them attractive for new housing developments.
If you're thinking about buying a home, it's important to look at your finances and the current housing market. "Buying a home isn’t always the best financial decision, no matter who is president," says Ryan. "Sometimes, renting and investing the money you save is a smarter move when market conditions are tough."