The current housing market poses a number of challenges for first-time buyers. Economists and industry experts agree that even historically-low mortgage rates aren’t creating an easy path to homeownership for first-time buyers.

Danielle Hale | Photo credit: realtor.com

But two policy proposals being tentatively floated by the Biden administration and some of its Democratic allies could be a game-changer for first-time buyers. The downside, however, could be that the flames of the hot market are further fanned.

“Low rates are helping when we think about the monthly payments, but higher home prices are creating a bigger challenge on the downpayment side,” Danielle Hale, the chief economist at realtor.com, said Thursday during the National Association of Realtors’ (NAR) Forecast Summit.

Prices have been increasing at a double-digit pace in 2020, but low rates have made it so the average monthly payment on a $350,000 home is roughly $3 to $4 cheaper, Hale explained.

“That’s great but that’s not the only part of the story,” Hale said. “For first-time homebuyers, the biggest hurdle is not necessarily the monthly payment but getting in the door in the first place.”

Ali Wolf | Photo credit: Meyers Research

Ali Wolf, the chief economist at Meyers Research, echoed Hale’s sentiments, explaining that her team has the top-line number is what has consumers “freaked out.”

The real estate industry, in general, is good at looking at monthly payments, but not topline numbers, according to Wolf.

“We’ve talked to lots of first-time buyers and first-time buyers say they’re not jumping in because they can’t afford or save for a downpayment, or they have student loans,” Wolf said.

But with the election seemingly in the rearview mirror, help from the incoming Biden administration and lawmakers could be on the way.

None of the panelists have a crystal ball — and a special election in Georgia will decide control of the U.S. Senate — but the Biden administration has signaled that housing and access to affordable housing are priorities.

President-elect Joe Biden campaigned on a $15,000 first-time homebuyer tax credit and he’s also spoken vaguely about some forms of student loan forgiveness. It’s not clear what form the latter might take — lawmakers have called for various amounts of debt forgiveness — but both policy proposals could be game-changers for first-time buyers, according to Hale.

“These would be important in helping first-time homebuyers overcome the downpayment challenge,” Hale said. “A tax credit that’s geared to be readily available at the closing table, that would certainly help and debt forgiveness would help buyers be better prepared to tackle higher monthly payments.”

“Research has shown that these policies do matter and these things do delay first-time buyers from getting into the market,” Hale added. “They both would address challenges that buyers face.”

The policy proposals would not address the biggest issue facing the housing market however, which is a lack of supply, according to Hale.

John Burns | Photo credit: John Burns Real Estate Consulting

In fact, these proposals coupled with a lack of supply could potentially create an even bigger supply and demand imbalance, John Burns, the CEO of John Burns Real Estate Consulting, said.

“We’re talking about a red hot housing market right now,” Burns said. “What happens if you do a $15,000 tax credit in a red hot housing market? You make it even hotter.”

“So we’d have even more price appreciation,” Burns said. “So maybe it would increase homeownership, but prices are going to rise even faster.”

Even without a clear timeframe, it’s encouraging to see elected officials acknowledge that first-time buyers are struggling to get into the housing market, Wolf said.

“It doesn’t have to be played on day one, but I like to know their mind is the right place.”

Email Patrick Kearns

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top
We're giving away 3 free ICLV tickets at Connect Now next week. Register and attend live for your chance to win!REGISTER×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription