Wednesday, the White House announced its plan to ease the tension in the housing market by enabling more home buyers to access housing. As unemployment continues to fall to pandemic lows, the demand for houses remains strong, making it especially difficult for first-time homebuyers and renters alike. Here are the details on the Biden Administration's plan and how it could affect you.
Housing Market Remains Hot
According to the National Association Of Realtors (NAR), homes sales rose in July for the second month in a row, marking a 1.5% increase over July 2020. The median home sales price for July was $359,900, an increase of 17.8% from July 2020.
Only 28% of homes sold in July were under $250,000, while 29% sold for $500K or more. Many homebuyers continue to be outbid, which is now putting pressure on the rental market. According to the Home Buying Institute (HBI), home prices are expected to grow into 2022 as well, unless something changes.
The White House's Plan To Ease Housing Market
First, the Federal Housing Finance Agency (FHFA) will raise a regulatory cap and allow Fannie Mae and Freddie Mack (which backs half of the $11 trillion housing market) to invest more of its resources into the Low-Income Housing Tax Credit. This will allocate more investment dollars to developing and preserving affordable rental housing.
Secondly, the Biden Administration plans to expand a grant program for Community Development Financial Institutions (CDFIs) to encourage the production of more affordable houses and increase production and financing options for manufactured homes.
Manufactured homes are partially assembled in warehouses and factories rather than on-site like traditional homes. Generally, manufactured homes cost less and are bought primarily by lower-income families who can't afford $250,000 for a house. The production of duplexes and fourplexes will increase under this grant as well.
In addition, the administration will allow first-time home buyers and philanthropies the opportunity to purchase fixer-uppers or foreclosed homes, insured by the Federal Housing Administration (FHA), before they’re made available to investors. This would enable them to purchase homes that currently do not qualify for an FHA loan and compete with investors who have bought up many of these properties in recent years.
Lastly, the Department of Housing and Urban Development (HUD)’s will create a “Housing Supply Toolkit.” This toolkit will have strategies to help state and local governments get the most from HUD grants and tips to expedite the production of new homes.
White House's Plan Could Add 100K Homes to Housing Market
The policy changes that the White House announced will affect home buyers, renters, and investors. The administration projects that 100,000 additional homes will be made available to buyers and renters within the next three years. Their emphasis is on the middle and lower-income brackets.
For prospective buyers that haven't been able to compete, this is good news. With more homes being built, more leniency with FHA loans, and increased availability for manufactured homes, thousands of more prospective homeowners may be able to purchase their homes.
For renters who are facing increasing rent, this is good news as well. The increased production and investment in apartments coupled with more people being able to purchase homes should make it easier and cheaper to rent.
For investors, this news may not be welcomed so much. The policy changes will cause investors to wait longer before they can purchase homes, giving prospective homeowners more of a chance.
The housing market remains hot, making it difficult for first-time homebuyers and renters alike. The changes announced by the Biden Administration are designed to assist middle and low-income families access housing, by adding 100,000 homes and rentals to the market within the next three years.
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