https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/07/fact-sheet-president-biden-announces-plan-to-lower-housing-costs-for-working-families/
Biden is pushing for a $10K tax credit for first time home buyers which would give them a 5K tax credit for the first two years of home ownership. They are also pushing a $25K down payment assistance for first generation home buyers.
The estimate is that these programs will help 3.4 million families buy homes.
As of January 2024 there were 665,559 homes for sale in the US.
In 2023 there were 1.413 million new home starts in the US.
If we look at the data, we learn that even if all of these homes were "affordable" to those these programs are designed to help, that there are @1 million more buyers than there are homes available. If we back out the homes that are not affordable to first time home buyers ($242K, median), then that number goes up drastically. Given the fact that the housing market has had a low supply of inventory since at least 2020, and no signs of a dramatic increase, it seems reasonable to draw conclusions about the effects of these two programs.
It seems reasonable to conclude that the intent of these programs is to increase demand for housing that a first time buyer can afford. It's likely that that goal will be achieved.
Yet, we all know what happens when demand gets higher while supply stays low, don't we?
Yup, prices go up. So it's reasonable to conclude that Biden's policies will actually raise prices on starter homes, which would cancel out much, if not all, of the benefit.
Compounding this, is that data shows (I saw the numbers last week, but don't have access to them yet) that millennials lag behind in their savings rates. This is the generation that values experiences over things, and that (and other factors) are driving their inability to save enough money for a down payment. Despite the fact that down payments of 3.5% are readily available.
In short, it's probably a pretty good time to sell your house, especially if it's a starter home.
Apparently Biden is also pushing a $4,800 tax credit to all homeowners. Which seems like giving a tax break to the people in the US who have more wealth, while placing the burden for paying for that largess on those who have less wealth. Or we could call it a tax cut for the rich, to buy votes.
I've seen reports of this, but no details. Honestly I can't believe that Biden is stupid enough to believe that a $4,800 tax credit for all homeowners is a good idea.
25 comments:
It is not the government's job to give people my money to buy a house. There are plenty of rentals available for those who can't afford to buy. It is however, the government's job to stop over spending, stop infringing upon private industries with burdensome taxes and regulations, stop printing money and stop allowing unchecked invasion by foreigners with little to offer which puts downward pressure on wages. Trump's policies led to increased wages, while prices for the most part stayed low and affordable. Supply chains weren't obstructed and the cost of lumber was tolerable. Trump could have done more (and which of us can't) but what he did proved his mettle and fitness for the job, whereas the current president and his party aren't fit to carry his jockstrap.
In this case, this is just another attempt to bribe people to vote for him and his party. It will, as you more than suggest, cause problems with the supply/demand situation and then they'll trot out some other BS problem-causing solution.
No it's not. Although government meddling in housing is a big part of what brought on the housing crash of 2008. Unfortunately, there are not "plenty of rentals" for those who can't afford to buy. That shortage is why rents are at ridiculous highs right now.
I know you want to acknowledge it, but the biggest reason lumber got so expensive was the governments response to COVID, especially shutting down the US/Canada border. Which happened during the Trump administration. Although, your Trump ad is off topic. FYI, the eviction moratorium, under trump< also played a huge role if the increase in rents.
Yes, this is one more attempt to buy votes. It'll be successful for many even if they never see it actually happen. Because Biden voters believe that Biden making the promise is exactly the same as Biden delivering on the promise.
And yes, if this does happen for large numbers of people it will push home prices higher, and cost those who use it more than it "saves". Not to mention the fact that Biden is "borrowing" money from their taxes to give them this free gift. (and that they'll be paying back the money they get, and the interest in their taxes for the rest of their lives)
Giving people income tax breaks to buy homes is NOT the business of the Federal government. It will just increase government debt..
Does that mean you've never used the tax deduction for mortgage interest?
I agree that many of these vote buying schemes will increase the debt, and as I pointed out, raise home prices as well.
An argument could be made that it is in the best interests of the nation for the government to provide tax incentives to promote certain things, marriage, children, home ownership, to name a few.
Tax deduction is for after buying, not as incentive to buy. And the deduction is for taxes I already paid. Big difference.
Taking advantage of tax law for reducing tax liability doesn't mean the law in question is best. Sure, we certainly like the deduction and as renters (there were tons of options available to us prior to our selecting the place we now rent) we no longer have that write off.
Trump's eviction moratorium, when we were still figuring out the COVID mess, was to have lasted a mere four months (from the start of Sept-the end of Dec 2020) mostly to ensure folks had a place to isolate and quarantine. Many were of course denied the ability to work, but landlords weren't denied their income once the moratorium was lifted and people began working again.
And despite your suggestion I'm running an ad for Trump, the truth is that his economic policies contrast very well with those of Biden's and we're the worse for his being denied a second term. The ad for Trump is the Biden presidency and it needs to be TRUMPeted over and over again until people get the message...hopefully by November of this year. Things will not improve. Many of Biden's policies will be enacted. People will suffer more than they already are.
Glenn,
Of course the deduction is an incentive to buy, just because it isn't realized until after the purchase doesn't mean it's not a factor in the decision to purchase. In any case, if home ownership is something that benefits the country, then it's not that different.
"but landlords weren't denied their income once the moratorium was lifted and people began working again."
Sure they were. Landlords never got back the income they lost during the years Trump's eviction moratorium was in place. Not only that they were prevented from raising rent enough to recoup their losses. That doesn't even get into the fact that squatters used the eviction moratorium as an excuse to not be removed from properties they didn't own or have a lease to rent.
But hey, the fact that you found "tons" or rental options in one city certainly demonstrates that there is not a rental shortage (especially an affordable rental shortage) across the country.
Who cares about the semantics of your Trump ad, it is off topic for this thread and I should have edited it out.
I never even heard of tax deduction for mortgage interest until AFTER I purchased my first house. My incentive to buy was to get my own place instead of paying rent.
To be clear, I'm not suggesting that taking the mortgage interest deduction is wrong. I'd argue that renters should get it instead of landlords as the renters pay the mortgage interest, but that's neither here or there.
My point is that IF giving financial incentives to encourage home ownership are bad, then the mortgage interest rate should go as well.
My point in this post is that Biden's policies, if implemented, will actually harm the people it is intended to help. On top of that harm, it will also increase our already massive debt.
Debating if behavior should be incentivized by the govt, and what behavior we want incentivized, is another topic entirely.
Well, if you "never heard of it", I guess that we can assume that your experience is representative of every potential home buyer ever.
Hell, Rush spent all sorts of time on this subject back in the late '80s early '90s.
This notion that taking one's personal, anecdotal, experience and extrapolating that experience out across the majority of the population doesn't work when Dan does it and doesn't work here.
Had you said up front that you personally were not aware of it when you bought your first house, no big deal. Assuming that the majority of people (especially now) are as unaware as you were back in the day is where the problem lies.
But now that it's clear, it's all good.
I never even intimated that my experience was any other than mind. Are you pulling a Dan?
My point is that it should NEVER be given as an incentive to buy a house. Giving a few thousand dollars to entice one to buy a house is not the same as deducting mortgage from income tax--One alread has that money and has been taxed on it. Will IRS charge income tax on the incentive?
If you say so.
My point is that both are incentives to buy a house, they differ in several ways, but both are (or would be) something to be considered when buying a house. Again, the fact that you were unaware of this incentive doesn't make your experience the only possible right path. FYI, there are multiple incentives that are mentioned in the post. I object to all of them on the grounds that it will be a net loss for the buyers, and increase the debt.
Is your point that absolutely zero incentives should ever be given to encourage home purchases? That would be a coherent conclusion. The notion that some incentives are only bad because of when they are received, is less coherent.
It would be political suicide to repeal the mortgage interest deduction, the outcry would be horrendous. So I think we're stuck with that incentive. But the rest that are mentioned in the post are huge mistakes and will harm the housing market.
I'm not Biden or the IRS, I have no idea whether or not this giveaway would be taxed. I suspect that since it's not even in any sort of final written form, that it's impossible to answer.
I don't think any incentives should be given to buy a house. I also don't see income tax deduction on mortgage interes as incentive to buy a house.
Well, if you don't see it as an incentive, then it's obvious that there is no possible way it could be an incentive. Because you didn't know about it, therefore it wasn't an incentive for you, therefore it is unknown and not an incentive for anyone else.
I understand, you don't think there should be any incentives to buy houses, just tax benefits for those who do.
"Sure they were. Landlords never got back the income they lost during the years Trump's eviction moratorium was in place."
You're confusing abuse of the policy to the policy itself, which expressed that landlords were still entitled to having all rents paid.
The idea of "affordable" is the same as the leftist notion of "affordable" health care and other things to which the word is attached. It's a subjective term which doesn't mean anything as regards supply/demand. Sure, that a segment of society can't afford "X" the way the rest of society does can stimulate creation of options to meet the demand of that segment, but the word can be used to rationalize all manner of government spending so as to appear to be "doing something" regardless of the true consequences of such actions. Beware of falling in that trap.
I wonder how many people actually think about the mortgage interest write off when buying a home. I mean, sure, some may no doubt. But is it really that common? I recall when the fetching Mrs. Marshall Art and I bought our first home together, I was more concerned about whether we could afford a house if we couldn't do it with a 15 yr mortgage as opposed to a 30 yr. The difference per month at that time was something around $65-$80, and I felt if that would make a difference in our lives, we probably need a smaller house or a larger down stroke. The mortgage interest deduction was a nice after the fact perk, but in our case, it wasn't actually considered as part of our decision to buy.
I do think such deductions are a reason which should make buying a better decision than renting, but such aren't overwhelming against renting, which for some is just a less risky idea. It's merely one factor on one side of the pro/con process.
Better than incentives, however, is a better economy in which wages rise by virtue of the supply/demand concept. Biden bragged about rising wages during his term, but though I'd have to research it to support the premise, most increases were artificially forced upon employers and most due to Biden's crap economy. Wages went up during Trump's time, mostly in the first half (which is when my employer bumped us $2.00/hr within two months at the end of 2017 or 18. Business was booming so it was easy to do to be competitive. When folks are making money, they don't need incentives other than the desire to have.
Craig,
You can really be obtuse sometimes.
The Federal government has no business giving tax dollars to people for any kind of incentive to do things. Let individual states do that (and I don't believe my stante taxes should do that either.)
Okay, I pay income tax on my income. To reduce the amount of taxes I pay I am permitted to deduct donations to charities, medical expenses, and the interest I pay on mortgage. Take away the last deduction and people will still buy houses.
But, deducting an amount from my income to be taxed is NOT THE SAME as the government handing someone a chunk of cash to get them to buy a house. If you have income, the incentive cash isn't included and therefore not taxed. It's just cash in hand, cash which the rest of us pay for!!
Glenn,
I can, but not in this case. I'm merely pointing out that if one is consistent in arguing that the federal government should not incentivize things, then one would have to be against the mortgage interest tax deduction.
"Take away the last deduction and people will still buy houses."
You're right, "some" will. The problem is that "some" won't because they lack that incentive. An incentive only makes something more attractive.
Again, it's not "the same" action, but it is the same principle. The rest of "us" pay for every single tax deduction and credit that is available.
No, I'm talking about how the policy was alimented in real life. But, let's play, the policy was designed to allow people who were unable to afford their rent during COVID to live in their rentals without paying rent, and without allowing the landlords the ability to evict for non payment of rent. Fast forward 2-3 years (1,700/Monthx12=$20,400/year) and explain how the renter is supposed to magically come up with the 20,400/year that they owe? Of course, this was never intended to be paid back. Remember one thing, ALL landlords are rich, evil people who overcharge their renters and don't maintain their rental properties. Strangely enough, the landlords all had to pay their mortgages, taxes, fees, and perform maintenance, while taking in zero income. Good policy.
"But is it really that common?"
Yes.
" but in our case, it wasn't actually considered as part of our decision to buy."
Again, extrapolating your decision making process to the majority of home buyers.
"I do think such deductions are a reason which should make buying a better decision than renting"
Which would seem to be almost the definition of incentive.
Obviously, a better economy is the optimal situation. Yet, we still see tax incentives to promote various things, when the economy is better.
You're saying mortgage interest deduction is commonly regarded as
deciding incentive...as is, "if it wasn't for the fact that I can deduct mortgage interest, I'd have never bought a house". I can't see that as being the case. As one of a list of incentives, it can surely be added and acknowledged. I highly doubt it's among the highest on the list, given it's benefit won't be realized and enjoyed until tax time. Low interest rates on the loan itself, however, can be a deciding factor as regards the decision between buying at all or not buying. My daughter is in the process of seeking home as she's looking to move down here to SC. The current high interest rates are far greater a factor in her buying decision than the mortgage interest deduction ever could be. And she may not find a 15 year mortgage to be a good choice as a result, even if the interest rates remain high. The 30 would mean a lower monthly. But you know all this.
"Again, extrapolating your decision making process to the majority of home buyers."
No. I was merely stating it wasn't a factor in our case, which you could tell by my stating " but in our case, it wasn't actually considered as part of our decision to buy."
Freakin' JEEZ!
Tax considerations certainly do have an impact on purchasing decisions. They're unnecessary in a properly run economy. I just read an interesting article about Calvin Coolidge and his hands off approach to dealing with the private sector, and how in ten years the improvement to the nation was astounding. I think that's where Glenn was trying to go with his comments, and I agree with both of them.
No, I'm saying that the mortgage interest deduction is A deciding factor, not THE deciding factor. If one, as one should, looks at the costs of purchasing a home PITI etc, one should then look at things that offset those expenses (rent income, tax deductions/credits etc) to determine the actual cost of owning a home.
I understand that you have a list of your personal subjective opinions on the matter, which don't extrapolate out beyond you and your wife. But when you make things up "highest on the list" and pretend like I've said them, that's when you lose credibility.
I'd further note that the mortgage interest deduction might not be as big of a factor when interest rates are historically low, but that as rates rise it becomes a greater factor. I'm curious, why you'd say that current rates are "high"? Are you aware that the 50 year average for interest rates is 8%? Are you aware that the recent spate of abnormally low rates were an anomaly, and are a big part of the reason why we currently have low inventory?
Yes, I am aware that the standard 30 year mortgage carries a lower monthly payment than a 15 year mortgage. I'm also aware of the market data that tells us that the majority of home buyers sell their homes in 7-10 years which negates a portion of the attractiveness of a 15 year mortgage. If I was working with a young client who was insistent on a 15 year mortgage, I'd suggest that they sit down with their LO and compare a couple of scenarios. 1. A 15 year mortgage and selling the house before paying off the loan. 2. A 30 year mortgage, with the same sell date, but with the payment difference invested somewhere else.
You seem to be assuming that a 15 year mortgage is automatically the best choice for everyone, and that the majority of people stay in their homes until they pay off their mortgage. While, for many people, a 30 year mortgage (selling in 7-10 years) is likely the better option because of the lower payment. With a depreciating asset (a car) it usually makes more sense to pay it off quickly, and to keep it after it's paid off. With an appreciating asset (a house), it is often more advantageous to keep the monthly payment low, and use the "extra" cash for other things.
The fact that it wasn't a factor in your case, is immaterial to anyone other then you. It has very little explanatory value to a larger discussion.
1. Then you've missed my point.
2. You've (you and Glenn) chosen to take this discussion away from the point of the post.
3. I am and have not commented on the value of incentives for home ownership, I have merely pointed out that it's inconsistent to be opposed to some incentives while supporting others.
4. My objection to the incentives I posted about is that they will have exactly the opposite effect on the affordability of homes than intended.
5. Y'all chose to make this about whether or not the mortgage interest deduction was an "incentive" or not. Glenn's (and your) argument boils down to, "It wasn't an incentive for us, therefore it's not an incentive for anyone.".
6. The notion that your position can't be disagreed with is strange.
7. "Tax considerations certainly do have an impact on purchasing decisions.", thank you for agreeing with my contention.
8. I'm not sure how applicable what Coolidge did is to 2024, but if you think so, cool.
Interest deduction played no part in deciding to buy a house. PERIOD.
And I am totally against my tax dollars being used to bribe someone to buy a house.
And you totally missed my point in the difference between tax deduction and the government handout. I have to have an income to deduct the interest from my income tax. A hand out has no bearing on the tax.
"But when you make things up "highest on the list" and pretend like I've said them, that's when you lose credibility."
No I don't. When you make things up that I wasn't doing more than putting that item in perspective, that's when YOU lose credibility. Why the f**k are you giving me such crap over such minutia? Glenn rejected your claim it's an incentive. You insisted it is. I simply took a middle ground between the two of you and have not in any way extrapolated my situation beyond my own situation. Again, I'm certain I stated "in my case". Again, JEEZ!
I'm assuming nothing about the length of mortgages. We stayed in our home around 35 years, so the interest we paid was far lower. Upon reflection, I would have to run the numbers to see how much would be saved even if we sold in half that time, but IN OUR CASE is was a more important factor in deciding to buy. The point was the added monthly being possibly too much suggested to me that we weren't in a position to buy at all if an extra $80 would break us. This anecdote was spoke to incentives. If $80 more per month couldn't be handled, tax write-offs would have made no difference in deciding not to buy. At that time, we were living rent free in the home in which she grew up, paying only utilities. Her father granted her this relief after her 1st husband bailed on her. They were going to buy the place from her father before he cheated on her. So despite her and her ex having had a townhome prior to this, her and I were basically first time buyers weighing all the options. Tax write offs made no difference TO US IN OUR SITUATION. Do you get it now?
"The fact that it wasn't a factor in your case, is immaterial to anyone other then you."
No. It's just an example in a discussion, but because it seems to conflict with your statement, you're panties are getting twisted. Lighten up. I'm not at all attempting to be combative, but you're taking it that way.
" Y'all chose to make this about whether or not the mortgage interest deduction was an "incentive" or not. Glenn's (and your) argument boils down to, "It wasn't an incentive for us, therefore it's not an incentive for anyone."."
Again, that wasn't my argument, since I wasn't making an argument at all using my own situation. And to express that it's a minor incentive at best...which it is compared to all else which compels one to buy a house...is just a statement of fact. Indeed, it's often spoken of as "added" incentive at best, as in, "Don't forget, you can write off the mortgage interest, too!"
" The notion that your position can't be disagreed with is strange."
From what orifice did you pull this? You seem to be more upset that your position is opposed in any way than I am of mine.
" I'm not sure how applicable what Coolidge did is to 2024, but if you think so, cool."
I thought I was quite plain. I guess I wasn't. Rather than offer incentives, simply stop crushing opportunity with economically destructive policies. Coolidge's policies expanded the economy such that in ten years, advancements which improved the lives of most every American were such that poverty was reduced and opportunities were available to all. These included the ability to buy big ticket items like homes and cars. In the meantime, Coolidge subsidized next to nothing.
Glenn,
You've made it quite clear that you, personally, did not consider the tax deduction when you decided to buy a home. I'm assuming that was some time ago, and that things might be different now for people that are buying homes. You repeating your assertion, has no bearing on anyone else.
Again, I understand that you personally think that there is some substantial "difference" between a tax deduction and a "government handout". While they are obviously different on form, they both serve the same purpose and get the same end result.
But thanks for repeating yourself.
"Why the f**k are you giving me such crap over such minutia?"
Why are you? Glenn is insisting that the interest tax deduction is not an incentive, you agreed with him, I am disagreeing with you. Is that OK? Do I have your permission to disagree with you? Does my interaction with multiple buyers, prospective buyers, and real estate professionals not give me some degree of credibility beyong you and Glenn sharing your personal anecdotal experiences?
"From what orifice did you pull this?"
I simply read most of what you've written of late, and watch you on your quest to parse some of what I've written about Trump to support your claims.
No, you were quite plain. I'm simply questioning whether or not something as simplistic and lacking in specifics as "Do what Coolidge did." can be simplistically applied to 2024. I'm not saying it's impossible, just that it's vague and simplistic.
I do applaud the effort to take this so far away from the point of the post, and bog this down in semantics and minutia.
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