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Home sales have been down this year, but it's not due to a lack of buyer demand. Rather, it's because housing inventory has been extremely limited. If anything, buyers are clamoring for homes, particularly as they want to capitalize on record-low mortgage rates. But in the absence of adequate inventory, a lot of potential buyers are getting shut out.
That could change, though, once President-elect Joe Biden takes office. Here's why.
Less uncertainty could boost inventory
The coronavirus pandemic and recession it spurred have made many homeowners reluctant to list their properties. Given the state of the economy and the uncertainty of the election, potential sellers' hesitancy to shake things up is understandable.
But now the election is decided. And there's potentially light at the end of the very dark coronavirus tunnel. The positive news on the vaccine front could cause a large number of sellers to change their tune and put their homes up on the market. And the more inventory that's available, the more home purchases we're likely to see.
That's not all. Biden has a specific plan to make homeownership more accessible to the masses. First, he's proposing a tax incentive called the First Down Payment Tax Credit worth up to $15,000 for qualifying first-time buyers. Unlike other tax credits, eligible buyers would get access to that cash at the time of their home purchase. They would not need to pay out the money and then wait to be reimbursed upon filing their tax returns.
Biden also has a plan to put an end to discriminatory practices that have historically prevented people of color from becoming homeowners. He's made it clear he intends to go after mortgage lenders that discriminate based on race. Some lenders charge higher interest rates or impose additional borrowing requirements that aren't applicable to white mortgage candidates.
Should you plan on buying a home once Biden takes office?
In itself, a Joe Biden presidency may not inspire you to go out and apply for a mortgage. But if buying a home is already on your radar, it might now be a realistic goal. Perhaps you've been hesitant due to the unfavorable economic climate, or the inflated home prices we've seen in recent months. If so, it could pay to gear up to buy in the coming year or two.
Of course, that lead time gives you an opportunity to make yourself an outstanding loan candidate. You can work to improve your credit score, get rid of some unhealthy debt, and save additional funds for a down payment. Remember, there's no guarantee the aforementioned tax credit will get passed into law, so you can't necessarily count on it to help fund your home purchase.
It's too soon to say how good a job President-elect Biden will do in leading the country out of the pandemic and busting out of our current recession. But if he does succeed in helping the U.S. recover its health and finances, that alone could drive home purchases up -- with or without a homebuyer's credit.