Critics say proposed $10,000 tax credit for first-time buyers would increase demand and help keep home prices elevated
The Biden administration on Monday pushed back against criticism of its housing-market proposals after detractors said a plan to provide a $10,000 tax credit to first-time home buyers would increase demand and help keep home prices elevated.
President Joe Biden's proposed tax credit is structured to help first-time home buyers without creating negative spillover effects for the rest of the market, an administration official told MarketWatch.
Only about a third of home buyers were first-time purchasers last year, and the proposed credits would only go to buyers with household incomes under $200,000, narrowing the pool of recipients further, which would limit the impact on the broader market, the official said.
The official also said it's important to note that the aid for buyers is paired with a proposed $10,000 tax credit for sellers of homes that go for under their area's median price, which should put downward pressure on prices. That credit for sellers of so-called starter homes could help nearly three million families, according to Biden administration estimates.
In addition, the official said the administration's proposed 2025 budget, which was released Monday, includes investments that would lead to the creation of approximately 500,000 starter homes in the next decade, which should put further downward pressure on housing prices.
Mark Calabria, who served as the Trump administration's head of the Federal Housing Finance Agency, was among those criticizing Biden's housing proposals last week, saying "almost everything they've proposed increases demand, ultimately doing little for housing affordability."
Ed Pinto, senior fellow at the American Enterprise Institute and co-director of the conservative think tank's housing center, also sounded skeptical, predicting that the credit for first-time buyers would "create more demand, which is going to raise prices."
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