As we approach the end of the year, it’s worthwhile taking stock of what has been a rollercoaster ride of emotions for real estate buyers and sellers.
It culminated in three influential industry associations recently joining forces to persuade the Biden administration to urgently address home ownership affordability.
The historically wide gap between the interest rate set by the Federal Reserve and 10-year Treasury bonds has been a challenge for many buyers. While the difference is usually 150 basis points (bps), it has ballooned to 300bps.
The Federal Reserve has allowed mortgage costs to stay high and not released money to close the basis-point gap we see today.
That saw the Community Home Lenders of America (CHLA), National Association of Realtors (NAR) and Independent Community Bankers of America (ICBA) join forces to get something done.
Perhaps unrelated to their lobbying, the White House said it was putting before Congress several proposals to stimulate the housing market.
The statement came as NAR data shows home sales shrank for a third successive month in September, slipping by 0.7%, with all four major US regions posting declines.
The Biden administration announced the following new initiatives including a $16 billion investment in the Neighborhood Homes Tax Credit to finance the building or rehabilitation of over 400,000 homes.
The money is designed to stimulate the construction sector, build more homes to ease the accommodation crisis and help owners invest in remodeling projects to make their homes more suited to their needs. The average investment from this fund will be $40,000 per home.
A $10 billion downpayment assistance program was also announced. This program will work alongside a $100 million pilot program to help first-time buyers and those on low incomes achieve homeownership.
Additionally, lobbying by the real estate industry also received a positive response from the Federal Reserve.
It said interest rates were unlikely to rise due to inflationary pressures while the disparity between mortgage rates and 10-year Treasury bonds existed. Though how and when the disparity will end is unclear.