Presidential Incentives for Home Buyers and Sellers
During last week's State of the Union speech, President Biden introduced plans to address the nation's ongoing issues with lack of affordable housing. These plans included the introduction of new tax breaks for first-time buyers and sellers of the starter homes that have become scarce.
Here are details of these plans:
First time homebuyers would receive a $5,000 mortgage relief credit for the first two years after their purchase. This would be roughly equal to lowering mortgage interest rates for these buyers by 1.5 percentage points.
Sellers who part with their starter homes would receive a one-year credit of up to $10,000. In this instance, starter homes are defined as properties valued below the median price for the seller's county.
Details of these and other housing-related matters were recently released by the White House. The March 7 Fact Sheet recognized that homeowners with lower mortgage interest rates would be reluctant to sell if their new mortgage featured a higher rate. "This 'lock-in' effect makes homeowners more reluctant to sell and give up that low rate, even in circumstances where their current homes no longer fit their household needs."1
Girls Just Wanna Have Equity
As we celebrate Women's History Month, it's an ideal time to check out the progress women have made with moving up to home ownership. Even during a challenging year, the number of single women homeowners increased to 51.8% during 2023. In total, the numbers of female-headed homeowner households increased to nearly 20 million last year.
Wealth among single women has also increased. Median net worth figures increased from $54,400 in 2019 to $74,500 in 2022, according to data from the Survey of Consumer Finances (SCF). Single women who were also homeowners enjoyed a net worth increase from $199,400 in 2019 to $266,500 in 2022.2
What To Expect from the Next Federal Reserve Meeting
The next Federal Open Market Committee meeting will be held next week (March 19-20). Economists who initially hoped for a rate cut to be announced are now expecting the Fed to hold rates steady at 5.25%-5.50%.
Recently, Federal Reserve Chair Jerome Powell explained the Committee's approach to members of the House Financial Services Committee, describing that he and his colleagues would "keep our heads down" in an election year. Interest rate cuts were still planned, but only if evidence of falling inflation was identified.
Powell also explained that interest rate cuts would probably be appropriate later in 2024, but only if the economy reflects a continued decline in inflation rates. While consumers and economists alike are keen to see a drop in interest rates, Powell explained that the Open Market Committee is dealing with competing risks. If rates aren't lowered soon enough there could be damage to the economy, but cutting rates too early could encourage a return of inflation.3
Easy fixes for seller problems
Whether it's pricing, staging or another part of the home sales process, you'll probably run across a few homeowners who may have the potential to delay a sale. Here are three examples of these problems, together with strategies to consider.
1. The seller has questionable taste.
Have you ever been confronted with Star Trek-themed rooms or dozens of taxidermied animals during your first visit to a seller's home? While it can be difficult to hide your dismay, some sellers can be thin-skinned when it comes to criticism. Instead, convince the seller that their decor is lovely but may be distracting to potential buyers, and it would be better to downplay the decor so the home's best features will be easily seen and appreciated during showings.
2. The seller thinks it's fine to call you 24/7.
It's easy to say "Call me anytime" without realizing that the occasional client will translate this to 24/7 availability. Unless you're a chronic insomniac, consider promising to return all calls, texts and emails within a certain timeframe. This can be one business day, or sooner if you're sure you can handle it. Offering a backup source, such as a junior agent or assistant, can also assure sellers you won't leave them hanging.
3. The seller is sold on their home's Zestimate.
This can be a sticky situation if the seller spotted the Zestimate online and made their decision to sell based on that number. Even if it isn't too far off, you'll need to prepare a comparative market analysis to justify your recommended price point. Explaining exactly how Zestimates are created by an algorithm may also be helpful.4
Potential Home Sellers Are Optimistic. Buyers, Not So Much.
According to the Fannie Mae report, around 65% of consumers surveyed in February stated it was a good time to sell a home, which was a 5% increase from January 2024. Conversely, opinions about buying a home became slightly more positive, but only 19% of consumers said that February was a good time to buy.
When asked about their outlook regarding mortgages and interest rates, many respondents stated that they believed that rates would decline during 2024.5
Sources: 1cnbc.com, 2blog.firstam.com, 3reuters.com, 4theclose.com, 5nationalmortgageprofessional.com
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