You may be a novice hoping to make your first home purchase soon, a homeowner thinking about upsizing or downsizing, or an experienced investor weighing the possibilities. No matter why the prospect of buying or selling a home in the next few years has crossed your mind, you’re likely wondering about the potential impacts of the shifting political winds in Washington D.C. While nothing is certain, understanding how the Biden administration may affect the housing market can help you chart an effective course.
How the Biden Administration May Affect the Housing Market
As the Associated Press reports, January 2021 will usher in a Biden-Harris administration and a House of Representatives with a Democratic majority. However, while the final tally for the U.S. Senate is uncertain, it appears likely that this chamber will remain under Republican control. It’s a situation that financial experts are eyeing carefully.
Interest rates are a major concern for anyone seeking a mortgage or interested in refinancing. In recent years, interest rates have sunk to historic lows. According to HousingWire, that’s a trend that mortgage industry experts expect to continue under Biden. They believe that the combination of a fragile economy and a limited housing inventory means that a push to raise rates is unlikely. Lower interest rates make borrowing money more affordable. That’s why low rates often lure buyers into the housing market or prompt interest in refinancing, so if rates stay low, the volume of sales and loans is likely to remain high.
Biden’s housing plan calls for investing some $640 billion over the next decade with the goal of ensuring that every American has access to safe, stable, affordable, energy-efficient housing that provides access to good schools and a reasonable commute. It calls for sharpening the regulatory teeth of agencies like the Consumer Financial Protection Bureau, adjusting zoning laws, building more affordable housing, and introducing a $15,000 tax credit for first-time homebuyers. Many of these plans, including those aimed at increasing the supply of affordable housing, are likely to stutter under the pressure of a split Congress. If they do pass, they will take time to have an impact. Others, like the tax credit, may increase pressure on an already tight market due to the current limited inventory. With more people competing for a finite number of houses, home prices are likely to remain high or rise.
Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) tasked with keeping the American mortgage market functioning smoothly, but the Federal Housing Finance Agency moved these GSEs into conservatorship after the 2008 mortgage market meltdown. While the Trump administration has been steadily working to free them from this status, HousingWire reports that many experts expect a Biden administration to take the opposite approach. Some worry this could lead to an increase in regulation that might stifle credit availability, raise the cost of credit, and drive wary investors into seeking programs that are subject to less scrutiny. Some believe the GSEs might be used to help advance the Biden administration’s affordable housing goals. However, other experts are more optimistic. They point to Biden’s long history of successfully working across the aisle and suggest that his administration might manage to balance the interests of consumers and businesses by finding effective compromises.
Although it is impossible to know with any certainty what the future holds, experts can use their knowledge of their fields, past events, and the policies proposed by those both inside and outside of past, current, and future administrations to make predictions. Understanding what those predictions might mean for the housing market and your own housing goals can help you figure out how to move forward with your plans. If you need a little guidance, PrimeLending of Denver can help. Contact us today to learn more about our services and how they can benefit you.