After a rocky and unpredictable 2020, a new year brings plenty of questions and predictions about the housing market — especially with a new administration.
The Biden administration has made housing a focus of its platform, starting with COVID-19 relief plans and moving on to include tax credits, some of which may impact you.
Here are some of the changes in the housing market that might be coming in 2021 and beyond.
A focus on housing policies
One of the biggest priorities of the Biden administration is a renewed focus on housing policies. Many of these policies will be aimed at first-time buyers.
One of the proposals is a first-time homebuyers tax credit of $15,000. What makes this credit different is the administration plans to have it be both advanceable and refundable. That means homebuyers would get their credit at the time of purchase. Currently, new homeowners typically can’t claim these benefits until they file their taxes.
Adjustments to the Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (TCJA) was signed in December 2017 and has a number of regulations that have impacted homeowners, both in positive and negative ways.
Many of these are set to expire in 2025. However, there has been discussion about removing or extending some of these to help homeowners. Some examples include:
- Extending the private mortgage insurance (PMI) deduction: It’s currently set to expire after the 2020 tax year but has been extended in the past and could this year as well.
- Extending the residential energy credit: This is another program that is set to expire at the end of 2021. However, the administration’s focus on promoting green energy could extend the deadline.
- Adjusting or expiring the state and local tax (SALT) deduction policy: Currently, homeowners can only claim up to $10,000 of property tax deductions on their taxes. The new administration could lift that cap or remove it completely before it expires in 2025.
Looking at a unified government
Until the next election in 2022, the Democrats control the White House and Congress. Although they have a very narrow majority, the expectation is there will be a focus on pushing through new laws and regulations around housing.
One of the primary focuses of the administration is signing a COVID-19 relief package. President Biden has put out a $1.9 trillion dollar plan that includes the first-time homeowner tax credit, an extension to the mortgage and rental moratorium, and additional aid for those who own rentals or multiple properties and need that income.
Currently, there has been back and forth wrangling on the details, but estimates are a deal will be in place by the end of the first quarter of 2021.
Policies aim to drive demand
Many of the new administration’s policies are focused on ways to get more people to become homeowners if you’re a first-time buyer, that’s a good thing. Through some of these proposed programs, you may be in a much better position to become a homeowner in the next year.
If you currently own a home, you aren’t going to lose out either. With a push to drive homeownership comes an increase in demand, which can help raise property values. In the coming years, your home may be worth more than it is now due to the increased interest in homeownership.
That increase in home equity values can make a difference if you’re looking to sell, pay down your mortgage, or take out a home equity loan. So, it’s something to watch as new laws are enacted.
Opportunities for investors
Something else to consider, especially if you are an investor looking for future opportunities, is the drive in affordable housing. With demand rising, so will housing prices across the country, especially in more affordable areas.
Now, couple that with the impacts from COVID-19, namely the increase in employees working from home. As that trend continues, and more employees have the option to work from anywhere, they will migrate. Some of these shifts are already taking place and driving changes in housing markets, particularly the country’s Sunbelt regions.
If you’re an investor who wants to expand your portfolio or are a first-time buyer who would like to get rental income, be aware of the potential opportunities. An increase in demand and prices could drive some out of the market and into more affordable rental options.
Have questions about buying? Want to learn more about your options? OVM is here to help. Reach out today and get in touch. You can speak with one of our team of expert loan officers.
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