When Tax Credits are Actually Bad

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Filed under: Market Comentary

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Yesterday, I had 2 conversations that gave me the idea to address this topic in a video. One of the things that Biden talked about in his election campaign was a first-time homebuyer tax credit – up to $15,000.

Why Real Estate Incentives are a Bad Idea

I’ve been in real estate for most of my professional career, so you would think that I would be on board with this idea. Yes! Shouldn’t we give people a tax credit to get more people buying homes!?

But, in my opinion, it’s not a good strategy right now. We already have ridiculously low interest rates – and as a result, inventory is lower than we’ve ever seen before. The last thing we need to do is pump another $15,000 into people’s incentives to buy a house right now.

Long-Term Real Estate Perspective

I’m all for finding ways to help first-time homebuyers’ step into the market. There are a bunch of statistics out there – millennials are turning 40, and they are starting to buy. It’s a great trend because of the long-term value available in real estate investment.

I encourage people to get in, own it forever, and pay it off! That house will take care of you in retirement.

Supply and Demand in the Real Estate Market

At the same time, I also see a supply-and-demand issue. The last thing we need to do right now is add stimulants to push more people to want to buy. I can’t imagine what a train wreck it would be in the industry. I talked to an agent yesterday who told me they saw 36 offers on a house – and we are regularly seeing 8 – 12 offers on a single property before shutting down showings. Demand is so high without a tax credit in the mix!

I don’t know if this idea is still being talked about any more. But, for the first time in my professional career I wouldn’t be supportive of any type of tax credit to incentivize more people to buy. There just aren’t enough houses to sell! In my opinion, I don’t think the housing market needs any stimulus.

Fed Announcement Today

On a side note: it was a Fed day and rates held. They mentioned that they don’t expect the economy to ramp back up until at least 2022 – so it will be an interesting year!

As always, I’m here to offer personalized advice if you have questions. Reach out any time!

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