With the ongoing preparations for the inauguration process, it is quite normal to wonder how the new administration will affect homeownership as a whole.
Following the coronavirus pandemic, the federal government put in place measures to contain adverse economic impacts. In regards to mortgage rates, the Federal Reserve agreed to slash the rate to near zero. As a result, homeowners will enjoy record-low mortgage rates.
According to Jerome Powell, the Federal Reserve chair, the federal funds rate will be kept low to allow the economy to recover. Jerome’s tenure will last until 2022. Former Federal Reserve Chair Janet Yellen has been called to support the Treasury. And with Yellen’s experience in guiding the economy through the Great Recession, things are set to become even better.
The co-founder and COO of UrbanDigs, John Walkup, predict that the Fed will have more independence and will not be considered as an executive arm.
On that note, those interested in buying a home should take advantage of the current low mortgage rates.
Homebuying could become more difficult
The Biden administration is proposing to introduce a first-time homebuyer tax credit worth $15,000. This credit will target young first-time homebuyers as well as minorities. Eligible applicants could claim the whole $15,000 tax credit which is more than the $7500 credit put in place during the Obama administration.
According to the Mortgage Bankers Association, the mortgage originations will amount to a total of $2.49 trillion this year. This will be a decline compared to 2020’s $3.18 trillion. The demand for real estate had spiked last year following the low mortgage interest rates.
With buyer confidence gradually returning, more buyers are returning to the market. This according to Walkup will create an overly competitive environment in 2021 compared to 2020 when uncertainty became the order of day because of Covid19.
Zillow predicts a 10.5% rise in home values narrowing the selection of properties for buyers. Moreover, Realtor.com claims that last year, the national home inventory dropped by 39.2% compared to 2019’s digits.
Refinancing rates have receives a new record-low
Like mortgage rates, refinance rates have achieved low rates in 2020. The demand for the mortgage refinance loans spiked by 105% following the low mortgage rates.
However, the Biden administration has not elaborated on how it will handle the market refinance fee as there are other priorities that need attention. For instance, millions of homeowners have been unable to finance their mortgage payments due to the pandemic.
All in all, the Biden administration may support home purchasing, so if your financial status can afford mortgage payments, then this could be the right time to do so.