Democratic presidential candidate and current vice president Kamala Harris has proposed a $25,000 credit for first-time homebuyers, a measure that would help considerably with a buyer’s ability to fund down payments. As with any proposal, it has it’s obvious benefits as well as potential challenges.
Consider what it means for the market.
For many first-time buyers, this $25,000 credit would be a game-changer. Individuals and families who have been renting and saving with the goal of being able to make a purchase would have increasingly greater access to housing options that better suit their needs and budget. With rising rents, this extra push could make homeownership more attainable, especially for those who’ve been locked out of the market due to high down payments.
Moreover, homeownership historically has been a primary avenue for people to build equity and future economic health as their first-time purchases appreciate in value. Over time, this appreciation in value can have a significant impact on future larger home purchases and other significant life events.
Notwithstanding the increase in buying power, the $25,000 credits could also serve to drive asking prices even higher. More buyers in the market with extra cash can lead to more demand, but without increasing the supply of homes, escalating home prices could neutralize the impact of the credit. This would hurt large-scale investors who don’t benefit from the credit and see their purchasing power diminish as prices rise.
Despite the risks, this proposal could help balance the scales. More people owning homes means stronger communities and more stability in the housing market overall. It’s a step toward opening doors for first-time buyers, especially those in marginalized communities, which we fully support. However, for this plan to be as successful as possible, it must go hand-in-hand with initiatives to increased housing supply which in turn will serve to avoid fueling price inflation.