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President Joe Biden<\/a> has floated plans to address the country’s affordable housing issues<\/a>, including new tax breaks for first-time homebuyers and “starter home” sellers. However, experts have mixed opinions on the proposals.<\/p>\n “I know the cost of housing is so important to you,” Biden said during his State of the Union speech<\/a> Thursday night.<\/p>\n “If inflation keeps coming down, mortgage rates will come down as well. But I’m not waiting,” he said.<\/p>\n<\/div>\n Here’s a look at more tax-planning news.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n Biden has proposed a “mortgage relief credit” of $5,000 per year for two years for middle-class, first-time homebuyers, which would be equivalent to lowering the mortgage interest rate for a median-price home by 1.5 percentage points for two years, according to an outline<\/a> released by the White House on Thursday.<\/p>\n The administration is also calling for a one-year credit of up to $10,000 for middle-class families who sell their “starter homes” to another owner-occupant. They define starter homes as properties below the median price for the seller’s county.<\/p>\n<\/div>\n U.S. President Joe Biden delivers the State of the Union address in the House Chamber of the U.S. Capitol in Washington, D.C., on March 7, 2024.<\/p>\n Pool | Getty Images News | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n “Many homeowners have lower rates on their mortgages than current rates,” the White House said. “This ‘lock-in’ effect<\/a> makes homeowners more reluctant to sell and give up that low rate, even in circumstances where their current homes no longer fit their household needs.”<\/p>\n However, it’s difficult to predict whether Biden’s proposal will progress during a presidential election year, especially with a split Congress, experts say.<\/p>\n<\/div>\n With soaring home prices<\/a> and mortgage interest rates<\/a>, 2023 was the least affordable year for homebuyers in more than a decade, according to a report<\/a> from Redfin.<\/p>\n In 2023, those making the median U.S. income of $78,642 would have spent 41.4% of earnings by purchasing a median-price home at $408,806, up from 38.7% in 2022, the report found.<\/p>\n<\/div>\n While rates have fallen from 2023 peaks<\/a>, the average interest rate for 30-year fixed-rate mortgages was still hovering around 7%<\/a>, as of March 7.<\/p>\n “We’re close to multidecade highs for mortgage rates,” <\/strong>said Keith Gumbinger, vice president of mortgage website\u00a0HSH<\/a>.<\/p>\n “Unless [Biden’s proposed credit] counts as qualifiable income, it’s not going to actually make it easier for homebuyers to qualify for mortgages,” he said.<\/p>\n<\/div>\nMore from Smart Tax Planning:<\/h2>\n
How the homebuyer, ‘starter home’ sale credit works<\/h2>\n
Interest rates still near ‘multidecade highs’<\/h2>\n
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