Sharply higher mortgage rates have caused a sudden pullback in home sales, and now sellers…
It’s not easy being a home buyer these days. U.S. home prices are high, housing inventory is low, and consumer sentiment is wobbling. A federal tax break for first-time home buyers will help.
Even with the recent interest rate cuts, there hasn’t been a material increase in the number of homes being purchased: new home sales dropped 12.8% in June, the largest decline since July 2013, and continue to be sluggish. Instead, these cuts have boosted the refinance market. The total volume of mortgage refinancings is on track to swell $678 billion in 2019 from $458 billion in 2018, the Mortgage Bankers Association reports. This refinancing boom should continue at least for the next several months, given that more than 8 million homeowners are eligible to save $266 per month on average by lowering their monthly payment.
As the purchase market remains soft, I’m concerned that this deceleration will continue, especially as the broader U.S. economy weakens. Having managed a large mortgage company during and after the financial crisis of 2008, I know that it’s vital for the U.S. housing market to remain robust and resilient.
That’s why a tax break for first-time owners is necessary so that they can more easily afford to purchase a home. Most of these first-time buyers are millennials. This generation of young Americans make up the largest group of home buyers, at 37% of the overall market.
Moreover, many more millennials are waiting to purchase a home because they are facing significant financial challenges such as high costs of student loans and credit card debt. In addition, wages have stagnated whereas living costs have increased, making it ever difficult to save for a down payment on a home. Even the many millennials who already have a mortgage are missing out on the opportunity to refinance at lower rates. In short, lots of millennials just can’t afford to buy a new home or refinance their existing mortgage.
Read more at: marketwatch.com