Biden's Housing Blueprint & Market Shake-Up: Unpacking This Week's Big Moves!

Author

Michael Cassano
March 11, 2024

Good morning, everyone! Last week brought us President Biden's housing cost reduction proposals during his State of the Union address, alongside another eye-opening jobs report. Let's explore their impact on the housing industry.

Read Time: ~4mins

Rates ended the week DOWN compared to last week, and volatility was LOW. Rates are in the high 6’s, low 7’s for most loan types without paying discount points. Paying discount points can get you in the low-to-mid 6’s.

Biden's Strategy to Cut Housing Expenses

Just before the State of the Union address, President Biden presented a comprehensive strategy aimed at decreasing the costs associated with renting and home buying/selling.

  • For Homebuyers: The administration is proposing a $5,000 annual tax credit for middle-class, first-time buyers for two years to help alleviate the stress of high rates, potentially lowering effective rates by over 1.5% on average-priced homes.

  • For Home Sellers: To address homeowners hesitating to sell because of their low interest rates, a $10,000 tax credit for one year is proposed for middle-class families willing to sell and move on from their low-rate mortgages.

  • Assistance for First-Generation Homeowners: A proposal for up to $25,000 in down payment assistance is on the table for first-generation homebuyers.

  • Cutting Closing Costs: The President is looking to eliminate unnecessary fees charged by some banks during home financing and is considering a pilot program to eliminate the need for lender’s title insurance on refinancing, potentially saving homeowners up to $1,500.

  • Building More Homes: Plans include various credits and funds aimed at constructing and preserving 2 million homes.

It's crucial to remember that these are proposals and would need Congressional approval.

Key Takeaway: While these proposals appear promising on paper, the real challenge lies in our country's inventory shortage. Most immediate measures might boost demand without solving the inventory crisis, potentially leading to higher housing prices. The long-term solutions offer hope but require time to implement and depend on actual execution.

The proposal encouraging homeowners to sell starter homes looks beneficial at first glance. Yet, it doesn't solve the supply problem since those sellers will also need new homes, further straining inventory.

Unveiling the February Jobs Report

The latest non-farm payroll figures released on Friday significantly exceeded expectations, with 275,000 jobs added compared to the anticipated 198,000.

Unexpectedly, the unemployment rate rose to 3.9% from last month's 3.7%.

Digging deeper into the report, a startling adjustment was disclosed almost in passing at the very end, possibly easy to overlook.

Recall that January's report showed 353,000 new jobs, far surpassing the 180,000 forecasted, which led to a surge in mortgage rates. This figure has been adjusted down to 229,000, with the possibility of further reductions in the coming months. Overall, job numbers from September to January have been revised down by 312,000.

Key Takeaway: The integrity of the Bureau of Labor Statistics is under scrutiny, given the pattern of initial high job growth figures later revised downward, buried in report footnotes. This tactic seems to be recognized by the markets, as evidenced by the muted reaction to Friday's surprising job addition, avoiding a spike in mortgage rates.

Looking Ahead: CPI Inflation Data Tomorrow

We're on the cusp of the latest inflation data release tomorrow, with the next Federal Reserve meeting scheduled for March 20th. Current market sentiment does not foresee a rate cut at this upcoming meeting.


Feel free to get in touch if there's anything you need. Wishing you a fantastic week ahead!