Proposed Bill Offers ‘Pandemic Savings’ for First-Time Homebuyers
First-time homebuyers were poised to make a big splash into the home buying pool before COVID-19 came along. The National Association of REALTORS’® 2019 Home Buyers and Sellers Generational Trends Report showed millennials as the largest cohort of homebuyers at 37 percent. The pandemic, combined with rising home prices and tight inventory in many areas, is now making it difficult for young homebuyers to save for their first down payment.
While mortgage rates remain low – a good thing for potential home buyers – home prices are on the rise due to limited inventory. “Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply,” Lawrence Yun, NAR’s chief economist, said. According to Yun, the supply of homes for sale at the end of June totaled 1.57 million, down 18.2% from the year-ago month.
The good news is that first-time homebuyers in June of 2020 were still responsible for 35 percent of home sales. This is up from 34 percent in May, and about equal to buying trends in 2019 before the pandemic, proving this demographic continues to value homeownership.
The First Time Homebuyers Pandemic Savings Act, a new bill introduced by Rep. Sean Patrick Maloney (NY-18) aims to help first-time homebuyers realize their dreams of homeownership even as the nation recovers financially from the pandemic induced economic crisis.
“Making sure the next generation of homeowners have the resources they need to buy their first home is going to play a big role in our economic recovery,” Rep. Maloney said in a statement. “This bill is a way to bring new opportunity to new homebuyers and help young families get one step closer to realizing the American dream.”
Through this bill, first-time homebuyers would be allowed to withdraw funds tax-free from their retirement accounts under the umbrella of coronavirus-related distributions to assist with the purchase of a home. The bill would allow for up to $25,000 of these distributions to be tax-exempt and penalty-free if used toward the purchase of a first home. Because the bill sits under the umbrella of coronavirus-related distribution, it is not subject to the early-distribution penalty of 10 percent and would allow first-time homebuyers to repay the money over the course of three years.
There are plenty of programs earmarked for first-time homeowners, both nationally and at a state level. Down payment assistance programs are available in the form of grants and deferred loans and can be used to supplement funds from The First Time Homebuyers Pandemic Savings Act. The Federal Housing Administration (FHA), Freddie Mac, and Fannie Mae are a few of the places first-time homebuyers can look to find down payment assistance grants and programs.
Vince Malta, NAR’s president, believes the struggle for current first-time homebuyers is exceptional. “While various barriers have stood in the way of homeownership for younger generations, COVID-19 has pushed the American dream further out of reach for countless families and individuals by no fault of their own,” he said. “This legislation would make a tremendous difference to those struggling to save for the down payment on their all-important first home.”
The housing market is often a direct reflection of what’s happening with the nation’s economy. This is why making homeownership more viable for the next generation of homebuyers is an essential component to the turnaround of the economic crisis. Rep. Maloney’s bill aims to give potential first-time homebuyers the help they need to make that happen.