As many of you know, Kamala Harris unveiled a plan to give American first time homebuyers $25,000 towards their down payments as a way to help with this current housing crisis. You read a lot of analysts and professional journalists talk about this plan and somehow despite all of their years of experience they can’t agree on whether it would be beneficial to America or completely and utterly disastrous. A lot of their opinion probably has to do with who they’re voting for, but that’s another rant for another time.
Before I dive into what I think, if you aren’t familiar with Daily Ranters, we are average Americans. We’re not professional political analysts, we’re the average Joe working average jobs in various industries across the country. The point of Daily Ranters is to hear those voices. The voices of average people and what policy, politics and current events mean to us. Our hope is that we spark healthy dialogue and that we expose people to think about topics in a new light or at least better understand why folks feel the way they feel.
With that being said, here’s the thoughts of an average 27 year old American whose a prospective first time homebuyer. First thought, I think it sounds awesome. Free money? Sure sign me up! Second thought, will this actually work though or will home prices just go up?
Last year, 26% of homebuyers were first time homebuyers. This year that number is up to 32%. The reason for that is the same reason this number is likely to continue rising, high interest rates. Older generations who have a house already locked in at 3% mortgage rates aren’t going to move and double their mortgage rate unless they have to for life reasons. Why would they? It just doesn’t make financial sense.
That means that the people who are going to enter the market right now is increasingly people who are aging into it, first time homebuyers. To me, if I was about to list my home and Kamala Harris just announced that 32% of the market is about to get an extra $25k in cash, I’m ecstatic because I’m just going to tack another $25k onto whatever my listing price was about to be.
Why wouldn’t I? Houses are selling with ease due to limited demand so the problem isn’t the sellers, they might as well make more money if they can. Net-net in my opinion a $25k handout to 32% of the market is just going to lead to a $25k bump in home prices and which doesn’t help first time buyers and makes life that much harder for people on the market who aren’t first time homebuyers.
I like the idea of helping American’s achieve the American dream, but this isn’t going to be the way to do it. It’s the same strategy as floating the idea for College loan reimbursements. It’s a tactic to buy votes by flaunting money. Can’t blame her for trying since I don’t think most American’s will do the math here! You can say I’m wrong, and I might be, but that’s my thought process, an average American. I’d raise my home price by the same amount of money that first time buyers would be getting from the government just like the vast majority of sellers will and no one but the seller will be better off for it.
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