On Wednesday, September 01, 2021, the White House announced immediate steps to increase affordable housing supply for Americans.
The plan will focus on boosting home sales to individuals and non-profit organizations, while limiting sales to large investors, who scooped up one in six homes sold in the second quarter of 2021.
Demand for housing soared early in the pandemic as Americans looked for more space for their home offices and homeschooling. This massive change in how Americans viewed homeownership, combined with a record number of first-time homebuyers entering the market, created a large gap between the supply and demand of affordable homes for both renters and homeowners. This has made it harder for families to buy their first home and has also driven up the cost of rent.
As these supply constraints have intensified, large investors have stepped up their real estate purchases, especially of single-family homes in urban and suburban areas. According to redfin.com, one out of every six homes purchased in the second quarter of 2021 was acquired by investors.
These large investor purchases of single-family homes to use as rental properties have been driving up prices for lower-cost homes, making it harder for aspiring first-time homebuyers to invest in real estate and build wealth. And these purchases are unlikely to boost the affordable supply of rental homes because investors charge more for rent to recoup higher purchase costs.
The Proposed Solution
The White House plans to make available nearly 100,000 affordable homes over the next three years in an effort to tackle the housing supply shortage that has contributed to skyrocketing home prices.
The new policies would limit the sale of the new homes to individuals and nonprofits rather than investors who bought one of every six homes sold in the second quarter. The plans will also boost the supply of manufactured housing and 2-4 unit properties by expanding financing through Freddie Mac.
The administration also plans to work with state and local governments to leverage existing federal funds, and help reduce exclusionary zoning and other practices that have discouraged efforts to boost the supply of housing, the official said.
What Does This Mean For You?
The implementation of this plan may take time, but steps are finally being taken to address the shortage of affordable housing in the United States. Home prices will likely continue to climb, but not at the rate we have seen over the last year, and the decreased competition that comes with more housing supply means it could get a little easier for first-time homebuyers during the rest of 2021 and into 2022 compared to a very tough 2020 and first part of this year.
Now is the time to schedule a housing review and take a look at your living situation. Even if you are not ready to purchase a home now, a NEO Home Loans mortgage advisor can help you make a plan and prepare you for the pre-approval process so you are ahead of the competition when the time is right.