Chicago Real Estate News

 

April 7, 2021

Buyer & Seller Perks in Today’s Housing Market

 

 

Right now, the housing market is full of outstanding opportunities for both buyers and sellers. Whether you’re thinking of buying your first home, moving up to a bigger one, or selling so you can downsize this spring, there are perks today that are powering big moves for people across the country. Here are the top two to keep on the radar this season.

The Biggest Perk for Buyers: Low Mortgage Rates

 Today’s most compelling buyer incentive is low mortgage interest rates. The 30-year fixed-rate is now averaging just over 3%. While that’s slightly higher than the record-lows from 2020 and earlier this year, it’s still way lower than historic norms, making purchasing a home an ongoing perk for hopeful buyers (See graph below):Buyer & Seller Perks in Today’s Housing Market | MyKCMThis is a huge advantage for buyers and helps to make owning a home attainable for more households – and there’s good reason to strive for homeownership. The latest Homeowner Equity Report from CoreLogic shows how homeowners saw major gains in their net worth last year, all thanks to owning a home. Frank Martell, President and CEO of CoreLogic, explains:

Positive factors like record-low interest rates and a booming housing market encouraged many families to enter homeownership. This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake. As a result, we may see more of those currently renting start to enter the market in the near future.”

Low mortgage rates are a plus for buyers right now, but experts forecast we’ll see them continue to rise as the year goes on. If you’re ready to purchase a home, it’s wise to get started on the process soon so you can secure today’s comparatively low rate.

The Biggest Perk for Sellers: Low Inventory

Today, there are simply not enough houses on the market for the number of buyers looking to purchase them, and it’s creating a serious sellers’ market. According to Danielle Hale, Chief Economist at realtor.com:

“Total active inventory continues to decline, dropping 50 percent. With buyers active in the market and sellers still slow to put homes up for sale, homes are selling quickly and the total number actively available for sale at any point in time continues to decline.” (See map below):

Buyer & Seller Perks in Today’s Housing Market | MyKCMThe lack of houses for sale continues to challenge the market, and with low mortgage rates fueling buyer demand, homes are hard for buyers to find today. According to the latest Realtors Confidence Index Survey by the National Association of Realtors (NAR), the average house is now receiving 4.1 offers and is on the market for only 20 days.

Buyers are clearly eager to purchase, and because of the shortage of inventory available, they’re often entering bidding warsThis is one of the factors keeping home prices strong and giving sellers leverage in the negotiation process.

Homeowners who are in a position to sell shouldn’t wait to make their move. There’s a light at the end of the tunnel for today’s inventory shortage, so listing this spring will get your house on the market when conditions are most favorable. With low inventory and high buyer demand, homeowners can potentially earn a greater profit on their houses and sell them quickly in the fast-paced spring market.

Bottom Line

Whether you’re thinking about buying or selling a home, there are major perks available in today’s housing market. Let’s connect today to discuss how these favorable conditions play to your advantage in our local area.

March 31, 2021

How much does cash matter in a bidding war

 

 

 

When there’s a bidding war, cash is king. And a recent Redfin study confirmed that it’s the only sure-fire way to win that dream house in a market this crazy.

Homebuyers who offer all-cash improve their chances of winning a bidding war by 290%, per Redfin’s study of clients buying homes between June 2020 and February 2021. And waiving the financing contingency is the second-most effective bidding-war strategy, Redfin officials said – improving homebuyers’ odds of winning by 66%.

Interestingly, Redfin data showed waiving the inspection contingency and conducting a pre-inspection – meaning the buyer conducted an inspection before making an offer – had no significant impact on whether a prospective buyer wins a bidding war.

That’s likely because those strategies are so common in a competitive market. And don’t even think about making an offer below asking price in 2021, officials said. You won’t win the bidding war.

“Offering all cash is usually an effective bidding-war strategy, but the market is so hot that even the number-one strategy has evolved this year,” said Nicole Dege, a Redfin agent based in Orlando. “All-cash buyers used to be able to go in a little below list price, but now I’m seeing a lot of cash offers that are at list price or higher. Anything below list price, regardless of the terms, just can’t compete.”

At the head of this particular snake is the COVID-19 pandemic, which forced lumber mills to close in 2020 due to health and safety concerns, thus crippling builders and construction crews with skyrocketing material prices. This, in turn, significantly cut the number of new builds in the country – meaning, if someone was looking to buy a home, they most likely focused on existing lots.

But an odd side effect of the pandemic kept buyers busy, even with home prices jumping due to demand: mortgage rates dropped below 3%, which kept the market busy – including with first-time homebuyers. The result: a bottleneck with scores of would-be buyers in a low-inventory market.

“The supply-demand imbalance has led to a sharp run-up in home prices, with the median sales price up almost 16% nationally, and almost 21% in the West,” said Mike Fratantoni, Mortgage Bankers Association senior vice president. “The lack of inventory on the market is preventing home sales from being much higher.”  

Jim Johnston, a Redfin agent in San Diego said he’s recommending buyers look at homes listed around $75,000 below their budget so they have room to negotiate with the seller.

“I educate my buyers on the market so they’re not shocked when listing agents ask them to waive the appraisal contingency, which is often necessary in a competitive market because sale prices can be bid up well over the appraised value,” Johnston said. “When that happens, sellers want to know buyers have the cash to cover the difference between the appraised value and the sale price.”

Experts do believe inventory relief is near, especially when the spring buying season concludes, mortgage rates continue to creep above 3%, and the COVID-19 vaccine rollout reaches more people. More vaccinated people means the reopening of lumber mills, which should drive down building material prices and increase the number of new builds – leading, then, to less demand and less bidding wars.

But for now, inventory is still struggling to catch up to demand, and a cash offer is the best way to snag a home, Redfin officials said.

“It’s important for buyers to sweeten their offer in any way they realistically can,” said Rachel Wilson, a Redfin agent in Spokane, WA. “Sometimes that’s more cash, sometimes it’s waiving contingencies, but other times it’s a matter of figuring out what the seller wants, like a fast close or a provision to allow the sellers to rent the home back for a few months.” 

 

HW - Tim Glaze

March 24, 2021

Are buyers overpaying for homes

 

In the real estate business, Months’ Supply of Inventory forecasts how long it would take to sell off the remaining supply of available homes given the current pace of sales. While four to six months is generally considered a balanced market, inventory levels across Chicagoland dipped below two months’ supply in February, meaning it’s a sellers’ market in many areas.

 

In a recent interview with FOX 32 Chicago, @properties co-founder Thad Wong said that today’s competitive market has been spurred by a desire for more space amid the COVID-19 pandemic. Given all the time spent at home over the past year, housing needs have changed and people are looking for properties that can accommodate their current lifestyle. That, along with record low mortgage interest rates, has driven buyer demand.

Thad also addressed Chicago’s recent strong home price growth, which has been fueled by low inventory and high demand.

Responding to a reporter’s question about whether homebuyers are overpaying for homes right now, Thad said, “I don’t think so. We’ve had very stagnant appreciation over the last number of years. Pricing in Illinois and Chicago has been almost flat, so in a lot of ways, we’re catching up to the rest of the country.”

By: @properties

March 17, 2021

Renters and Biden's $15,000 homebuyer tax credit.

 

The housing industry has been keeping a keen eye on President Joe Biden’s proposed $15,000 homebuyer tax credit for first-time buyers. But just how many people would actually benefit from it?

According to a report from Zillow, about 9.3 million renter households in the U.S. (27.4%) would spend less than a third of their income on the monthly payment for the median home sold in their metro in 2020 if they received the full tax credit. That is, of course, if certain stars align: think a 3.5% down payment on a 30-year mortgage with a 3% interest rate.

But given those factors, the tax credit would cover a borrower’s entire down payment for a home in 40 of the 50 largest U.S. metros. In metros that are considered more affordable, the tax credit would help a large percentage of renter households: in Pittsburgh, 40.5% could afford a median mortgage; in Cincinnati it would help 39.7%; in Cleveland, 39.0%; and in St. Louis, 38.5% would benefit. On the other hand, areas like California would see a smaller share of renters who could benefit — more likely in the thousands than millions.

Under former President Barack Obama, the federal government offered first-time homebuyers a tax credit of $7,500 in 2008 and $8,000 in 2009 and 2010 via the Housing and Economic Recovery Act. Those who received the credit in 2008 were required to pay back the credit over time, while those who received it later had it waived.

The Biden administration has released few policy details about the first-time homebuyer tax credit, but one key difference with earlier tax credits is that the money would be available to borrowers up front at the time of closing. With previous tax credits, borrowers paid the money out of their own pocket to buy the house, and were reimbursed at tax time.

To date, the administration has focused on the COVID-19 pandemic, and given that the U.S. housing market is at its hottest point in a generation and prices are already at a peak, it’s unlikely that the Biden White House will prioritize it in the near-term.

One consequence of creating a $15,000 down payment assistance program is the demand it would create in a market that’s already struggling with supply. The Census Bureau found that just 307,000 new homes were on the market in January, roughly four months’ worth of supply at the current sales rate. As for how much borrowers paid that month, the median sales price was around $346,000, while the actual sales price averaged closer to $409,000 — pushing prices out of reach for those who would receive the down payment assistance.

If it does get passed, the tax credit would be a game-changer for many renters, particularly those who struggle to save for a downpayment in high-cost metros.

Renter households are estimated to save only 2.4% of their income each year, according to Moody’s Analytics. At that rate it would take a typical renter about 14 years to save $15,000. A $15,000 down payment springboard could potentially push millions of renters in to homeownership within a few years, especially Black and Latinx renter households that make up a disproportionately smaller share of potential buyers. 

“Policies targeting the systemic inequities in our financial system — including reforming the credit reporting system  — could help disadvantaged households get their foot in the door and close the racial homeownership gap,” said Zillow economic analyst Alexandra Lee.

Lawrence Yun, chief economist at the National Association of Realtors, said preserving the 1031 Exchange to incentivize land sales for builders is key to the future of the housing market. An extra $15,000, he said, won’t help with the already low supply of homes available.

Only with added supply will the homebuyer tax credit be effective in boosting homeownership and enlarging the middle class,” Yun said. “Without supply, home prices jump much higher with no meaningful gain to new homeownership.”

 

HW- Alex Roha

 

March 10, 2021

Home inspection red flags

The home inspection: 5 red flags to look out for

 

You got your pre-approval, found the perfect home and made an offer. At this point, you’ve probably already started daydreaming about sipping drinks on the back porch, cooking dinners in that giant kitchen or cozying up in that little reading nook that seems like it was built just for you. We know it’s easier said than done, but try not to get too attached.

It’s often difficult to remain objective and skeptical during this emotional phase of the home purchase because you want the house to be perfect, and you want to make it yours. But before you close the deal, you’ll want a reputable home inspector to give the home a thorough examination to determine its relative health. Here are a handful of inspection red flags to look out for. 

Roof

A leaky roof is a huge red flag during the home inspection. If rain and snow are coming in, money is flying out. And replacing or repairing the roof is just one aspect of addressing the issue. There’s also the water damage to worry about—mold, mildew and wood rot—which can lead to health hazards and structural weakening. Replacing the roof and eliminating the effects of water can run up a huge bill, so be very wary of any problems in this area.

Plumbing

The plumbing of a house is often called “the guts” for good reason: it’s embedded within the walls, out of sight and hard to access. If the main sewer line or plumbing in your target home is many decades old, a leak or burst pipe is just waiting to happen, effectively acting as a ticking time bomb that can explode in a big financial loss.

Electrical

Old and outdated electrical wiring can also be a big problem. Not only does it pose a fire hazard, it can compromise other essential home functions. If the electricity goes out, so do the lights, refrigerator, sump pump and temperature control, leaving you vulnerable to any number of disruptions and dangers. 

Like putting in new plumbing, upgrading the home’s electrical wiring is a costly undertaking that requires opening up and repairing the walls. In short, there’s no easy or inexpensive way to get it done.

Exterior

Along with the roof, the rest of the house should exhibit full waterproofing against the elements. Moisture in the floor and walls is just as serious as it is in the ceiling. Doors, windows and skylights will probably be the biggest areas of concern, where caulking and weather stripping may be dried out, disintegrated or destroyed. Replacing or resealing windows and doors isn’t typically a big deal; again, it’s the water damage that’s cause for alarm.

Foundation

Sticking doors, uneven floors and cracks in the wall may indicate defects in the foundation. Some signs of stress are due to normal “settling” of the house, whereas others point to more serious structural concerns. Though your home inspector is trained to know the difference, he or she may call in a specialist to determine the extent of the issue. 

If the foundation “tipped” or settled unevenly, it could slowly be ripping the frame of the house apart, and you don’t want any part of paying a structural engineer to save your home one day.

If you encounter potential deal breakers during the home inspection, you have a few options: 

  1. Continue with the purchase knowing you’ll need to invest in future repairs
  2. Renegotiate the sale price to factor in the cost of repairs 
  3. Terminate the deal altogether

 Whatever you decide, just try to keep emotion out of the equation.

March 3, 2021

Off market property search

 

 

Buyers in search of a new home this spring are benefitting from Zenlist, a new technology that offers access to the most complete and up-to-date database of homes in the Chicagoland marketplace. Zenlist is a gamechanger for how buyers and their agents work together to successfully conduct home searches, especially in today’s very competitive, low-inventory market.

 

@properties was the first brokerage firm to establish an enterprise agreement with Zenlist. Since then, a handful of other Chicago-area brokerage firms have signed on as well. We spoke with Zenlist founder and CEO, Tom MacLeod, in the latest installment of @ The Market, about how buyers can benefit from the app.

Here are 10 things you can do with Zenlist:

Check Out Thousands of Listings (even before they hit the market)

Zenlist gives homebuyers access to the greatest number of local listings by combining active listings from the MLS with pre-market (or private) listings that aren’t available on popular apps like Zillow, Trulia, Redfin, or Realtor.com. With today’s inventory being so low, this is an incredible tool to have as a buyer because it gives you the opportunity to see a growing segment of the market that is normally reserved for agents.

Collaborate With Ease

Homebuyers can only gain access to Zenlist through a licensed real estate agent. Once on the app, buyers and agents can save searches, share them back and forth, share and comment on listings, and send messages. Looking with a family member or partner? Zenlist allows you to collaborate with them too. See a home you like? Just make a note, and your co-buyer and agent can see it and respond.

Send Questions Directly to Your Real Estate Agent

Have questions or thoughts about a specific listing? Send them directly to your real estate agent through the app. Zenlist lets you ask questions and discuss listings with your agent in one convenient place, rather than jumping from email to text to calls.

Request Showings

Within the app, you can easily build tour folders of homes that you want to see in person, giving your agent everything they need to request a showing. This includes any of the notes or questions you’ve made on the home.

 Immediately Receive Notifications

In a market where inventory is low and demand is high, it’s important to be the first to know when a home fitting your criteria hits the market. Zenlist is on it, and instantly notifies you of new listings – including pre-market listings – the minute they hit the app. Zenlist usually posts new listings faster than Redfin or Zillow.

Filter Searches Easily and Intuitively

Whether you are looking for a home within a particular school district or you need a three-car garage, Zenlist lets you filter searches with greater specificity than other apps. You can even draw asymmetrical search boundaries, and easily hide listings that don’t fit your criteria, giving your agent even more insights into your preferences to help with your search.

Explore Virtually

Google Street View is integrated into Zenlist, making it easy to check out an area virtually. You can explore a neighborhood and its shops, restaurants, and amenities before making an in-person visit.

Keep Track of Homes

Zenlist keeps track of all the homes you’ve toured as well as upcoming showings.

View Home Layouts

In the age of virtual showings, getting an idea of a home’s layout is crucial to your search. Zenlist provides a list of rooms and dimensions per floor level for every listing so that you can really envision the home (even if it doesn’t have a floorplan) before scheduling an in-person showing.

View Tax and Assessor Information

Zenlist makes listing information extremely transparent. You can view property tax information, as well as the past sales history of every home.

For more information on Zenlist and to gain access to the platform, contact John Montgomery, an @properties agent.

By: @properties

Feb. 24, 2021

Filing Taxes after a crazy 2020

Like all things 2020, filing your taxes might look slightly different this year. With everything that’s gone on this year, now’s a good time to consult with a tax professional if you haven’t before.  

The combination of unusual circumstances mixed in with a fairly recent tax amendment (the 2017 tax overhaul), has caused some questions to arise. What if you relocated mid-pandemic? And what if you’ve been working from home for most of the year? Can you write off your rent or mortgage? What about that new office chair or printer—can you deduct those items? 

The short answer is, ‘no,’ at least not if you’re a W-2 employee, but there are a few things to consider. Here’s what you need to know as you prepare for tax season.

The home office stipulation 

A significant amount of the workforce saw their homes become their offices overnight—many spending the majority of the year in these new “home offices.” As expected, people are wondering whether they can claim expenses, such as internet, home office updates, etc. 

In the past, employees who itemized tax deductions on their federal returns were able to include various work expenses as miscellaneous deductions. Though in order to receive a tax break, these miscellaneous deductions had to top 2% of an adjusted gross income, and even when that criteria was met, only the amount exceeding the 2% threshold could be deducted.

But the Tax Cuts and Jobs Act (TCJA), effective from 2018 through 2025, has eliminated this option. There is an exception, however, if you’re a contractor or freelancer, as the TCJA didn’t change home office expenses rules for people who are self-employed. This goes beyond merely working from home though. Employees who receive a paycheck and a W-2 from an employer are not self-employed, and can’t claim the home office deduction, regardless of the reason they’re working from home.

If you’re self-employed, you can find deduction information in IRS Publication 587, but here are a few simple questions to ask yourself to see if you might qualify for potential deductions.

  • Is a portion of your home used “exclusively and regularly” as your principal place of business?

  • Do you have a “place where you meet or deal with clients” regularly?

In order to qualify for a tax deduction, you’ll need to be able to show that your home is where you conduct most of your essential business activities. 

There’s one more exception, and it comes at the state level. If you reside in one of these seven states, you may be allowed to make deductions on your state income tax returns. 

  • Alabama

  • Arkansas

  • California

  • Hawaii 

  • Minnesota

  • New York

  • Pennsylvania 

Rules regarding the qualifying amount of unreimbursed expenses varies by state, so be sure to check your state’s specific instructions and talk to your tax professional.

Relocation

With remote work and social-distancing measures in place, we’ve seen an uptick in people both permanently and temporarily relocating, which can have various implications depending on your state or your employer’s state. 

If you’ve moved permanently, filing your taxes should be the same as it was in year’s past with a move, similarly to if you’ve ever switched jobs mid-year. You’ll just need to ensure you cover both states if you’ve moved out of state. 

But what if you’ve relocated and you now reside in a different state than your employer? Or what if you’ve temporarily moved to a vacation home in another state because of the pandemic? If you’ve been there for six months or more, you probably owe taxes in both states. This is where it gets tricky, and many experts advise checking in with a tax pro if this is your case. 

If you work in one state and live in another, you could end up having too much tax withheld from your paycheck for your nonresident state and not enough from your resident state. And for a tax credit, you have to file in the right order: first filing and reporting income to the state where you work, then claiming the credit on your resident tax return in the state where you live. 

But there are some states with reciprocity to other states. If the state you live in has a reciprocity agreement with the state you work in, you’re in luck, and should only have to file in the state where you live. 

 

It comes as no surprise, that even your taxes might be complicated in the good ol’ year 2020. But hey, filing your 2020 taxes means you’ve entered 2021 and we can all hope for a better year.

Information provided is not tax advise. Please consult your tax adviser with related questions.

By: Kristen Elliott

 

 

Feb. 17, 2021

Chicago Real Estate Prices Jump 14.7% in 2020

 

The fourth quarter of 2020 showed price price growth over a year ago with 88% (161 areas) of those experiencing double-digit price increases, according to the National Association of Realtors.

“Mortgage rates reached record lows, thereby driving up the demand,” Lawrence Yun, NAR chief economist, said in a press release. “At the same time, inventory levels also reached record lows, leading to grim inventory conditions of insufficient supply in the fourth quarter.”

The largest price gains were seen in Bridgeport, Conn. (39.2%); Pittsfield, Mass. (32.2%); Atlantic City, N. J. (30.0%); Naples, Fla. (29.9%); Barnstable, Mass. (28.9%); Crestview, Fla. (28.6%); Boise City, Idaho (27.1%); Binghamton, N.Y. (24.4%); Kingston, N.Y. (24.2%); and Spokane, Wash. (23.6%).

The report added that vacation homes and affordable homes in small towns near major urban centers were in strong demand as a result of the pandemic. “Although tourism took a major hit overall throughout 2020, our data shows that vacation housing still did well in terms of sales,” Yun said. “Many people purchased in these areas because they found themselves with new work-from-home freedoms.”

In Chicago, the median price of a single-family home had grown by 14.7% to $292,100 by the end of the fourth quarter.

Nationally, the median home price jumped 14.9% to $315,900, compared to 2019. These shifts could become an impediment to homebuyers down the road, according to Yun. “The average, working family is struggling to contend with home prices that are rising much faster than income,” he said. “This sidelines a consumer from becoming an actual buyer, causing them to miss out on accumulating wealth from homeownership.”

By: Chicago Agent Magazine

Feb. 10, 2021

Valentines Day Love

 

 

By now, you’ve probably got the whole at-home celebration thing down to a science. But if you’ve found yourself fresh out of ideas for Valentine’s Day, we’re here to help. Whether you are spending the day solo or with a loved one, here’s how you can enjoy the holiday of love:

 

Take a Cooking Class

Show off your skills in the kitchen with a virtual cooking class. East Lakeview’s Get In the Kitchen has a whole lineup of events from February 10th – 14th, including cookie decorating, three-course dinners, a Valentine’s Day brunch party, and more. Likewise, Taste Buds Kitchen in Bannockburn is offering a virtual class for Valentine’s Day dinner on the 13th and the menu will include pan-seared steak and potatoes lyonnaise alongside an arugula salad.

 

Go to the Drive-In

What better way to celebrate the day of love than with a movie and popcorn under the stars? ChiTown Movies will feature several romantic films during Valentine’s Day weekend at the drive-in at 2343 S. Throop St. in Pilsen. The lineup includes favorites like The Notebook and Lady and the Tramp, and food is available for purchase on site. Reserve your tickets here.

Enjoy a Wine Tasting

Whether you are a wine connoisseur or just want to try out some new varieties, wine tastings are always a fun activity. Uvae Kitchen and Wine Bar in Andersonville is hosting a virtual wine tasting of Sweetheart Wines on February 13th. They are also offering Valentine’s Day dinners for two, a bubbles and cheese basket, and a wine and chocolate basket.

Need something more flexible? Schedule a tasting with VIN312 at a time that works for you. Winemaker Warner DeJulio will guide you through the history of the Ravenswood winery and the inspiration for five of their wines. Be sure to book your tasting a week in advance, and in the event you can’t book for the 14th, this also makes a great gift for your Valentine!

Photo by VIN312

Get Chocolates Delivered

Enjoy the holiday’s favorite treat delivered right to your doorstep. Leonidas Cafe has locations in Chicago, Evanston, and Northbrook, and is offering an array of chocolates, sweets, and treats for Valentine’s Day. In addition to heart-shaped chocolate boxes with a variety of flavors, Leonidas has a French macaron gift box, Valentine’s cookie trio, and a big chocolate dipped strawberry available for purchase.

With a flagship store near Goose Island, Veruca Chocolates has a robust Valentine’s Day collection that includes chocolates, stunning gift assortments, Kiss Me Caramels, and so much more. And just down Halsted, Pilsen’s Chocolat Uzma has a variety of holiday treats including heart-shaped chocolates, chocolate-covered strawberries, and dark chocolate truffles.

Order In

Plenty of locally owned businesses are helping make Valentine’s Day special this year. Order dinner from your tried-and-true staples, or get something from a restaurant you’ve never tried before. Sophia Steak in Wilmette is offering a prix fixe or a la carte special that features king crab, lobster tail, flat iron steak, and millionaire shortbread. The restaurant has themed cocktails, as well as a Valentine’s Day cookie kit that’s available for pick-up or delivery.

Fulton Market’s Sepia is also taking care of Valentine’s Day dinner with an unforgettable five-course meal for two. Dinner consists of smoked beet tartare, braised duck pot pie, and chocolate fondant cake. Over in Logan Square, Andros Taverna has the whole day covered with their Valentine’s Day Bakery Box and Eros Dinner for two. Would you believe that dark-chocolate dipped coconut halvaroons are just the beginning of the mouthwatering culinary journey?

Note: Please check all websites for possible COVID-19 standards or closures.

Photo by Seipa

Feb. 3, 2021

Potential home buyer tax credit

 

The housing industry is keeping a close eye on the Biden administration’s proposal of a $15,000 first-time homebuyer tax credit. If passed, the funds could be accessed immediately by the buyer at the closing table. Biden’s tax credit is more of a possibility now that both Senate races in Georgia went to Democrats.

Ralph DiBugnara, president of Home Qualified and senior vice president at Cardinal Financial, sees an obvious positive impact of the tax credit, but is still wary of parts of the bill, which includes an increased rate on long term capital gains.

“The real estate market is so hot that hurting investors now may not have a big effect, but long term it could cause major issues,” DiBugnara said. “Real estate Investors tend to buy more real estate in even in bad markets as a long-term strategy. If it becomes more expensive for them to do so, because of taxes, I believe some will shift strategies long term so when market cools there will be a lot less of them to support home buying.”

Lawrence Yun, chief economist at the National Association of Realtors, thinks Biden’s homebuyer tax credit will need to get support from 60 senators — a filibuster-proof majority in the Senate — if Democrats choose not to use budget reconciliation. And, the possibility certainly exists that Republicans will ask for a smaller credit number.

“Having a few Republican Senators on board will help change the public perception of working across the aisle,” Yun said. “That means getting what the Biden administration wants along with items favorable for Republicans, such as expanding high speed internet access to rural areas and a tax break for small businesses.”

For builders, Yun said preserving the 1031 Exchange to incentivize land sales is important for the future of the housing market. An extra $15,000, he said, won’t help with the already low supply of homes available.

Only with added supply will the homebuyer tax credit be effective in boosting homeownership and enlarging the middle class,” Yun said. “Without supply, home prices jump much higher with no meaningful gain to new homeownership.”

Ruben Gonzalez, Keller Williams chief economist, said it’s hard to comment on anything definitive at the moment but thinks Biden’s tax credit will garner bipartisan support.

“The challenge with the credit right now is that demand is already really strong with mortgage rates so low, and most evidence is showing that high earners have increased savings during the pandemic,” Gonzalez said. “The first-time home buyer tax credit seems like a good candidate for bipartisan support, but right now it’s still unclear if we are genuinely going to see bipartisan efforts in Congress.”

But past bipartisan support for similar tax bills seems to point things in a positive direction, DiBugnara said, of passing.

“I do believe, with the Democratic-led Senate, most of what is President Biden’s tax plan will come to fruition,” he said. “The [$15,000] credit seems to be one of the easier proposals of the tax plan to get passed, because it will stimulate the already hot real estate market and align with a low interest rate market. The majority of both parties have been in agreement with that.”

HW - Tim Glaze