$25K for 1st-time Home Buyers: Good Idea?
Will NAR Settlement Hurt Minority Home Buyers? | News Nuggets
Harris Proposes $25,000 in Down Payment Assistance
Vice President Kamala Harris, the Democratic party's nominee for president of the United States, released housing policy proposals to assist first-time home buyers and incentivize building "starter" homes.
Harris, who laid out her plans recently in a speech in Raleigh, North Carolina, called for up to $25,000 in federal down payment assistance for first-time homebuyers who have paid their rent on time for at least two years, Redfin reported. The proposal would require congressional approval.
Newsweek calls the plan an expanded version of a proposal set forth by President Biden, which would earmark $25,000 in down-payment assistance for 400,000 first-generation home buyers plus a $10,000 tax credit for first-time home buyers. The Harris campaign said its proposal would benefit four million first-time buyers over the next four years.
The Harris housing policy announcement also called for a new tax credit for builders to incentivize the construction of starter homes, restrictions on investor purchases of single-family homes, and a prohibition on shared software platforms used by landlords to set rent, which critics say facilitate price fixing. Obviously, the price of a starter home in Greater Boston is quite different from Northern Vermont, for example.
While the down payment support will help individuals and families struggling with ever-increasing home prices in Greater Boston, critics argue that driving more home buyers into the market will reduce inventory and fuel price increases. Others say the proposals to encourage housing development, including a $40 billion "innovation fund" to stimulate affordable housing development at the local level, will balance the demand side.
Increasing the housing supply and affordability seems to have bipartisan support. The question is whether builders can build fast enough to offset a wave of prospective home buyers looking to take advantage of the $25,000 down payment assistance. That's not likely, given the local red tape developers have to cut through in Massachusetts and the lack of available tradespeople.
Also, there's not a lot of buildable land left in the Boston area, so large home builders are more active in geographically larger states. Will Harris's innovation fund reach small and independent builders?
A point rarely mentioned is that any down payment assistance does not help individuals with lousy credit or lacking the income to afford a mortgage, and that's a good thing. The Harris plan requires timely payment of rent, usually a good indicator of one's ability to pay a monthly mortgage.
For some Greater Boston home buyers, income isn't the barrier to home ownership. They can afford the mortgage, property tax, insurance, PMI, etc. payments. On the other hand, sky-high rents make saving cash for the down payment and closing costs difficult. Add to the equation that the Boston area's housing stock is old and often in need of repair or upgrade, and it's tough to save enough. That's where down payment assistance can lend a hand to prospective home buyers, freeing up some cash for necessary repairs or desired upgrades.
The Unintended Consequences of the NAR Settlement
In an article for USA Today, reporter Andrea Riquier points out that the settlement between the National Association of Realtors and plaintiffs' attorneys will be another barrier to homeownership for minority and low-income home buyers.
"By decoupling the commission paid to buyer brokers from seller proceeds, the landmark class-action lawsuits brought against NAR and other large national brokerages on behalf of consumers have unintended consequences, advocates say.
"The concern: Black buyers, who often come to the house hunt with the deck stacked against them, will be further disadvantaged by having to pay more money out of pocket for an agent to represent them – or will choose to go without representation in a transaction that's expensive, confusing and laden with unfamiliar pain points."
Although the media has written extensively about the practice changes that took effect on August 17, 2024, the press has not written much about how low-income home buyers would fare under the new rules. Ms. Riquier nicely lays out the issues.
Michael Ketchmark, the attorney who successfully sued NAR and several brokerages, told USA TODAY via email," 'We examined this issue extensively and worked with consumer advocates for low-income and minority home buyers. Every state has assistance programs for first-time homebuyers to cover down payments. Under the old rules, minority buyers seldom used these programs because the money was being taken from the homeowners. This will change under the free market.'"
With all due respect to Attorney Ketchmark, his quote above demonstrates a lack of knowledge of the reality facing low-income home buyers. Instead of speaking with "advocates" for minority and low-income home buyers, he should have spoken with low- and moderate-income buyers and their buyer agents.
Last year, the National Association of Exclusive Buyer Agents (NAEBA) was out front on these potential issues and warned that decoupling commissions would hurt low-income home buyers and consumers in protected classes. NAEBA pointed out that a system that makes it harder for first-time and lower-income home buyers to retain loyal representation would not save home-buying consumers money. The nonprofit said the lack of trusted representation would lead to costly mistakes, ultimately costing home buyers more money.
Riquier also wrote, "While changes to the commission structure have grabbed most of the attention, many observers are also concerned about the erosion of the centralized databases that previously housed all information about real estate listings."
Some listing agents may choose to keep listings off the multiple listing services (MLS), sharing properties for sale with particular buyer agents and home buyers. NAEBA expressed concerns in October 2023 about how limited access to homes for sale could facilitate the circumvention of Fair Housing laws.
"NAEBA believes calls for dismantling rules requiring REALTOR® members to list all advertised properties on the MLS are dangerous. Allowing REALTORS® to bypass their local MLS for alternative platforms, encouraging what is known as a 'pocket listing,' could lead to sellers and agents circumventing Fair Housing laws and opening the door to disparate treatment of protected classes."
Ultimately, the real estate industry may face lawsuits in the future over why low-income home buyers and consumers in protected classes are less likely to have a buyer agent advocating for them. Those lawsuits will be a direct result of the decoupling of commissions.
News Nuggets
Top Boston Area High Schools: Boston Magazine recently released its 2024 Greater Boston top public schools rankings, highlighting the highest-performing schools.
The top five high schools included:
Dover-Sherborn Regional High School.
Weston High School.
Manchester Essex Regional High School.
Wayland High School.
Concord-Carlisle High School.
With 643 students and an average class size of 15.6, Dover-Sherborn Regional High School had 86 percent of its 10th graders score proficient or higher on the MCAS in English language arts, 88 percent in math, and 86 percent in science.
Boston Magazine considered various information to create the rankings, including state MCAS scores, class sizes, student-teacher ratio, and economic factors.
Hull High School, which ranked 56th overall, had the smallest class sizes at 9.6. In English, 69 percent of 10th graders scored proficient or higher on the MCAS, 63 percent in math, and 51 percent in science.
Georgetown High School, which ranked 53rd overall and had 289 students, had the lowest student-teacher ratio at 6.5:1. In English, 55 percent of 10th graders scored proficient or higher on the MCAS, 45 percent in math, and 47 percent in science.
Boston Latin had the highest percentage of 10th graders scoring proficient or higher in English (97%), math (98%), and science (91%) on the MCAS. The average class size at Boston Latin was 23.1. With an average class size of 18, Lexington High School placed third in English, second in math, and second in science.
Boston Magazine omitted highly specialized schools, as well as charter schools, from the rankings.
Mortgage Interest Rates Continue Decline: The 30-year, fixed-rate mortgage interest rate averaged 6.35 percent for the week ending August 29, 2024, down 11 basis points, according to Freddie Mac's Primary Mortgage Market Survey. During the same week last year, the 30-year note averaged 7.18 percent.
"Mortgage rates fell again this week due to expectations of a Fed rate cut," said Sam Khater, Freddie Mac's Chief Economist. "Rates are expected to continue their decline ..." The question for Boston area home buyers: How much more competition for scarce homes will lower mortgage interests spur?
