3 Reasons You Should Not Buy a House if You Think Biden Will Win the Election
The real estate market has been wild since the pandemic, with home prices skyrocketing and limited inventory resulting in bidding wars. Biden has proposed some potential solutions to address the ongoing housing market issues, and the outcome of the upcoming election could impact home prices, mortgage rates, and more.
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If you’re thinking of buying a home in the near future, the election outcome might impact your decision.
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Current Home Prices and Mortgage Rates are High – and Likely to Stay There
According to the Federal Reserve Bank of St. Louis, the median sales price of United States homes sold in Quarter 1 of 2024 was $420,800. That rate is up since Biden took office in January 2021; the median home sales price in Quarter 1 of 2021 was $355,000.
Interest rates are also high. According to the Federal Reserve Bank of St. Louis, the average rate for a 30-year fixed-rate mortgage in the United States was 6.89% on July 11, 2024. Like home prices, interest rates have increased since the pandemic and when Biden took office. On January 7, 2021, the average mortgage interest rate was 2.65%.
That’s not to say that Biden has been entirely responsible for growing home prices and interest rates. Steven Parangi, owner of Alpine Mortgage, is a mortgage broker and banker who has provided residential mortgage loans for more than 20 years. Parangi explained that supply and demand imbalances in the real estate market caused home prices to increase. “The housing market has been dealing with a severe shortage of homes, a problem that existed before the pandemic hit, but was worsened by it,” he said.
“Mortgage rates have gone up significantly, mainly due to the Federal Reserve’s efforts to combat inflation by tightening monetary policy,” Parangi explained. “Many existing homeowners are reluctant to sell due to having locked in lower rates, further constraining supply.”
Unless the next president implements changes to lower home prices and interest rates, buying a house may not be a wise financial decision.
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Biden’s Proposed Solutions Might Do More Harm Than Good
To combat high interest rates and home prices, Biden proposed a $400 tax credit in his 2024 State of the Union Address. “I want to provide an annual tax credit that will give Americans $400 a month for the next two years as mortgage rates come down to put toward their mortgage when they buy a first home or trade up for a little more space,” he said.
Michael Ryan, a financial expert with more than 25 years of experience as a financial planner and owner of Michael Ryan Money, felt that Biden’s tax credit might not largely help buyers. “Biden’s proposing a $400 monthly tax credit is, in my opinion, just a band-aid solution that doesn’t address the root causes,” he said. “While it may temporarily ease the burden for some buyers, the risk is it will further inflate home prices by artificially boosting purchasing power.”
Parangi felt that the credits wouldn’t fully address high home prices or the supply and demand issue. “The tax credits might stimulate demand by making homeownership slightly more affordable in the short term,” he said. “But without a corresponding increase in supply, this would exacerbate the existing supply-demand imbalance, leading to higher home prices.”
As part of his housing plan, Biden proposed an annual $5,000 mortgage tax relief credit for middle-class first-time homebuyers. The credit would be given for two years to compensate for high interest rates. Like the $400 tax credit, this solution could stimulate demand and actually inflate home prices.
We Need Big Changes to Make Home Buying Accessible
“The housing market is complex, and there’s no silver bullet solution,” Ryan said. “Biden’s proposals, while well-intentioned, may not be the game-changer many hope for.”
Making the housing market accessible requires a multi-pronged approach, explained Parangi. He recommended:
Policies that incentivize new construction, like tax breaks for builders, to generate more supply and reduce home prices
A stable inflation environment to reduce interest rates
Expanding affordable housing programs, like programs for first-time homebuyers, to help more people become homeowners
Investing in infrastructure in underdeveloped areas to make them more attractive for new developments, which can further increase housing supply
If you’re thinking of buying a home, it’s important to carefully consider your financial situation as well as the state of the housing market. “Buying a home isn’t always the best financial move, regardless of who’s in office,” said Ryan. “I’ve advised countless clients to rent and invest the difference when market conditions aren’t favorable.”
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. For more coverage on this topic, please check out I’m an Economist: Here’s My Prediction for the Housing Market If Trump Wins the Election.
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