Federal officials and state lawmakers are looking at new ways to help prospective home buyers compete with investors for scarce housing in hot real estate markets.
President Joe Biden last week announced new efforts to increase available housing and reduce financial barriers for prospective buyers as the American dream of building generational wealth through homeownership becomes increasingly out of reach for many.
According to the Federal Reserve Bank of St. Louis, the median U.S. home sale price in the first quarter this year is about $429,000, up from $370,000 last year and $329,00 in 2020.
“Today’s rising housing costs are years in the making,” the White House said in a May 16 statement. “Fewer new homes were built in the decade following the Great Recession than in any decade since the 1960s—constraining housing supply and failing to keep pace with demand and household formation.”
Federal and state regulators are eyeing steps to make prospective first-time buyers better able to compete for homes. Lawmakers in California and New Jersey, among others, have proposed boosting down-payment assistance funds for first-time buyers, taxing investors who flip residential real estate, and giving owner-occupants greater leverage to purchase foreclosed homes.
California has led the way in introducing and passing rules that allow tenants and prospective homeowners to match or outbid for-profit investors after foreclosed house auctions. Legislators in Ohio and Nevada have recently introduced nearly identical measures.
The Biden administration has also launched programs intended to direct more foreclosed homes owned or insured by the government to owner-occupants and non-profit organizations instead of investors.
Earlier this month, the Federal Housing Administration announced changes to its Claims Without Conveyance of Title program, adding an extra 30 days to the post-foreclosure sale process of FHA-insured homes for owner-occupants, nonprofits, and governmental entities to bid before investors are allowed.
The programs “can make a difference in certain markets,” said Doug Ryan, a vice president of policy and applied research at Washington D.C.-based nonprofit Prosperity Now. “We have to reduce the barriers of entry for families to become homeowners.”
‘Tough Out There’
Families looking for a starter home are grappling with a U.S. housing shortage, estimated above two million units, and stiff competition for what’s available. First-time buyers are competing with a surge of purchasing by investors.
A May report from the National Association of Realtors shows that institutional buyers made up 13% of the residential sales market last year. Meanwhile, investors bought a record 18% of homes sold in the third quarter—well above the 2020 third quarter rate of 11%, according to realty company Redfin. In growing markets like Atlanta, Phoenix and Charlotte, investor purchases accounted for nearly a third of homes sold that …….