SEATTLE, March 16, 2021 /PRNewswire/ -- A refundable,
advanceable tax credit of up to $15,000 for first time homebuyers, similar to the
one suggested by President Joe
Biden, could catapult millions of renter households into
first-time homeownership, a new Zillow® analysis suggests.
While Congress has already passed billions in aid over the past
year to provide homeowner and renter relief, housing will remain a
key area of focus through 2021 — especially as Congress continues
to grapple with decreasing affordability.
Zillow research found that with a 3.5% down payment1
on a 30-year mortgage with a 3% interest rate, 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 20202. An advanceable tax credit
would remove for them what two thirds of renters cite as the single
biggest barrier to homeownership -- saving for a down payment.
Other hurdles include qualifying for a mortgage and job
security.
A tax credit could be even more beneficial to renters in
relatively more affordable metros, like Pittsburgh (40.5% could afford a median
mortgage), Cincinnati (39.7%),
Cleveland (39.0%), and
St. Louis (38.5%). Costly
California metros like
Los Angeles (10.1%) and
San Jose (12.1%) have some of the
smallest share of renters that could afford a mortgage, but the
program would still significantly impact thousands in those
regions.
"Legislation that reduces barriers to homeownership could allow
millions of renter households to finally enjoy the stability and
wealth-building owning a home can provide," said Zillow economic
analyst Alexandra Lee.
Lawmakers have floated ideas surrounding the introduction of
legislation that would create a refundable, advanceable tax credit
of up to $15,000 for first time
homebuyers, similar to first-time homebuyer credits approved by
Congress during the Great Recession. Unlike those credits, the
recently proposed advanceable tax credit could be used at the time
of purchase, which could jumpstart potential homebuyers lacking
down payment savings.
Nationally, renter households are estimated to save 2.4% of
their income each year. At that rate it would take a typical renter
about 14 years to save $15,000.
Considering the low rates at which renters are able to save, a
$15,000 advanceable credit could push
them years ahead toward home buying, potentially covering the
entire down payment. In 2020, a 3.5% down payment on a typical home
sold was less than $15,000 in 40 out
of the largest 50 U.S. metros. In 30 out of the largest 50
metros, even a 5% down payment on the typical U.S. home would be
completely covered by a $15,000 tax
credit.
However, such a tax credit could also have some unintended
consequences. Down payment assistance does not completely
help those who face additional hurdles to enter
homeownership. Therefore, even though a tax credit for first-time
homebuyers would likely stimulate minority homeownership, it could
still disproportionately benefit white and Asian Americans who are
better positioned to buy because of better access to credit and
higher incomes. Also, recipients could only benefit from the
credit if enough homes at affordable price tiers are available on
the market. Competition for homes remains fierce with homes selling
at a historically fast pace. This strong demand, coupled with tight
inventory, is contributing to rapidly rising prices, which could
also inadvertently affect the utility of the tax credit for those
who need it the most.
Across the largest 50 U.S. metros, white renter households make
up a significantly larger share of those that could afford the
monthly mortgage payment. Asian households also fare relatively
well -- in almost all metros (48 of 50 largest) they make up a
slightly larger share of potential buyers. Conversely, Black (49 of
50 metros) and Hispanic (42 of 50 metros) renter households 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 Lee.
Methodology
Renters household income data was sourced
from 2019 1-Year American Community Survey microdata, accessed via
IPUMS. Zillow calculated the monthly payment on the median home
sale price across 2020, assuming a 3.5% down payment, a mortgage
rate of 3%, a mortgage insurance premium of 0.7%, and including
metro-level estimates of insurance and property tax rates.
Proportions of renters and potential buyers by race are compared
in a two-proportion z-test. Only statistically significant
differences at the 5% level are reported in the discussion of
metros with disproportionate potential buyers by race.
About Zillow Group
Zillow Group, Inc. (NASDAQ: Z and
ZG) is reimagining real estate to make it easier to unlock life's
next chapter.
As the most-visited real estate website in the U.S., Zillow® and
its affiliates offer customers an on-demand experience for selling,
buying, renting or financing with transparency and nearly seamless
end-to-end service. Zillow Offers® buys and sells homes directly in
dozens of markets across the country, allowing sellers control over
their timeline. Zillow Home Loans™, our affiliate lender, provides
our customers with an easy option to get pre-approved and secure
financing for their next home purchase. Zillow recently launched
Zillow Homes, Inc., a licensed brokerage entity, to streamline
Zillow Offers transactions.
Zillow Group's affiliates and subsidiaries include Zillow®,
Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow
Closing Services™, Zillow Homes, Inc., Trulia®, Out East®,
StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal
Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).
Proposed $15,000
Down Payment Assistance Tax Credit Impact on Renter Households
*
|
|
Metropolitan
Area
(Table ordered
by market size)
|
3.5% Down
Payment on
Typical Home
|
Total Monthly
Mortgage
Payment On
Typical Home **
|
Share of
renters that
could afford
a monthly
mortgage
payment
|
Median
Annual
Income of
Renter
Households
|
New York,
NY
|
$15,400
|
$2,612
|
22.4%
|
$57,300
|
Los Angeles-Long
Beach-Anaheim, CA
|
$24,850
|
$3,671
|
10.1%
|
$58,000
|
Chicago,
IL
|
$8,820
|
$1,621
|
33.0%
|
$46,000
|
Dallas-Fort Worth,
TX
|
$10,080
|
$1,890
|
26.5%
|
$50,000
|
Philadelphia,
PA
|
$8,855
|
$1,549
|
31.3%
|
$42,836
|
Houston,
TX
|
$8,995
|
$1,715
|
27.4%
|
$45,331
|
Washington,
DC
|
$15,225
|
$2,351
|
31.9%
|
$70,000
|
Miami-Fort
Lauderdale, FL
|
$10,850
|
$1,854
|
25.0%
|
$45,071
|
Atlanta,
GA
|
$9,205
|
$1,487
|
37.6%
|
$48,000
|
Boston, MA
|
$17,500
|
$2,831
|
18.1%
|
$59,000
|
San Francisco,
CA
|
$30,625
|
$4,522
|
16.3%
|
$85,000
|
Detroit,
MI
|
$6,825
|
$1,210
|
36.9%
|
$37,400
|
Riverside,
CA
|
$14,245
|
$2,238
|
20.9%
|
$50,000
|
Phoenix,
AZ
|
$10,973
|
$1,648
|
30.9%
|
$49,618
|
Seattle,
WA
|
$18,725
|
$2,892
|
20.3%
|
$65,000
|
Minneapolis-St Paul,
MN
|
$10,500
|
$1,761
|
27.1%
|
$46,200
|
San Diego,
CA
|
$21,910
|
$3,268
|
12.8%
|
$60,891
|
St. Louis,
MO
|
$6,755
|
$1,176
|
38.5%
|
$38,000
|
Tampa, FL
|
$8,698
|
$1,486
|
31.4%
|
$42,770
|
Baltimore,
MD
|
$10,325
|
$1,645
|
33.7%
|
$48,446
|
Denver, CO
|
$15,750
|
$2,376
|
20.7%
|
$58,000
|
Pittsburgh,
PA
|
$6,230
|
$1,104
|
40.5%
|
$38,466
|
Portland,
OR
|
$14,963
|
$2,355
|
19.4%
|
$54,000
|
Charlotte,
NC
|
$9,345
|
$1,477
|
35.6%
|
$46,000
|
Sacramento,
CA
|
$15,768
|
$2,428
|
17.3%
|
$51,000
|
San Antonio,
TX
|
$8,642
|
$1,587
|
27.3%
|
$42,803
|
Orlando,
FL
|
$9,520
|
$1,585
|
30.3%
|
$45,710
|
Cincinnati,
OH
|
$6,650
|
$1,153
|
39.7%
|
$39,349
|
Cleveland,
OH
|
$5,425
|
$1,001
|
39.0%
|
$34,811
|
Kansas City,
MO
|
$8,488
|
$1,471
|
31.4%
|
$43,200
|
Las Vegas,
NV
|
$10,675
|
$1,619
|
30.6%
|
$46,000
|
Columbus,
OH
|
$7,525
|
$1,356
|
35.5%
|
$44,400
|
Indianapolis,
IN
|
$7,403
|
$1,212
|
36.6%
|
$40,000
|
San Jose,
CA
|
$39,900
|
$5,827
|
12.1%
|
$97,821
|
Austin, TX
|
$12,250
|
$2,186
|
23.1%
|
$55,000
|
Virginia Beach,
VA
|
$9,013
|
$1,428
|
38.9%
|
$46,865
|
Nashville,
TN
|
$10,773
|
$1,680
|
26.7%
|
$47,163
|
Providence,
RI
|
$10,990
|
$1,875
|
22.1%
|
$38,965
|
Milwaukee,
WI
|
$7,175
|
$1,288
|
35.1%
|
$40,000
|
Jacksonville,
FL
|
$8,855
|
$1,468
|
32.0%
|
$42,800
|
Memphis,
TN
|
$6,592
|
$1,142
|
37.4%
|
$36,203
|
Oklahoma City,
OK
|
$6,633
|
$1,165
|
37.3%
|
$38,000
|
Louisville-Jefferson
County, KY
|
$7,000
|
$1,143
|
35.5%
|
$35,876
|
Hartford,
CT
|
$8,575
|
$1,590
|
29.4%
|
$41,000
|
Richmond,
VA
|
$9,450
|
$1,462
|
30.7%
|
$42,000
|
New Orleans,
LA
|
$7,665
|
$1,281
|
34.2%
|
$37,000
|
Buffalo,
NY
|
$6,125
|
$1,183
|
32.1%
|
$33,959
|
Raleigh,
NC
|
$10,535
|
$1,656
|
27.9%
|
$44,600
|
Birmingham,
AL
|
$7,175
|
$1,103
|
35.0%
|
$34,705
|
Salt Lake City,
UT
|
$12,950
|
$1,936
|
24.5%
|
$50,001
|
* Data in chart assumes a 3.5% down payment
**Includes insurance and property tax.
1 the minimum required for an FHA-insured
mortgage
2 Assuming no more than 30% of their income is
spent on housing
View original content to download
multimedia:http://www.prnewswire.com/news-releases/15-000-tax-credit-could-cover-entire-down-payment-for-homes-in-40-of-the-50-largest-us-metros-301247910.html
SOURCE Zillow