The American Rescue Plan And Real Estate
Recently, the House of Representatives voted to pass the American Rescue Plan Act. Shortly after, President Biden signed the American Rescue Plan Act into law. This legislation is the latest round of stimulus that the American public has been waiting on for months. The total price tag of this legislation is around $1.9 trillion and is designed to provide an economic boost to ward off the damage caused by the coronavirus pandemic. There is a lot to the American Rescue Plan and many of its provisions will have an impact on the real estate market. Whether you own a house, are looking to buy a home, or are thinking about refinancing your mortgage, the details of this legislation is relevant to you. The team at Peoples Choice Mortgage is here to highlight some of the provisions of the American Rescue Plan and what they mean for the housing market.
American Rescue Plan Act and the Housing Market
The real estate market is often impacted by government legislation and laws. This is especially true anytime the legislation is specifically targeting the economy. The American Rescue Plan is no different and many of its provisions have both direct and indirect impact on real estate. Altogether, the complex legislation will probably have a significant impact on the United States economy. In particular, there is a chance that this legislation will help turn up the temperature even more on an already red hot real estate market.
Rent and Mortgage Assistance
The American Rescue Plan continues various forms of assistance for renters and homeowners, plus adds a few more. Altogether, there is $27.4 billion included for rental and housing assistance. $21.55 billion of this is specifically for targeted rental assistance. This is great news for everyone who owns their own investment properties. Making sure that tenants who have been impacted by the pandemic can still pay their rent, will hopefully prevent the rental market from crashing. If large numbers of renters are unable to pay rent, then rent prices will come tumbling down, which will be bad news for those who won rental properties.
One measure that was put into place to also prevent this from happening, but was not extended in this legislation, is the eviction moratorium. In the early days of the pandemic, the federal government passed a moratorium on evictions and foreclosures. This prevented a bunch of houses from flooding the market and causing a real estate crash similar to 2008. These moratoriums are set to expire at the end of March. Many expected the American Rescue Plan to extend these moratoriums even further into the future, but that did not happen. It is unclear if Congress or President Biden has any plans to address this in the near future.
Another aspect of this legislation that affects real estate is the $100 million set aside for rural housing. Many Americans moved to rural areas during the pandemic to get more space. If this trend continues, it can have a big impact on the prices of real estate in major metropolitan areas. Homes and apartments in major cities might start to become much more affordable. For those considering moving to rural areas, there are some unique loan programs that make it easy and affordable. One government program that makes buying a home in a rural area easy is USDA loans. These government backed mortgages can allow you to buy a home in a rural area with no down payment.
Another provision in the American Rescue Plan that directly affects the housing market is $10 billion that will be directed at helping those who are behind on their mortgages. Millions of Americans fell behind on their mortgages due to the pandemic. Many experts predicted a housing market crash similar to 2008 because they anticipated a wave of foreclosures that would dramatically increase the supply of homes. That never happened thanks to government intervention. As we know, instead of the real estate market crashing, it boomed. The demand for new home purchases skyrocketed because of low interest rates and a small supply sent home prices and value sky high. Hopefully, more support for those who are behind on their mortgages will continue to prevent the housing supply from increasing too quickly. This in turn should mean that home values and equity should continue to increase for a large portion of homeowners.
Stimulus Checks and Childcare
The part of the American Rescue Plan that has been getting all of the big headlines is the latest round of stimulus checks. This is the third round of stimulus checks from the federal government since the start of the pandemic. It is also the largest round of stimulus checks, for those who qualify. Depending on your taxable income based on your 2019 or 2020 taxes, you could get up to $1400 per adult and dependent child in your household. Economists believe that the last two rounds of stimulus checks boosted consumer spending and the overall economy. If this research is true, the economy could see another boost based on this latest round. This also comes right around the same time as many states are beginning to relax their pandemic restrictions on businesses. Americans will have more money to spend and more places to spend it at, which could bode well for the overall economy.
Another aspect of the stimulus legislation that is designed to boost the economy is additional tax breaks for parents of children and additional support for childcare. As schools and daycares closed because of pandemic restrictions, many parents had to leave the workforce or change jobs in order to care for their children. These measures are supposed to help parents care for their kids and get back to work in a full capacity. This will make it easier for families to pay their bills, including their rent payments and mortgage payments. Again, this should prove beneficial to housing prices because it means that it is less likely the housing market will be flooded with new inventory.
Final Thoughts
The American Rescue Plan is a complex piece of legislation that might have a significant impact on the economy and the real estate market. How much of an impact and in what ways, is yet to be determined. However, one thing is certain is that because of this legislation many Americans will have more money to spend and catch up on their bills. This is good for the economy and great for anyone who owns a home. A strong economy and strong consumer spending means that more and more Americans can return to work. In turn, more Americans will have the income they need to buy the home of their dreams. For those who already own a home, this legislation means that they are more likely to keep it.
Altogether, signs are positive that today’s red hot real estate market is not going away anytime soon. So, if you were thinking about buying a new home or refinancing your current mortgage, you can do so with confidence. Nothing on the horizon indicates that the rug might be pulled out from you and the market will crash around you. Today’s real estate market looks healthy and durable. If you want to take advantage of today’s rising economy and housing market, contact us! We can take a look at your financial situation and see if we can come up with a plan that is perfect for you.
