Reply to $25K in down-payment support for 1st-time homebuyers

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]This will just lead to homes costing $25k more. People can’t be this stupid, right?

- lifelong Dem who will never vote for Trump [/quote]

+100

This is basic logic. I think people truly do not comprehend this very basic point.[/quote]

It isn’t that simple. $25k down payment assistance for a subset of moderate income homebuyers who would still have to qualify for a mortgage would not add $25k to the cost of homes. It would have less effect on housing prices than a Fed cut in interest rates would. [/quote]

You’re right…it would focus the pricing effect specifically on the most affordable entry level homes. Good job guys.[/quote]

It would incentive the construction of more entry level homes, which is the only way to fix the housing crunch. The traditional way to do this has been to give financing and tax subsidies to developers and investors to build affordable housing, because that’s the only way to get a housing assistance bill through the Senate. That has been a terrible and wasteful way to do it.

It would be much much better to give a subsidy to moderate income buyers and then make the builders and investors build to their housing demand to get their hands on the money. [/quote]

Developers don’t build affordable housing because they want to maximize the value of every sq ft that the market will allow them to cram into a given space. Why would they sell the same 4000 sq ft at an “affordable” price if there are people willing to pay more for minor adjustments to finish level?

As for subsidies, any money given to a developer to incentivize the construction of new housing units will have a downward effect on the retail price. If a developer can lower their building costs then they can offer more units at a lower cost and still make the same profit as they would have at a higher price point. Giving cash to consumers for a downpayment is even more inflationary than loan assistance and will create upward pressure on retail prices due to the consumer level increase in price tolerance.

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