A proposed tax credit for first-time homebuyers easily would negate the down payment of the typical Orlando home purchase, according to a new report from Zillow.
The $15,000 tax credit, supported by U.S. President Joe Biden, is more than enough to cover an Orlando home's typical down payment of $9,520, according to a March 16 report from the Seattle-based real estate data firm. That may further lift sales in a housing market that is already red-hot in Orlando and beyond.
"If that passes, there's going to be an upside risk in demand," PNC Financial Services Group Economist Abbey Omondunbi previously told Orlando Business Journal. "There's going to be greater demand for housing, which will actually increase house prices in 2021."
Down payments are a major obstacle for many would-be-homebuyers. In fact, a Zillow (Nasdaq: ZG) survey found that two-thirds of renters across 20 U.S. metros said a down payment was the biggest roadblock to buying a home. The proposed tax credit would give money to the homebuyer at the time of purchase instead of when the buyer files his or her taxes.
More down payment assistance is needed to make Central Florida homeownership more obtainable, according to iConnect Real Estate LLC owner Gigi Moorman. Metro Orlando's December homeownership rate of 59% was down from 63% a decade before, according to the U.S. Department of Housing and Urban Development.
The planned tax credit may help, as Zillow projects it would cover the entire down payment of a typical home in 40 of the nation's 50 largest metros. That is especially valuable because it would take the average U.S. renter 14 years to save up $15,000 for a down payment, according to the report.
However, a bump in people seeking a home would further stress the market, according to the report. In Central Florida, the supply of existing homes on the market in February hit its lowest point since 2005. "Continued boosts in demand without similar increases in supply risks leaving many would-be buyers on the sidelines, potentially outbid by better-qualified or faster-acting peers and/or unable to find a home they can afford in an area where they want to live."
Trends in the residential real estate market are important, as every home sale in the state has an estimated local economic impact of $77,858, per a 2018 study by the National Association of Realtors. In addition, the housing market often is considered a reflection of the local economy's overall health.
Growth in local home demand would pile on to hearty home sales. Central Florida recorded 2,995 existing sales in February, up 19% from February 2020, according to the Orlando Regional Realtor Association. As sales climbed, so did prices: the median sales price of $280,000 was up 12% from the previous February.