But possibly around the middle of this year, the Consumer Financial Protection Bureau will release a streamlined version of closing documents that should be easier for buyers and sellers to read and understand; the agency is currently testing new versions to determine what works.
Buyers looking for homes in the District will want to watch the D.C. First-Time Homebuyer Tax Credit, which rewards those purchasing their first home in the District with a $5,000 federal tax credit. The policy, which is part of a larger tax credit package, generally expires at the end of the year and is retroactively reinstated by Congress early in the new year, but the fight to put it back on the books gets tougher every year.
The elephant in the room:
Pending budget cuts
But the elephant in the room is government spending. The debt ceiling talks this summer between President Obama and Congress resulted in hundreds of billions of dollars in cuts to federal spending that are already on the books — $460 billion to the Defense Department alone over the next 10 years. They won’t take effect until 2013, but that budget will be out early this year.
In a region as dependent on government spending as this one, cutbacks play a significant role in home buyers’ mentalities. “People don’t buy houses if they feel threatened; they want to stay in place until they feel okay to buy,” said George Mason’s Fuller. Homes at the lower end of the market — rentals, condos and townhouses — probably won’t be particularly affected, but bigger houses may face a standstill in the market. “I don’t see them going up much,” Fuller said.
The presence of known budget cuts on the horizon is one thing. But there’s also the looming specter of potentially massive revenue reductions coming down the pike. When the congressional supercommittee failed to come to an agreement last fall, $1.2 billion in cuts across the board were automatically set into motion. Of course, some observers think those cuts will never see the light of day; they hope a lame duck Congress will step in around late November and raise taxes to avoid a draconian outcome.
But until then, no one knows what will happen — which means uncertainty could hang over the local housing market like wet fog. “Until Congress gives some direction, everyone will be sitting around waiting, because they don’t want to make the wrong decision,” Fuller said. “It could be a tough year.”
Amanda Abrams is a freelance writer.