In Pennsylvania, legislation to help them is winding its way through the Senate.
Chris Raad, first vice president of the Pennsylvania Association of Realtors, said his organization is backing a proposal that would allow Pennsylvanians to deposit money into a saving account that would go exclusively toward the purchase of a house. It would be known as the First-Time Homebuyers Savings Account.
Raad discussed the proposal Wednesday morning as part of a panel discussion at the sixth annual Lehigh Valley Business Real Estate and Development Symposium at DeSales University in Upper Saucon Township.
Sen. Bob Mensch (R-Berks, Bucks, Montgomery) served as the prime sponsor for the legislation, Senate Bill 1066.
According to the National Association of Realtors, 25 percent of first-time buyers have difficulty saving for a down payment on a house. And the share of first-time homebuyers in the national home market has fallen from 45 percent to 32 percent, according to NAR.
“The decrease in the first-time homebuyers can also be seen in the Lehigh Valley,” Raad said. “I think that’s a problem. Millennials are really having trouble saving enough for a down payment.”
The new savings account would help them, he said. And the money they deposit would be deducted from their state income taxes – provided it is used for a home purchase. Penalties would apply for withdrawing money for another purpose.
Parents and grandparents, meanwhile, would be able to open accounts to benefit their children and grandchildren, he added.
Under the program, taxpayers would be able save up to $50,000 over 10 years.
But even a few thousand dollars could be the entry for people to buy their first house, he added.
In Pennsylvania, this program could bring an increase of up to 4,000 home purchases, according to PAR.
A handful of states have signed first-time homebuyer savings programs into law, including Iowa, Mississippi, Virginia, Montana and Colorado, according to NAR. Legislation has been introduced in eight states.
Sen. Rosemary Brown (R-Monroe and Pike) is a co-sponsor of the bill and views the legislation as one that’s gained a good amount of support.
“To me, home-ownership is so important,” Brown said. “There are a lot of obstacles now. It’s a shift when you come out of college. What we are seeing is there’s a lot of student debt, so it becomes another obstacle. This gives them an incentive, just a way for people to save, tax-free.”
She also sees it as a way to spread awareness of financial literacy and help younger people establish better budgeting practices to accomplish goals.
It also helps ancillary businesses in the industry, such as contractors, electrical companies, paving companies and others, she added.