California's $250 Million 'Dream For All' Program Shells Out $150K In First-Time Homebuyer Funds Despite State's $73 Billion Deficit

With the median single-family home in California selling for nearly $860,000 in 2023 — more than double the national median — prospective first-time homebuyers are having a tough time breaking into the state's expensive real estate market.

Mortgage rates topping 7%, combined with persistent inflation pushing off expected Federal Reserve rate cuts, make affordability even more challenging. 

California allocated $250 million to relaunch its Dream for All program, which seeks to make housing more equitable for first-time homebuyers.

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Dream for All is run by the California Housing Finance Agency, with the agency using a lottery system to give between 1,700 and 2,000 prospective first-time buyers up to $150,000 to purchase homes.

The catch is that the money is a loan that must be paid back along with a share of the home's price appreciation when it's sold if there is any.

"When they repay this, this is going back into the program, and it’s going to allow someone else to take advantage," California real estate agent Sarah Moore said.

In addition to homebuyers being potential beneficiaries of the program, it could also provide a runway for homebuilders who need to keep adding supply to fill the nation's demand for affordable housing units.

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Homebuilders such as Lennar Corp. LEN and D.R. Horton Inc. DHI have seen their shares soar around 52% and 54%, respectively, over the past year as the nation deals with a housing shortage.

While the Dream for All program provides loans, it comes at a time when California continues to run a massive budget deficit.

The nonpartisan Legislative Analyst's Office in February updated its estimate of California's deficit to as high as $73 billion.

Whether the government's intervention in an unaffordable housing market for most prospective first-time homebuyers in California proves effective in the long term remains to be seen, but for the winners of the lottery, it might end up being their only choice to afford to own property in the high-cost state.

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