You May Need a Bigger Down Payment for a New Home

You May Need a Bigger Down Payment for a New Home

Up, up and away for the price of a new single-family home, which reached a record high $408,800 to kick off 2021. Goals-based clients who are saving and investing to buy a new home should be prepared for future sticker shock.

When the price of a new home is galloping higher like it has over the last nine months — up 13.5% since the low set in April 2020 — data going back to 1975 indicates it could keep rising. The subsequent one-year price increase was 4.9%, on average. Looking out over two years, the increase averaged 12.7%.

If history repeats itself, it will mean the standard down payment of 20% to buy the average priced new home would require writing a check for $92,144 two years from now, compared to today’s $81,760.

Higher home prices may also cause bigger monthly mortgage payments, something clients nearing the Spend stage should consider as they may need higher distribution rates to cover the increased cost of living.

Further reading:

Emerging Markets Are Surging – And Evolving: Market Notes
Inflation Could Be Coming, Are You Ready?
Disappearing Junk Bond Yields
Do Bonds Really Offset Stock Market Declines?
If Inflation Returns, Bond’s Diversification Power May Disappear
Essentially Nothing. That’s How Much Bonds May Return Over Next Five Years
High & Mighty Stocks; Feeling Inflationary?; Game Stopped: Market Notes
Bond Market Bears Growling as 10-Yr Yield Tops 1%
It’s Getting Harder to Fund Retirement Using Bonds
7.9 Trillion Reasons Not to Fight the Fed, ECB, BOJ or BOE
The Stock Market Is Strange, But Not Broken by GameStop: Market Notes
In Current Markets, Only Two Words Matter: Stimulus Spending

This commentary is written by Horizon Investments’ asset management team. For additional commentary and media interviews, please reach out to Chief Investment Officer Scott Ladner at 704-919-3602 or sladner@horizoninvestments.com.

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