How to Preserve a Down Payment While Waiting for Home Prices to Fall
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Here's your money briefing for Tuesday, October 18th. I'm Daniela Cheslow for The Wall Street Journal, filling in for J.R. Whalen. If you, like me, missed a chance to buy a house when mortgage rates were in the high 2%, the market is a lot tougher now. Rates are near 7%, while housing prices are still high. And that means many Americans who spent years saving up a down payment are just holding on to that money.
It's frustrating because you can't buy and then the money you have saved, it's really not working very hard for you. So it's not helping you save more for your future down payment.
On today's show, our personal finance reporter Veronica Dagger will talk about who's sitting out the market and she'll share some ideas from financial planners for getting the best return on those savings.
That's after the break. ReliaQuest, agentic defense for the enterprise. Learn more at ReliaQuest.com. That's R-E-L-I-A-Q-U-E-S-T dot com.
The number of people who are not buying houses because they've been priced out of the market is hard to estimate. But Fannie Mae forecasts that mortgage lenders will complete 49 percent fewer single family loans this year compared to 2021. That means a lot of people are holding on to their hard earned down payments. waiting for better conditions. But not all savings plans are created equal, especially with inflation running high. So what's the best way to preserve your down payment? Let's hear from Veronica Dagger, WSJ personal finance reporter. Hi, Veronica. Hey, Daniela. How are you? Great. You've been speaking to people who thought they'd buy a house, but now they're delaying.
Who is delaying home purchases and why are they waiting on the sidelines?
What are the reasons they gave for hitting pause?
We're approaching 7% mortgage rates in a lot of markets. A lot of people are facing that and say, you know, this isn't for me, especially if the home prices are still so high. There's a lot of question marks around what's happening in the economy. And so people aren't feeling as aggressive about buying a home. But it's frustrating because you can't buy and then the money you have saved, it's really not working very hard for you. So it's not helping you save more for your future down payment.
I was a little surprised to see in your reporting that down payments have been growing. The value of a down payment has been rising. Can you explain what's behind that?
Well, it's interesting. The typical homebuyer took out a mortgage in July of this year. They made a $62,500 down payment, and that's up 13.6% from a year earlier. But that's almost crazy. twice the median of $32,917 down payment they made in July 2019. So that was pre-pandemic. This is all according to Redfin. So the amount people are paying for down payments has really gone up a lot. You know, a bright spot for buyers today is that down payments have declined slightly just in recent months. because higher mortgage rates have cooled the competition for homes, and buyers don't have to put as much down to help win the bid. And that's also according to Redfin. So the housing market's not moving as quickly, it's not as competitive, and so that's good news for buyers.
But you still have to put a really good chunk of change down in order to get a home these days, just because home prices overall are still high. The price growth is slowing, but it's still moving in an upwards direction.
Doubling the average size of a down payment over three years, that is a really striking statistic.
Yeah, your pay probably not gone up that much. And so if you think about people's finances and you think of the overall economy and you think about inflation, the price of groceries, the price of your electric bill, all these things are so much higher now.
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