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.
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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 firstname.lastname@example.org.
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