24/7 Wall St. Insights
- With the stock market collapse and the Federal Reserve prepared to make rate cuts this year, it may be time to buy a house.
- Buying a house could be nearly as inexpensive as two years ago.
It may be time to buy a house. With the current stock market collapse and the Federal Reserve prepared to make as many as two rate cuts this year, a 30-year mortgage may carry a rate as low as 6% before the end of the year. And, if homeowners fear a recession, the price of homes may drop as well.
The median price of a home for sale nationwide is over $425,000. Much of that is due to low supply. People who bought these homes with 3% mortgages want to avoid selling and buying another in a 7% mortgage world. Fear of a recession, or a full-blown recession that starts next quarter, could make people more likely to part with their homes. Owners with high home equity may want to cash in before prices slip. If they don’t like moving to a 6% mortgage home, they can rent, as millions of Americans can.
The monthly payment difference on a $425,000 home with a 3% mortgage and a 7% mortgage could be as high as $1,000. A 6% mortgage does not wipe that payment out but could drop it by $200. While not attractive if married with falling home prices, buying a house could be nearly as inexpensive as two years ago.
Of course, buying a home soon has another aspect. If a recession begins and prices drop, will a buyer’s income be safe?
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