With home prices expected to rise by over 4% nationwide in the next 12 months, purchasers who want to put 20% down to avoid mortgage insurance will have to come up with a larger down payment.
In fall of 2024, 20% of those buyers had planned to sell from their stock portfolios in order to fund that down payment, a Redfin survey conducted by Ipsos found.
The Cotality (formerly Corelogic) Home Price Index increased in February by 2.9%; going forward 12 months, it expects a faster pace of growth at 4.2%.
This is more bullish than the first quarter forecast from Veros Real Estate Solutions,
Between January and February, home prices rose 0.3%, with the rate likely to increase to 0.4% when March's data is in. The forecast in the January report had expected
Home price growth picks up, but lags pre-pandemic
"Despite recent increases in home prices breaking the trend of flat prices, February's seasonal rise remained subdued compared to pre-pandemic levels, contributing to a decline in overall annual appreciation," Selma Hepp, Cotality's chief economist said in a press release.
"This continued cooling reflects weak home buying demand as households address economic and policy uncertainty;
Cotality's data found that the income needed to purchase a median-priced home is 22% higher than the average national wage.
That is likely driving some consumers who own stocks to sell them off in order to help fund their purchase or even keep their home.
Homeowners also selling stocks to cover monthly payments
In addition to the findings on future buyers, 13% of current homeowners sold stock to help fund their down payment. In addition, 10% of this group have sold stock to help afford the monthly mortgage payment.
A Redfin study released April 3 for the rolling four-week period ended March 30, found the typical monthly mortgage payment rose to a record $2,802, up 5.2% over the same period last year.
The recent
The Dow Jones Industrial Average, at one point on Tuesday up 660 points from its previous close, ended the day at 37,645.59, some 301 points lower.
Since April 2, when the Dow closed at 42,225, it has lost 4,769 points or about 11%.
Market volatility shakes buyer confidence and budgets
Instability is driving many to revaluate their personal financial strategies.
"In my area, this is mostly a concern for buyers in their 50s and older," Mahmood-Corley said. "Many of them are retreating from the housing market because a lot of the money they'd use to pay for housing is sitting in their stock portfolios, and they just don't know what's going to happen."
Redfin cited 2022 data which found 68.8% of homeowners and 39.6% of renters owned stocks.
It is not just in the wallet that the stock market gyrations impact homeownership demand, added Chen Zhao, Redfin's economic research lead.
"Big drops in the stock market not only cut into funds earmarked for down payments and other housing costs, they
On the other hand, a volatile stock market could push people to invest their money in real estate instead, as they see a home as a safer investment, Zhao said. A falling stock market could also push mortgage rates down, as investors are likely to purchase bonds like 10-year Treasurys instead. The 10-year yield moves inverse to the price, meaning it declines when demand is higher; it is one of the benchmarks used to price 30-year fixed rate mortgages.
Rising yields and mortgage rates add pressure on buyers
But the 10-year yield, which closed just under 4% last Friday, has increased 27 basis points in the last two trading days to 4.26%, a sign of weak demand for longer-term investments right now.
Spreads between Treasurys and mortgages have
The 30-year FRM rose to 6.89% on Tuesday from 6.85% the prior day and is up 17 basis points from last week's average rate of 6.72%, Zillow's rate tracker reported.
Future homeowners ranked selling stock to fund all or part of a down payment third of 13 choices. The 20% was exceeded by 48% who plan to save from their paycheck, while 29% are working a second job.
The Redfin survey was conducted by Ipsos in September 2024.
