With home prices climbing to a record, this year’s housing boom left some hopeful buyers frustrated, discouraged and stuck with a big lump sum of cash.
Home buyers typically save between 5% and 20% for a down payment, with extra for closing costs. This year, many would-be buyers were met with bidding wars, stumped by historically low inventory or priced out of red-hot locations.
Now, they are sitting on thousands of dollars they had otherwise earmarked for a down payment on a house, and they are wondering where to stash the cash until the market cools off or their dream home becomes available.
This question is particularly tough because of the low rates on savings accounts, paired with inflation pressures. Yet with an expensive stock market and a continuing pandemic, many savers are also loath to invest their hard-earned down payment in the broad market. Cashing out investments can also come with tax consequences.
Here’s what to consider when parking a down payment for the season.