Housing

Boomers Who Own a Home Should Stay Put, Don't Sell Today If You Can Avoid It

Austin Smith

Published: February 22, 2025 11:25 am

24/7 Wall St. Key Points:

• High mortgage rates near 7% are discouraging home sales, as many homeowners with sub-3% mortgages are unwilling to sell, limiting inventory.
• The cost difference between a 3% and 7% mortgage on a $450,000 home can exceed $900 per month, significantly impacting affordability.
• Homebuilders are trying creative financing options, but with no imminent Fed rate cuts, housing demand may weaken if the economy slows.
• A quick conversation with a financial advisor can help you unpack your savings, spending, and goals for your money. With SmartAsset’s free tool, you can connect with vetted financial advisors in minutes. (Sponsor)

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Transcript:

[00:00:04] Doug McIntyre: Lee, I don’t think this is a good time to buy a house. So let me walk through a couple of things so that if people are thinking of buying a house or selling it, the house,, they should at least walk through this. So you’ve got mortgage rates very close to 7%. Yep. Then you’ve got a whole bunch of people who, during the heyday of low interest rates, got mortgages at less than 3%.

[00:00:26] Doug McIntyre:  So for starters. You don’t have a big pool of sellers when you’ve got a bunch of people with 3 percent mortgages because, that’s too much of a deal. So that means inventory is tight. Very tight. Tight inventory means not good prices for buyers. But you combine that with, these interest rates and you’re talking about, I saw an analysis from the American Home Builders Association.

[00:00:55] Doug McIntyre: So this is the difference. A 450,000 house, A 3% mortgage rate. The mortgage payment with a 20% down payment is roughly $1,900 a month. Sounds about right. Yeah. 7%. It’s $2,800. That’s a little bit more. Well, people think, oh, what’s the difference between 3% and 7%? Well, look, it’s a big difference. So. I also think that there are a lot of reasons that real estate may be near a top.

[00:01:27] Doug McIntyre: Oh, absolutely. It’s, it’s not. It is like the stock market. It’s had a big run, but if we have a slowdown in the economy, which could be caused by a couple things, a little inflation, maybe tariffs. You buy a house at the top and you have a 7% mortgage. You you’ve really hurt your financials. Oh, well

[00:01:50] Lee Jackson: And you’re exactly right, Doug.

[00:01:51] Lee Jackson: They’re trying to fight their way out of it where where the big homebuilders like, Horton and all these guys are trying to come up with, neat financing, you know kind of like car companies do when they can’t sell it, but the bottom line is, you know, mortgages, and most people know this, are standard mortgages are 30 years, and if you’ve got a 30 year at 275 or 299, you ain’t never moving, especially if you’re older.

[00:02:17] Lee Jackson: if you’re, if you’re in your fifties or sixties, you’re not going anywhere. because in my case, I had one just like that. And when we moved from New Orleans to Mississippi, I had to have a six and five A’s. Well, I kept that for about six months and said, no, I paid it off. But not everybody has that luxury.

[00:02:34] Lee Jackson: And I had a ton of equity in my other home. But I think you’re right. I think that the market’s going to be in trouble because there is no supply. And rates could go higher because they’re certainly not going to lower fed funds. And, Bessent has said he wants to lower the 10 year yield. Well, how do you plan on doing that?

[00:02:54] Doug McIntyre: I think the advice you just gave though, is good. If you’re 55 plus age bracket, selling a house, that’s got a super low mortgage rate on it. And thinking about, yeah, maybe I’ll buy some, even if you’re going to buy a house, that’s less expensive. At 7%, your payment could be just as high. On a house that caughts a third less than the one you’re living in.

[00:03:19] Lee Jackson: Oh, absolutely it could, and especially, and when we need to point this out, and this is something you know, and I’ve done a lot of real estate deals in my life and I should have thought better about this, but remember friends, when you get a 30 year mortgage, the amortization on a mortgage is all on the back end.

[00:03:35] Lee Jackson: So the first year, let’s say your payment is 2,000, well you’re paying 300 in principal and you’re paying 1,700 in taxes and insurance and interest. So you’re, you’re getting no equity and, and really paying a ton in interest. So yeah, if you got one of those bad boys from 2022 and 21, hang on to it.