You may have been rattled by “Black Monday,” when the China stock market tumbled, wiping out billions of dollars in the value of stocks and sending the stock market in the U.S. on a roller coaster ride.
However, if you are interested in buying a house there might be a silver lining to Black Monday. Even though Denver is 6,696 miles from Shanghai, the Great Fall of China, as some are calling it, could help you save some money if you want to buy a home.
Bad economic news typically means lower interest rates, as investors often sell stocks to flee to the perceived safety of bonds, driving down interest rates, including mortgage rates.
On August 27, three days after the Chinese stock market crash, the average 30-year, fixed-rate mortgage rate stood at 3.84%, according to Freddie Mac. That was a three-month low and a 6.3% drop from where rates stood a year before, based on our analysis of historic data here at TRELORA.
Rates at the end of August also were down 2.3% from the previous week, the second largest week-to-week drop so far this year.
What does this mean for the Denver real estate market? On a typical home in Denver, the week-to-week drop might save you about $20 a month in principal and interest. While not an earth-shaking amount, you could treat yourself to a nice meal in most Denver restaurants with the savings. And if you owned your home for three decades, that is a $7,200 savings over 30 years. The timing of the China stock market downturn, if it had to happen, might in this case be seen as somewhat fortuitous.