NEW YORK (TheStreet) -- The positive flow of economic data has been forcing investors to consider possible tapering -- a reduction in bond purchases by the Federal Reserve -- earlier than previously thought.
TheStreet's Joe Deaux is with Jeff Taylor, managing partner of Digital Risk, analyzing what a potential taper would do to the housing market.
Taylor suggested that prospective home buyers lock in the current mortgage rates before they move higher. These are some of the best rates in the last 30 years, and so putting a down payment on a house makes sense, he urged.
According to a study, however, only 17% of Americans can afford the typical 20% down payment, he said.
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But there's a way around the down payment: Mortgage insurance.
Taylor suggested that those who cannot afford to put a down payment on a house should lock in the rate via mortgage insurance, which allows the prospective buyer to back out of the insurance should the property value fall to 79% or less.
But can the housing market sustain a Fed taper? According to Taylor, it can because the housing market is far from its all-time highs. He said that the private sector would need to play an important role in making up the difference when the Fed backs out.
-- Written by Bret Kenwell in Petoskey, Mich.