Can’t Buy a Home? Pay More!

by JT McGee

In the most bombed out places, prices are rising fast thanks to all-cash buyers backed with investment dollars. Blackstone, American Homes 4 Rent, and Silverbay Realty Trust have made billion-dollar, all-cash buys in American cities.

Aggressive all-cash buyers have pushed out the homeowner, leading Yahoo Finance to publish a piece on how to compete in a hot housing market.

Suggestions are as follows:

  • Get pre-approved
  • Consider properties that might be overpriced
  • Make a competitive bid
  • Free up cash

This is fairly standard advice if your sole goal is to own a home, and by that I mean that you just want to own a home, no ifs, ands, or buts about it.

But what if you want to…you know, own a home you can afford? Borrowing money against investments to get a cash-out refinance at a later date, or bidding over the asking price doesn’t exactly seem like the best advice in the world. Using a line of credit to purchase a home would have backfired recently when the 10-year went to 2.6% from 1.6% in a span of one month. Bidding over the asking price just screams “I want to own a home no matter what.”

You can see the sentiment in the housing market changing in pieces like this. It’s as if the assumption is, once again, that the price of homes will only go up. Five years out from the financial crisis, 2008 no longer exists.

{ 2 comments… read them below or add one }

The Tortoise Banker July 31, 2013 at 02:46

I just bought a house listed that was listed for $369,000, offered $329,000 Seller Countered to $355, I countered to $335k and we ended up at $345k. Luckily there weren’t a rash of cash buyers competing for this property. I feel like we got a nice price, as did the seller.

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American Debt Project August 5, 2013 at 22:47

We’re revising our homebuying strategy. I thought I wanted to get in something ASAP (as emotion took over) but watching average prices go up 40% in 12 months in the area, my new goal is to save money for the next two years and buy something that will actually be nice to live in. I learned my lesson that it was worth it to pay off debt, so maybe it is worth it to have that damn 20% down payment too. Will prices be crazy high in 2 to 2.5 years?

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