Wait or buy? What to do when home prices rise faster than down payment fund

By Zach Wichter | Bankrate.com

If you’re trying to break into the housing market right now, you may find that your down payment fund isn’t going as far as you thought it would. Record-breaking rises in home prices mean the targets you set to save, say, 20 percent of your expected home purchase price may no longer cut it.

Here’s what you need to know about what’s going on in the housing market and what your options are for how to proceed.

Why home prices are likely rising faster than your down payment savings

It all comes down to a few factors: limited housing supply and a huge number of motivated buyers are putting pressure on housing prices. Low mortgage rates mean most buyers can afford to borrow more than they otherwise would, which is turning up the pressure even more, and inflation is pushing buying costs up for pretty much everything across the board.

Sellers are rejoicing, but for buyers (low mortgage rates aside) it can be tough terrain to navigate.

“This last year has been brutal, particularly for the first-time homebuyer market,” says Matt Woods, co-founder and CEO of SOLD.com.

Most experts agree that the pandemic has led to a tough market for buyers, but there are signs that things may finally be cooling off. At any rate, this nearly straight-up trajectory for home prices seems fairly unsustainable.

“I think about my four kids, how on earth will my four kids ever be homeowners if this is the conundrum they’re dealing with?” Woods says.

What you can do if your down payment savings aren’t keeping up

There are essentially three ways you can respond if your dream home — or even a barely adequate home — is out of reach.

1. Wait out the home sale market, beef up your down payment

Probably the easiest option — because it’s essentially passive — is to just wait for the market to cool down more. Doing that can give you the opportunity to boost your savings, and you may even see home prices come down a little in your area, which means your funds will go farther.

Keep in mind, there are no absolute guarantees in real estate because market conditions are always changing, but if you can’t afford to buy now, it’s probably not a good time to dive in.

“The biggest thing to start with is just to make the decision on whether now is the right decision in terms of buying the home,” says Robert Heck, vice president of mortgage at Morty. “If you have flexibility and time, the options there are a bit more widespread.”

Focus your affordability calculations on your monthly expenses, not necessarily the overall sale price, he says.

“This home appreciation phase is waning,” Woods added. If you choose to wait it out you can use the time to invest money in higher-yield — and, admittedly, higher risk — funds to boost your savings more quickly.

“Putting money under your mattress isn’t going to help,” he says. “If you’re parking it in the safest place, you can count on it not helping and not growing. If you’re leveraging the investment opportunities that are out there, the market’s been kind.”

“The biggest thing to start with is just to make the decision on whether now is the right decision in terms of buying the home,” says Robert Heck, vice president of mortgage at Morty. “If you have flexibility and time, the options there are a bit more widespread.” (iStockphoto)

Because the investment market is so hot right now, you may even be able to boost your savings quickly with some higher-risk options. But let’s be clear that money you need in one to three years is not best-suited for riskier investments. That said, if you can stand more risk, consider investing some of your down payment money in:

—Stocks, which are arguably the most traditional investment tool and can produce big yields quickly if you buy the right ones at the right time.

—Cryptocurrency, which is kind of having a moment in the investment sphere right now. Keep in mind that crypto valuations have been a bit of a rollercoaster, so you could majorly boost your savings, or lose your shirt.

You should speak to your financial advisor about your investment options. Other short-term, high yield products may be available, but you’ll want to decide what works for you with someone who really knows your situation.

2. Alter your home search punch list

Another option is to change your housing wish list. Everyone wants to get the best possible house in the nicest and most convenient neighborhood they can afford, but if you can be a little more flexible about exactly where to land, it could help you get into a home faster and more affordably.

“The American dream is this grandiose, ‘got to go own my forever home right now,’ ” Woods says. “My advice is starter homes are great and maybe you need to be as humble as you can possibly swallow just to get into the game.”

Being comfortable with a starter home, or agreeing to look in a broader geographical area will open up more options and may let you look at places where your savings will perform a little better.

“Trying not to get caught up in the exuberance of buying the home, chasing the offer,” Heck says. “Slowing down is important here.”

3. Tap a housing assistance program or go for a nontraditional approach

You might be able to benefit from homebuyer assistance grants or some upstart companies that offer novel ways of getting you into a mortgage.

Woods says companies like Unison help folks get into homes by essentially paying all-cash on their behalf and working out the mortgage once the person has moved in. Others strike up equity-sharing arrangements where they contribute to your down payment and then take a larger percentage than a traditional lender when you eventually refinance or sell.

Plus, Woods added, you can always go the “strike a deal with your rich uncle” route, if it’s available to you.

“There are so many different paths you can go down, so try to verse yourself in as many of those as possible,” Heck says. Doing your research will help you chart the best course for your own situation.

More traditional routes for down payment assistance include:

—FHA loans, which can be secured with as little as 3.5 percent down.

—VA loans, which can be a great deal for active or retired members of the military and their families

—Local and national first-time homebuyer programs

Also keep in mind that many lenders will allow you to secure a loan with less than 20 percent down. You may have to pay for private mortgage insurance until you build up more equity, but if you can afford the extra monthly cost you’ll still be able to get into a home if your offer is competitive.

Working with a knowledgeable real estate agent remains crucial

In this ultra-competitive market, having a knowledgeable agent as a guide is key. Most sellers receive multiple offers, many of which may be above the asking price, so it’s important to make sure you work with someone who really understands the market where you’re looking and can help you make your offer as strong as possible, even if prices are higher than you were expecting.

A good buyer’s agent will also be able to help you figure out how to tailor your search and will be able to adapt if you change what you’re looking for as you rationalize your budget.

Bottom line

With home prices being pushed up rapidly by multiple compounding factors, it’s a tough market for buyers. But that doesn’t necessarily mean it’s impossible to buy; it just may take a little extra strategizing. Or, you could take a pause and come back when the market has cooled down a bit more.

MLS, Liga MX plan revamped Leagues Cup in 2023 with all 47 teams

The Major League Soccer and Liga MX relationship continues to expand.

It was announced Tuesday that, beginning in 2023, all of the teams in both leagues – 29 from MLS and 18 from Liga MX – will compete in an expanded Leagues Cup tournament.

The leagues will pause their domestic seasons for one month in the summer to play the new edition of the Leagues Cup, with the format consisting of a group phase followed by a knockout stage.

The current version, which has a championship match set for Wednesday night between the Seattle Sounders and Club Leon, had four teams from each league starting in a quarterfinal round.

The new version will also serve as qualification for the CONCACAF Champions League, with the champion earning a spot in the round of 16 and the second- and third-place teams qualifying for the opening round.

“The new Leagues Cup with every club in MLS and LIGA MX competing in an intense, month-long, tournament will establish new standards for what is possible between our two leagues, and further showcase our players and clubs to a global audience,” MLS commissioner Don Garber said in a statement. “Since its launch 3½ years ago, our partnership with LIGA MX has grown quickly and the competition has brought out the best in both of us.

“On the path to the FIFA World Cup in 2026 hosted by the U.S., Canada and Mexico, this is the perfect moment to produce a tournament that will elevate the profile of CONCACAF and showcase the incredible passion our region has for soccer played at the highest level.”

Earlier this summer, the leagues staged the first MLS vs. Liga MX All-Star Game and skills competition.

One concern MLS clubs will face is roster congestion, with a full regular season schedule, along with games in the U.S. Open Cup, CONCACAF Champions League and the Leagues Cup.

Historically, Liga MX teams have dominated the Champions League event, winning 17 of the 19 tournaments since 2002, when it reinstituted a two-leg format. In 51 all-time matchups between MLS and Liga MX teams, MLS clubs have just nine wins, though the timing of the event has historically put MLS teams (in the beginning of their season) at a competitive disadvantage.

The Leagues Cup expansion was part of a broader announcement by CONCACAF regarding the future of the Champions League format. Eighteen North American clubs will qualify with the Leagues Cup winner, MLS Cup winner, and Liga MX winner progressing directly to the round of 16. Six Central American clubs will qualify, with the winner of the Central American Cup advancing directly to the round of 16. Three Caribbean clubs will be in the field, with the winner of the Caribbean Cup also moving directly to the round of 16.

Inflation forces homebuilders to take it slow, raise prices

By Alex Veiga | The Associated Press

Even in the hottest U.S. housing market in more than a decade, new home construction has turned into a frustratingly uncertain and costly proposition for many homebuilders.

Rising costs and shortages of building materials and labor are rippling across the homebuilding industry, which accounted for nearly 12% of all U.S. home sales in July. Construction delays are common, prompting many builders to pump the brakes on the number of new homes they put up for sale. As building a new home gets more expensive, some of those costs are passed along to buyers.

Across the economy, prices having spiked this year amid shortages of manufactured goods and components, from cars and computer chips to paint and building materials. The Federal Reserve meets this week and officials’ outlook on when they might start raising interest rates could indicate how worried the Fed is about inflation.

The constraints on homebuilders are unwelcome news for homebuyers, already facing historically low levels of resale homes on the market and record prices. Economists worry many first-time homebuyers are getting priced out of the market. The erosion in affordability is one reason the pace of home sales has been easing in recent months.

At Sivage Homes in Albuquerque, N.M., the builder’s efforts to keep its construction on schedule are undercut almost daily by delays for everything from plumbing fixtures and windows, to bathtubs and appliances.

“Nowadays, we literally could be sitting waiting 30 days, maybe even 60, for one thing or another,” said CEO Mike Sivage. “I’ve been doing this since 1986 and I have to say I’ve never seen anything like this before.”

The pandemic set the stage for higher prices and shortages of construction products. Factories went idle temporarily and are now trying to catch up on production at the same time that demand has intensified due to an unexpectedly hot housing market and a surge in home remodeling.

Lumber futures jumped to an all-time high $1,670 per thousand board feet in May. They’ve since dropped to $634, about 10% higher than a year ago. Still, wholesale prices for a category of homebuilding components that includes windows, roofing tiles, doors and steel, increased 22% over the last 12 months, according to an analysis of Labor Department data conducted by the National Association of Home Builders. Before 2020, it was typical for such aggregate prices to rise a little over 1% annually.

In this March 16, 2021 photo, a workman carries beamS at a new housing site in Madison County, Miss. Rising costs and shortages of building materials and labor are rippling across the homebuilding industry, which accounted for nearly 12% of all U.S. home sales in July. Construction delays are common, prompting many builders to pump the brakes on the number of new homes they put up for sale. As building a new home gets more expensive, some of those costs are passed along to buyers. (AP Photo/Rogelio V. Solis)

Those conditions are likely to persist. Robert Dietz, chief economist at the NAHB, said he’s heard from builders that “there are ongoing challenges, and in some cases growing challenges, with flooring, other kinds of building materials.”

Meanwhile, any savings on lumber have yet to filter down to many builders, including Thomas James Homes, which operates in California, Washington state and Colorado.

“The price we’re paying for lumber today is the same price we were paying 90 or 120 ago,” said Jon Tattersall, the builder’s president, who noted his company’s overall building costs have increased about 30% since November.

Homebuyers shouldn’t expect to see any discounts from falling lumber prices, either, because builders set their prices based largely on overall demand in the housing market.

A signed contract for a home yet to be built typically includes an allowance for unexpected construction costs, but generally builders will have to eat big increases and then pass them on to the next buyer.

“On our future ones, those are the ones we’re having to raise the costs on,” Tattersall said.

Higher building materials prices aren’t the only factor driving up builders’ costs. A chronic shortage of skilled construction workers has worsened during the pandemic, forcing builders to factor in higher labor costs.

Inflation is being felt across the economy. Consumer prices rose 5.3% in August from the same month a year ago. At the producer level, inflation jumped an even steeper 8.3%, the biggest annual gain on record.

The Federal Reserve has said it believes the surge in inflation will be temporary. For now, though, the rise in building materials costs and the lingering supply crunch are making everything from houses and apartments to commercial buildings more expensive.

To manage, many builders are slowing the rollout of new homes. Zonda Economics, a real estate data tracker, estimates some 85% of builders are intentionally limiting their sales.

In this March 16, 2021 photo, a workman arranges a beam on a frame at a new housing site in Madison County, Miss. Rising costs and shortages of building materials and labor are rippling across the homebuilding industry, which accounted for nearly 12% of all U.S. home sales in July. Construction delays are common, prompting many builders to pump the brakes on the number of new homes they put up for sale. As building a new home gets more expensive, some of those costs are passed along to buyers. (AP Photo/Rogelio V. Solis)

“They’re trying to make sure they have the land ready, the workers ready and the materials ready to be able to actually delver the homes that they’ve sold,” said Ali Wolf, Zonda’s chief economist.

Even with inflation, builders are benefiting from the hottest housing market in years. Demand for new homes has strengthened, while the number of previously occupied U.S. homes up for sale has fallen to historic lows, pushing prices higher.

The median price of a new home sold in July climbed 18.4% from a year earlier to $390,500, an all-time high, according to the Commerce Department. For existing homes, the median price jumped 17.8% in July to $359,900, according to the National Association of Realtors.

Builders typically hire contractors who handle framing, electrical, plumbing and other facets of construction. As these firms have faced higher costs to secure skilled labor or source the materials they need to do their job, they’ve had to pass those increases onto builders.

Tri Pointe Homes, which builds homes in 10 states, including California, Texas and Maryland, has faced higher labor costs. It’s been working through those increases, at times moving beyond its core group of contractors, said CEO Doug Bauer.

One way Tri Pointe and other builders are dealing with product delays is to ask contractors to install temporary fixtures and appliances, for example, so that buyers can move in as quickly as possible.

“Then, as soon as the original item becomes available, we are returning to install it,” Bauer said.

In this June 24, 2021 photo, housing construction is ongoing at a site, in Middleton, Mass. Rising costs and shortages of building materials and labor are rippling across the homebuilding industry, which accounted for nearly 12% of all U.S. home sales in July. Construction delays are common, prompting many builders to pump the brakes on the number of new homes they put up for sale. As building a new home gets more expensive, some of those costs are passed along to buyers. (AP Photo/Elise Amendola)

To stay ahead of rising costs, Tri Pointe has raised its home prices and reduced buyer incentives when necessary. Even so, the builder has raised its guidance on the number of homes it expects to deliver this year from 6,000 to 6,300.

While the big, publicly traded builders have the means to buy building materials and warehouse them until needed, smaller builders that make up the majority of the industry are at the mercy of suppliers.

Sivage, whose company builds homes priced from $250,000 to $1 million, used to be able to lock in the price of lumber with suppliers a year in advance. That changed in recent years as demand for lumber increased. Now, Sivage doesn’t know what it will cost him until it’s ready for delivery.

“We’ve had to grin and bear it,” he said.

In this June 24, 2021 photo, lumber is piled at a housing construction site in Middleton, Mass. Rising costs and shortages of building materials and labor are rippling across the homebuilding industry, which accounted for nearly 12% of all U.S. home sales in July. Construction delays are common, prompting many builders to pump the brakes on the number of new homes they put up for sale. As building a new home gets more expensive, some of those costs are passed along to buyers. (AP Photo/Elise Amendola)

Ducks’ future looks bright as top prospects shine in Rookie Faceoff

Logan Nijhoff, an undrafted, 20-year-old left wing who was invited to the Ducks’ rookie camp, scored the tie-breaking goal with only 1.7 seconds remaining in a 5-4 victory over the Arizona Coyotes on Monday in the final game of the Rookie Faceoff Tournament in Glendale, Arizona.

The Ducks were 2-0-1, defeating the Coyotes and San Jose Sharks and dropping an overtime decision to the Colorado Avalanche. The depth of their talent pool was underscored by the fact that first-round draft picks Jamie Drysdale (2020), Mason  McTavish (’21) and Trevor Zegras (’19) didn’t play Monday.

Who else stood out in the Rookie Faceoff?

For starters, defenseman Olen Zellweger, a third-round pick in July, showed he could skate and handle the puck with the same sort of poise that Drysdale showed while playing 24 games last season with the Ducks. Zellweger scored the Ducks’ first goal Monday and set up the next two.

Zellweger, who turned 18 on Sept. 10, is likely ticketed for a return to his junior team in Everett, Washington, for another season of playing with his peers. Because he barely made the age cutoff for the most recent draft and because he’s only 5-foot-9, the Ducks can afford to be patient with him.

Among the forwards, center Bo Groulx and wingers Sasha Pastujov, Jacob Perreault and Brayden Tracey helped to spark the Ducks’ offense to an average of 5.67 goals in Arizona, a welcome development for an organization that averaged an NHL-low 2.21 last season.

Groulx played a strong two-way game against San Jose and Colorado before sitting out Monday’s finale against the Coyotes. Pastujov had a hat trick against the Sharks. Perreault’s shot was every bit as good as advertised. Tracey had four assists in an 8-4 victory over the Sharks.

Last but not least, goaltender Lukas Dostal didn’t participate in the Rookie Faceoff, remaining in Orange County to skate with the Ducks’ veterans. Dostal, 21, is considered to be among the Ducks’ top five prospects, along with (in no particular order) Drysdale, Groulx, McTavish and Zegras.

Heading into training camp Thursday morning at Great Park Ice, Dostal is third on the Ducks’ goalie depth chart behind starter John Gibson and backup Anthony Stolarz. Dostal is expected to begin the season with the San Diego Gulls, the Ducks’ AHL team, and to be their No. 1 goalie.

Roman Durny, a fifth-round draft pick in 2018, and Gage Alexander, a fifth-round selection in July, handled the goaltending duties in the Rookie Faceoff. Olle Eriksson Ek, who rounds out the Ducks’ depth chart, was not on the rookie team’s roster, but is expected to attend training camp.

L.A. mansion once worth $500 million defaults on $100 million in debt, forcing a sale

A gargantuan residence in Los Angeles dubbed “The One” by its developer is now on track to be sold after the owner defaulted on more than $100 million in loans and debt, according to court documents.

In an Instagram post last summer, Nile Niami, the project’s developer, pitched the 105,000-square-foot home as having seven pools, a 50-car garage, a 10,000-bottle wine cellar and even its own nightclub. Promoted as being the largest and most expensive urban property in the world, “The One” was expected to come to market for $500 million, according to the video Niami posted on Instagram. But it suffered many delays and complications and now faces a court-ordered sale to pay debts.

Niami borrowed $82.5 million from Hankey Capital in 2018 to continue building the home. But in March of this year, Hankey served a notice of default sending the property toward a foreclosure sale. Niami had 90 days to pay or renegotiate the debt, which had grown to more than $110 million, according to court documents.

With no payment made by July, the home was placed in court-ordered receivership, which is an alternative to foreclosure for complicated real estate deals. The receiver, Theodore Lanes of Lanes Management Services, is tasked with accounting for debts against the property, readying then selling the property and, ideally, repaying lenders and creditors with the proceeds.

Hankey Capital declined to comment about the default or receivership. Nile Niami did not respond to a request for comment.

But despite promises by Niami that the property is nearly done — during a video tour of the home posted in April he said it would be “another four weeks, probably” — there is a complicated punch list left and the property is not ready for market, according to Lanes’ first report filed with the court.

Some items Lanes outlined are fairly typical final details when building a home — the gas company won’t provide service until there is a certificate of occupancy issued, for instance. But others are particular to the property: the permit to build a commercial-grade catering kitchen was denied and that space remains empty.

Lanes said in an email to CNN Business that he is still learning about new issues that need to be dealt with, including obtaining the plans and permits and sorting out agreements with artists whose work is in the house, a furniture staging company and the gardener.

“It’s a pretty extensive list,” he said.

Other problems the property faces, according to the report: the insurance had lapsed in early 2021, challenges from social media users to sneak onto the property have led to intruders.

“Clearly anything that would fall under safety would have priority,” said Lanes in his email. “As for the other projects, they are all being evaluated based on requirements to achieve the certificate of occupancy. If they are mandatory for certificate of occupancy, they are getting priority.”

The home also has more than $2 million in unpaid taxes and invoices to vendors for concrete, air conditioning and scaffolding, according to Lanes’s report.

“This is a very complicated property with quite a few open issues,” Lanes wrote in his report. “At present, the focus is to obtain complete insurance and develop a timeline and budget to secure the certificate of occupancy in order to maximize value and to make the property more marketable.”

Nearly a decade in the making, the home sits atop a hill in Bel Air, with views of the Los Angeles basin. The colossal home features 20 bedrooms, including eight bedrooms for the staff and a three-bedroom guest house, approximately 6 elevators, a library, cigar room and candy room, according to a two-part home tour posted on YouTube in April.

The home is promoted as having a four-lane bowling alley, a 50-seat movie theater, a putting green, wellness center and gym, beauty salon, juice bar and tennis court.

Despite Niami repeatedly teasing that the home was weeks away from coming to market, it never arrived.

Instead, over the past year, Niami has been unloading other properties — at discounted prices.

Earlier this year, he sold a West Hollywood mansion for $26 million, far below an earlier $35 million asking price, according to property records reported on Realtor.com. In April, he sold a Bel Air mansion for $36 million, a little over half of its original $65 million asking price in 2018, according to Zillow.

Other default notices arrived too, including one on a debt of $10 million on a home in the Hollywood Hills and another on a debt of $23.4 million on a home in Bel Air, according to the Los Angeles Times.

And Niami is being sued by other creditors looking to get their money. Real estate firm Compass is suing for non payment of a $200,000 loan he took out while trying to sell a different home in Bel Air, according to court documents.

It is not clear at what price “The One” will ultimately be listed, or when it will come to market.

“I am still evaluating proposals and strategies from various potential listing agents,” Lanes said in an email.

Although the property hadn’t yet come to market earlier this year, a Google Forms application was available for potential buyers to fill out. Beyond contact information, it only asks one question: “Which influencer did you find out from?”

Several social media influencers have already featured it. Last April, Niami gave a home tour to YouTube personality Michael Blakey. The tour provides a glimpse of the nightclub with VIP area and a walk-through of the 4,000-square-foot master suite, with its own pool.

“I gave them everything here,” Niami said in the video. “We have everything anyone could ever want in this house.”