Hopeful home buyers entering the housing market this year are getting hit by headwinds on all sides: near-record high home prices, along with brutal mortgage rates, double what they were two years ago.
But there's another trend making things tough for buyers: competing with "all cash" offers from investors and well-heeled buyers ready to write a check on the spot.
In the last couple of years, you couldn't make an offer on a home without facing stiff competition from five or 10 other buyers, some of them ready with all cash.
But housing experts say that's starting to change as the red-hot market begins to slow.
That means buyers like Keenan Crigler, who we met last fall, may have better luck than they did in 2022.
"I did have to start lowering my budget," a frustrated Crigler told us.
Realtor Michelle Sloan of RE/MAXsaid competition from all-cash offers made it tough for people taking out a conventional mortgage loan to have their bid accepted.
"They don't have the collateral to win, to win the bidding war," she said.
Yes, you can now get a 40-year mortgage ... but should you?
Traditionally, 15- and 30-year mortgages have been available. Now, you can extend payments over 40 years under a new program.
But things may be improving, according to Daryl Fairweather, chief economist foronline brokerage Redfin.
"The good news is that right now, you probably aren't gonna face as much competition," she said.
Fairweather says with mortgage rates close to 7%, the market is slowing down and the number of homes purchased with cash is starting to fall.
According to Redfin, about one-third of US homes were paid for with all cash in December 2022, down slightly from an eight-year high in November.
"A lot of investors buy in cash," she said, "and some of those investors are backing off of the market."
If you have the funds, of course, a cash offer is the way to go to avoid those high interest rates.
Plus, sellers are more likely to accept your offer knowing their is no loan to approve.
But if you can't pay with cash, Fairweather said don't give up and make the offer you're comfortable with.
"Sellers can't really be as picky these days," she said. In some areas, "They have to take whatever offer they get."
More high-income earners are choosing to rent rather than buy
Major metropolitan cities are seeing a rise in people with six figure incomes renting instead of buying a home.
Realtor Sloan says to beat all-cash buyers:
-Be pre-approved for your loan
-Have your down payment ready (and the more you can put down the better)
- Consider putting down more "earnest money," to show how serious you are
- Let the seller know you plan to live there, which can give you an edge over investors looking to flip or rent out the house.
"I have had plenty of sellers who said 'Michelle, I would prefer a family who is going to move into the home. I don't want my home turned into a rental," Sloan said.
Appealing to the sellers that way and having full pre-approval for your loan may help you beat those cash investors.
