We are really in a volatile time period everyone.  The inflation report just came in for May and we are looking at 8.6% of a rise in the price of goods since this time last year.

Not only that, but interest rates have been rising at a fast pace, with a 50 basis point jump coming up in just a few short weeks.  The combination of inflation, rise in interest rates has really taken buyers OUT of the housing market.

The down payment background

Over the last 3-4 years, my wife and I have been saving for a house.  I know that it sounds like a long time, but we really weren’t as aggressive vs. how we have been the last 12-18 months.  In fact, we hit our original down payment goal a few months ago.  Truly hitting our down payment goal on time of when we originally wanted to, brought definitely a milestone of happiness to us.  So what’s the problem?  Shouldn’t we just buy a house?

Shock factor – the last 18 months, supply for homes have been limited to none.  In Northeast Ohio, we actually have had investors coming in and swooping up our cheaper, Cleveland-based properties.  The economic stimulus also did not help, flooding everyone’s bank accounts, while also having record low interest rates.  This alone causing bubbles to occur.  Not saying the Real Estate market is in a bubble, but see the chart below on real estate valuation:

Therefore, we even adjusted our down payment goal by another 6-7% upwards and reached that target as well.  I’ll be using % terms to simply not disclose the cash amount that we have been striving to reach towards, don’t worry it’s well under $100,000 – but just a little privacy on this one.

The positive signs have been the last 2.5 months.  Pricing is falling due to the rise of interest rates and inflation.  This has taken buyers out of the market and we are starting to see significant corrections across the markets we have been watching.  We are very excited, but yet, cautiously monitoring our next decision for buying our potential, future home.

Now we have a down payment account that we think is “full”, but the question my wife & I keep debating is, “Do we keep adding to the down payment fund?”.  Do we invest?  What would you do if you haven’t found the house and you also do not want to overpay for a house in today’s still highly priced, real estate market?  Here is our current 3 pronged savings strategy we have with our down payment fund.

3 savings / down payment strategies

1.) Earning on our down payment fund while reducing risk.  We have been building our down payment fund for a house for years.  We use a combination of high yield savings accounts and even stablecoins through crypto accounts to safely earn a yield that is greater than having one account.  Here is our breakdown of our down payment fund and the sources were the funds are at:

a.) 23% Allocation: SoFi Bank – 1.25% Yield: It’s no question, we love using SoFi bank, it’s a great financial platform, FDIC insured and they offer one of the highest rates out there.  We are adding more funds to this account each and every month.

b.) 19% Allocation: Yotta Bank – 1.96% Yield (Average): We also have fun using our Yotta Bank account.  You earn a base rate of 0.20% plus you receive a “ticket” for every $25 you have on deposit with them.  These tickets allow you the opportunity to earn more rewards, which is essentially a boost to your interest.  In total, we have been averaging 1.96% on our Yotta Savings account.  Since it is higher than our SoFi, we do not mind keeping a portion of our down payment here.  FDIC insured and we earn almost 75 basis points higher or 57% more than SoFi.

c.) 24% Allocation: Ally Bank – 0.90% Yield: We have used Ally for years.  The reason we have almost 25% of our down payment fund here, is due to that legacy we have with Ally.  We each have our investment accounts, the main one at least, with Ally and we also have IRA accounts with them.  Therefore, it’s hard, at the moment, to completely break away from the Ally platform, especially because we can earn slightly more elsewhere.

d. 34% Allocation: Stablecoins at Voyager and BlockFi: 7%-9% Yield.  At Voyager, I have USDC which yields 9%, fully backed by US Dollars and equivalents.  At BlockFi, I have USDC, BUSD, GUSD – all backed by the US Dollar & equivalents.  I know, definitely seems like I am taking on risk, but this has been smooth for me over the last 8 months.  There is definitely something to be said about the stablecoin earning power, as I have earned and grown my account by more than I thought I could due to the stablecoins.  I love both platforms and currently am recommending Voyager if you want to earn 9% on your cash, by owning USDC.

As you can see, the average yield I am earning on my down payment fund currently is approximately 3.5%-3.6%.  The allocation to SoFi will be increasing, simply because of their modern platform, the straight 1.25% and ease of use.

2.) Being Patient.  We are being as patient as we can be.  We know that in the next 3-6 months, the housing market could really cool off even further than where it is now.  There is not more than 3 hours that goes by that I don’t receive one of these messages from Zillow:

Price drops first started back in March, and they were small – probably in the 2%-5% range.  Now I am receiving house price drops in the 7%-15% range.  As we are navigating this housing market, we know that prices are still “too high”, and that there is/should be still room to go.  The combination of inflation, rising interest rates and overall less disposable income can only reduce the value of homes, simply due to less buyers.

3.) Adding to our Down Payment Fund at 1.25%!  I highly recommend using SoFi’s banking application, as you can earn 1.25% (as of June 2022) on both your savings AND checking account.  Therefore, any extra savings you have, you should put it here.  We have a “vault” or a sub account within our savings here dedicated to our down payment fund for a house.  We will continue to add a portion of our extra savings to the fund each month.

Now, are we saving more or investing?  We save approximately 10% of our wages each month to put into the down payment account(s).  However, we typically wait until we go through our income and expenses at the end to decide how much more to put in the down payment fund, as you know we are also striving to reach financial freedom.  What would you do?

House Down payment conclusion

Therefore, we are staying patient, earning on our savings. and also putting portions of our saving each month back into our down payment accounts.

What do you think?  What would you do if you were us?  Would you be looking to buy sooner than later?  Would you be adding even more to your down payment fund vs. buying stocks?

I would love the feedback on the strategies that I have put in place for my wife and I.  This is the best part of personal finance is that every decision is usually different than what someone else is or would do.

Can’t wait to see the comments you have on the house saving and house buying process I am in.  Appreciate the stop by and talk soon!


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