My wife and I have been expecting to buy a house for the past two years (currently living in a condo worth around 400K with no mortgage). Because of this, we have pretty much all our investments in cash (1200K) with only a small amount in stocks (200K). (We have and continue to max out our retirement contributions which both have employer matching.) The problem is that we never seem to be able to find a house; the current market in our area has very low inventory. (We expect to pay 1400K or so, but there is a wide margin here as well) If a house we like comes on the market tomorrow we will immediately buy it. But we are worried that our search might drag on for a few more years and that cash (with today's rates) are not a very good investment.
Are there any alternative investements to cash we should consider with a house purchase possibly coming up in the near future?
If I had to guess, I would place the probability we buy in the next 12 months as 50%, and the probability we buy in the next 24 months at 75%.
To me, it feels like the stockmarket over the next 12 months is going to be highly dependent on whether a vaccine for COVID becomes available, and this potential volatility makes it seem very risky for a short-medium term investment. On the other hand, I would guess this same volatility would bleed into other investments as well, leaving us with cash making only 1%. We are not adverse to risk in general, but the fact that predicting the cost of the house we end up buying (it might be anywhere from 1000K to 1600K) adds an extra complication.
EDIT: unlike in this question: What is the best way to invest short term without losing principal? we are definitely OK with some risk, but I was thinking there might be intermediate options between cash and a 6-12 month market investment at the current time. For example, one suggestion might be to invest 200-400K in the market with a view to holding it medium-long term and then taking a small mortgage if necessary. Maybe there are other financial instruments which are intermediate between index funds and cash.
