George Kamel - 4.5 Million People Bought Homes Last Year (Here's How)

Episode Date: March 6, 2024

💵 Sign up for EveryDollar today - Create a free Budget!  If buying a house right now feels about as hard as a Nature Valley granola bar, how were 4.5 million homes purchased in 2023? In today’s video, find out the one thing most buyers did last year to land their home. Next Steps 📗 Order George Kamel’s new book, Breaking Free From Broke. Real Estate Predictions for 2024: https://www.youtube.com/watch?v=3AJk58Q3ipg   Offers From Today's Sponsors This episode is sponsored by BetterHelp. Get 10% off your first month of therapy! https://www.betterhelp.com/george   🎙️ The Ramsey Show   🍸 Smart Money Happy Hour 💡 The Rachel Cruze Show 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 💼 The Ken Coleman Show 📈 EntreLeadership   Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

Buying a house right now can feel about as impossible as eating a Nature Valley granola bar without getting crumbs all over your Stanley Tumblr. But according to the National Association of Realtors, just under 4 million people purchased an existing home last year. And according to the U.S. Census Bureau, just over half a million people bought new construction homes last year. If you're doing the math at home, that means about 4.5 million homes were purchased in 2023.

And while that number is down from previous years, that's still a lot of homes. Now that's a lot of damage. And they did this despite mortgage rates reaching 23-year highs and home prices being higher than Seth Rogan on a step ladder on the International Space Station. That's high. So you might assume these people are all super rich millionaires and billionaires making all cash offers, or maybe they figured out some kind of weird financing trick like a mega backdoor double-reverse mortgage al-a-eupe. But truthfully, most of these buyers were everyday people who did this one thing that helped them successfully buy a house in a crazy market.

And in this video, I'll tell you what it is. And I'll also share what you need to know about buying a home in 2024. But before you get too excited and call your realtor, do me a quick favor. Like, subscribe, and share this video with everyone you know who is currently doom-scrolling Zillow and hoping that extra zero was a typo. They could use a pick-me-up. Zillow helps you find the perfect home that you could absolutely never afford. Okay, so here's the one thing buyers did last year that helped them successfully buy a house in a crazy housing market. They prioritized what they wanted in a home.

It's that simple and it's that hard. They were realistic about what they could and couldn't afford, so they decided what was most important to them and they compromised on the other stuff. Maybe they prioritized location, or the monthly payment, or having a nice new move-in-ready place with no repairs to be made. Or maybe they were one of those sick freaks like Chip Gaines who just wanted to throw a sludgehammer through a wall of asbestos. I'm doing as best as I can. I'm sorry.

Classic pun. Regardless of what your priorities are, if you're looking to buy a home right now, this is a must-do in this market. Because you're not going to get the perfect house in the perfect location for the perfect price. And once you know what your priority is, there's specific things you can do

to increase your chances of finding an affordable home you love. So let's look at what home buyers did last year to get the house they wanted based on their priority. The first thing people prioritized comes down to money, money, and money. Hello, I like money. For a lot of people, the most important thing they wanted in a home was an affordable monthly mortgage payment.

That means they were willing to compromise on other things like the condition of the house or the location, and that helped them become homeowners last year. And rising interest rates made an affordable mortgage payment a big priority for a lot of buyers. I don't know if you've run the numbers yourself, but it is wild how much a higher interest rate can raise your monthly mortgage payment.

Let me show you what I mean. In February of last year, the median home price was at 3.3. $363,000, and the average rate for a 30-year fixed-rate mortgage was just over 6%. Assuming a 20% down payment, the typical principal and interest payment would be $1,211 a month. By October of last year, the median home price had risen to $391,800, and mortgage rates were at 7.79%. So get this, that little 1.7% rate hike added more than $1,000 to the typical monthly payment,

it up to $2,254 a month. That's sheer insanity. I'm out. That means buyers who wanted an affordable payment had to put on their thinking cap and do some solutioning about how to afford a home. So here's some strategies they came up with. First, they brought down their mortgage rate with something called discount points. This is where you pay your mortgage lender a fee, or points, to get a lower interest rate

on your loan. So you're basically prepaying some of the interest up front. Here's how it works. Typically, each point is equal to 1% of the mortgage. and paying one point brings the rate down by about a quarter percent. So if you were planning to take out a $400,000 loan, you could pay $4,000 to buy down a 7.5% rate down to 7.5% down to 7.5%% down to $7.5,000, which does lower your monthly payment.

Sounds like a pretty sweet loophole, but you've got to be careful with this. It's not always the right move. You've got to do the math here and find out your break-even point to see how long you need to stay in the home for this to be worth it. And here's a pro tip. When you're negotiating for the house, you can ask the seller to provide concessions to help you do this. And if the seller is willing to buy down the rate, go for it. That's like free money. This is a good example of why you want to have an experienced real estate agent on your team.

They're going to know whether or not this is a good option for you and how to go about making it happen. The next way buyers brought down that monthly payment was by considering older inventory, aka houses that have been sitting on the market for a good while. Now, usually those sellers are more willing to negotiate, which could help you lower your total costs and your monthly payment, which might save you enough money to install that American Ninja Warrior practice course in the backyard. You know you've thought about it. We all had that phase. Another big thing people prioritized in a home was location. These buyers decided they were okay with getting a fixer-upper as long as the house was in the area they wanted to be in. They also had to be

okay with paying a bit more because homes in great locations are more likely to bring full asking price and more competition. So your offer is going to need to be strong, especially when you're competing with all cash offers with zero contingencies. So here's what some buyers did to help them make a competitive offer on a house in a great location. They got a little creative with their financing. Some people used gifted funds from family and other used down payment assistant programs. Now, some red flags here. These come with restrictions, red tape, and potentially awkward holiday dinners.

So here's the truth. If you need these things to buy a house, you're not ready to buy a house. So how do you know when and if you're ready? A good rule of thumb is to make sure your monthly payment is no more than 25% of your monthly after tax income. That's going to dictate your home budget and down payment. If you do that, you should be able to comfortably make your mortgage payments without having to worry about keeping the lights on.

And speaking of keeping the lights on, today's video is sponsored by BetterHelp. Sometimes the important things in life, like relationships or goals, they take a backseat to the urgent things, like, I don't know, the final season of young Sheldon. You do you. But therapy is a great way to help you focus on what really matters to you. And BetterHelp is designed to be convenient, flexible, and suited to your schedule. And it's really easy to get started. You answer some questions, and you get matched with a licensed therapist.

And best of all, you can switch therapists at any time for no cost. So learn to make time for what makes you happy with BetterHelp. Go to betterhelp.com slash George today to get 10% off your first month. That's BetterHelp, h-elp.com slash George. Okay, for a lot of buyers, the most important thing to them was the condition of the house. So they decided they were willing to compromise on other things like location and price. These are my people. at me. You think I'm out here trying to replace a toilet from the 80s? Does this look like a guy

who knows how to patch drywall? No, definitely not. When it comes to DIY, I'm more like DIY, bro. Life's too short to ship your own lap. Just hire a guy. Or a gal. It's 2024. Ladies can ship lap if they want to. WWJGD, what would Joanna Gaines do? And if that's you, you may want to follow in the footsteps of the half a million people who went with a new construction home last year. If you choose to build, you're going to have a brand new spanking home and you'll likely get to make a few custom improvements, you know, in case you want those side-by-side his and hers bidets. All the rage among the youth. That's disgusting. But here's where the compromise comes in. You might end up living in a less developed area, aka the freaking boonies, and you'll probably

end up paying a pretty penny for it, too. According to the Census Bureau, the average new construction home costs just under $500,000 nationally. So how did some of those homebuyers afford new construction last year? Well, some home builders have been offering to buy-down mortgage rates for the buyers to make their new McMansions a little more attractive. Some of the large builders have even offered buy-downs of up to two points, which would save buyers a ton on their monthly payment. So if you're considering a new build, make sure to discuss all of the options with your builder, including buying down the rate. It could be just the thing that gets you into that home. So those are just some of the ways four and a half million people were able to buy a home last year.

And the main thing most of these buyers had in common was that they prioritized what they wanted and they were willing to compromise on the rest. And for most people, that's what it's going to take to get into a home right now. Now, if you're in the market for a house and you're feeling discouraged at the home prices and the interest rates, I get it. Homes are expensive, and things just aren't like they were when your Mee Ma'Maw and Pop Pop bought their first house for $1,000 and a bushel of raspberries. But here's the deal. If history tells us anything, houses will be more expensive five or 10 years from now than they are today. I know that's not the news you're looking for, but that's the truth. So if you're financially ready to buy a home

and lock in that price, go for it, get off the sidelines. And here's what I mean by financially ready. You're debt-free, you have a fully funded emergency fund of three to six months, and you've got a solid down payment. Then when you finally find that perfect starter home, you've always dreamed of settling for. Choose a 15-year fixed-rate mortgage that's no more than 25% of your after-tax income. And no matter how crazy the housing market is or what you prioritize in your home search,

that is the smartest way to buy a home in 2024, or any year for that matter. And side note, there's no shame in renting. Okay, people love to talk about how renting is a waste of money, but don't listen to those people. They don't pay your bills. Renting shows patience and responsibility as you get your financial house in order to save up that down payment. Now, if you want more info on how to buy a home the right way, including some mortgage traps to avoid, check out my new book called Breaking Free from Broke.

You can get your copy with the link in the description below. And if you're in the market for a house this year, check out this video to see my real estate predictions for 2024. As always, be sure to like, subscribe, and share this video with your friends who have given up hope on buying a home and are now searching Home Depot's website for shipping containers with a skylight. Thanks for watching. We'll see you next time.