Real Estate the Ramsey Way - Dave Breaks Down The Current Real Estate Market and Home Values

Episode Date: August 4, 2025

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Dave Ramsey here and welcome to another episode of Real Estate, the Ramsey Way, where you'll learn how to make smart home decisions, avoid costly mistakes, and navigate home ownership with confidence. Hey Dave, can I ask you a quick real estate question real quick? You can. All right, so this might be bad math in my head. So let's say we're in Nashville, Tennessee, where the real estate has gone way up in value over the last five, ten years. Right?

Okay. So let's say the house I bought back in 2020 is quote unquote worth double. And I put on the market for double what I paid for in 2020. And let's say because of the influx and inventory, I have to drop the price a bit. And somebody comes in and bids $10,000 left. So it's just a little under double. I feel like on social media and whatever the report is house prices are falling. But the way I look at it is I'm still on.

house money because it's worth almost double what I paid for it. And just because I take, is that a bad way for me to look at the real estate investment? Okay. Do you get what I'm saying? No, it is house money, but it's different than that. The reason social media is wrong is for a different reason. Market value of a property, by definition, when I went to real estate, when I got my four-year degree in real estate, I have a degree in real estate and finance, if you go to appraisal class and you go to take, even take your real estate test, they teach you this. The definition

of market value of a piece of real estate is what a willing buyer is able to give a willing seller and willing when neither are under duress. Okay? So, in other words, if you're

getting foreclosed on, that's not a valid say, you can't use that sale when you're doing an appraisal. Right. Because it does establish market value because one of the parties is under duress. Okay? If you've had a house on the, if you bought another house and you're having to sell your house out of desperation because you shouldn't have bought the other house and now you've

got two house payments, one of the parties is under duress. Okay. So they might sell it quote unquote below market value. Yes. Just to get rid of it. Yes. Because, but it has, but it does not establish market value. So when someone says house prices are going down, they mean market values are going down.

The market values have not gone down. But there are some parties because the market has been sluggish that are under duress. Gotcha. And are selling. They may have leveraged a property. They're what you call a motivated seller for one reason or another. And House has been sitting on the market and they lower the price below what the appraisal would be, what a willing buyer. But they're no longer without duress.

They have duress. I mean, there's a stress, they're in a stress situation. Okay. And so that doesn't establish market value. That doesn't establish what home prices are doing. Now, but if you're in a seller's market, then the buyers are under duress because that's when you get 83 offers on the house. If you're in a buyer's market, which we haven't seen in a long time because inventories

have never kept up with demand, but if you're in a buyer's market, that means there's houses everywhere and the buyers could come in and cherry pick what they want and they can demand stuff from sellers because the sellers are under more stress. And that drives prices down. But we haven't seen that in two decades. But even if market value went down 20 percent, I'm still up in my investment. But house prices would have gone down if that's the case. Correct. There you go. So social media would be correct. But social media is a drama queen. Correct. It's not functioning on anything except you know, some 20-something-year-old living in his mother's basement having a little snowflake attack. Correct.

And that's your social media. That's not going to do with the actual reality of what's happening in the market. That's just somebody pissed off because they feel like they got boxed out of the market because they're a barista after getting a PhD. Or they're pissed off because they did some napkin math and looked at their wrong Internet website and said, my house is worth $1.2 million. They get an offer for $700. And in their soul, they feel like they lost $500,000. when they bought the house.

If it was not worth 1.2. That's exactly right. Yeah. It was never worth that. And so is there actual market value? So if you're going to do an appraisal on a piece of residential real estate, you find three comparable sales within the last 90 days, comparable in area, comparable in attributes, and comparable in square footage. And you adjust for square footage. If one's a five bedroom, one's a four bedroom, one's got six baths, one's got four a baths.

One's got a five-car garage, one's got a three-car garage. You adjust for the differences, and you do that, and then you take the average of those three after adjustments, and you have a residential appraisal. But the qualification is all three of those comparable sales cannot have had a buyer or a seller under duress. So you can't use two foreclosures in the neighborhood as your comp, as your comparable sale. Otherwise, you have an invalid appraisal. What they do in 2008 when a whole neighborhoods were getting wiped out? Well, then you've got a new market.

The market established that this neighborhood is foreclosure neighborhood. Okay. So it drove it down because everything in there was. So if you had like those townhouses and stuff where they, you know, where these bogus investment deals, that's what all happened in 2008. And the mortgage bank securities, all that crap crashed. And so they started punt-punting on these loans left and right. And so they end up with whole neighborhoods back. Now you've got a complete reset on that neighborhood.

But that's not a statement of real estate. That's a statement of that name. neighborhood. That neighborhood was full of investment real estate, 100% renters, and 100% of the investors in air quotes were leveraged, walked away. Right. And so now you've got to reset. And now we've got, okay, what will people pay in that neighborhood where neither are under duress? And that takes about a generation to get through that, not a generation of people, but a generation of sales. Because the bank, when they take it back, they're under duress. Ah, okay. So when the bank resells it, you can't count.

that. That's a real estate owned, an REO. You can't count that as your appraisal. And so that's what we're getting into. So no, we, that's what this thing I just said, go to our website. We track this stuff. There's 1,036,101 homes on the market right now. We know exactly I'm here on the market. We know exactly when we're tracking all this stuff in detail. And you can go there and find the actual data. And you're month over month, over month, every month this year, median house price, which is the middle, not the average, it's the middle of house prices, is what a median is, and statistics has gone up every single month. It's not gone up much, it's gone up like a thousand bucks or two thousand bucks.

But it's not crashing like every month. It's not going down, right, is the point. It's going up. And there's good inventory and there's good demand. And everybody's sitting around waiting to see if the Fed chairman's really going to get fired and if we're really going to see some interest rates adjusted. And once they get past that waiting game, probably about September, you may see this market take off like a dadgum hair on fire thing.

September could be wild in terms of house prices going up again. But we're not, we've been telling you guys this out there, and it's proven to be true. I've been telling you this for five years. House prices are not going down. This is not a bubble. A bubble is when the prices have gone up faster than the demand. demand has outpaced inventory. Demand is higher than supply.

Every time you see that in economics, you see prices go up. It's a simple thing. It's seventh grade economics. If anybody taught economics in seventh grade anymore. But that's it. I mean, when there's a shortage of goods or services, the price goes up on those. When there's an overabundance of goods or services, the price goes down on those. It's very simple.

And you really can't hardly figure out any time in economics with an open market. anyway that that gets violated. It just shows up that way every single time, given a, given a half a minute. But I mean, you get weird anomalies like COVID and that kind of stuff that hit a marketplace. It takes a little while to get the wrinkle out of that out of the sheet on that, like the supply chain stuff, same thing. But the, this is, it's just, it's, the problem is everybody's just so frustrated that wants a house and can't get one right now. Sure. And so they're, so they're throwing all these darts out there that they call truth. to try to make themselves feel better about it.

And it's just not, it doesn't change anything. You still have to do the math. Hey guys, thanks for listening to Real Estate the Ramsey Way. Now, if you're here, you're probably thinking about buying or selling a house. It's exciting. And one of the biggest financial decisions you'll ever make. But you don't want to do it with an inexperienced agent who will rush you into costly mistakes, like the ones some of our callers find themselves in.

You need a pro who knows what. the flip they're doing and will keep you on track with your financial goals. That's why we only recommend Ramsey trusted real estate agents. These are vetted, hand-picked pros who actually listen to your needs, guide you through the process, and fight to get you the best deal. To find a Ramsey trusted agent near you, go to Ramsey Solutions.com slash trusted agent. That's ramsysolutions.com slash trusted agent. Harrison is in Indianapolis.

Hey Harrison, how can we help? Hey, it's a big for a call, Dave. Sure. What's up? My question, my question for you is I've listened to your show for a long time and talk about doing a 15-year fixed rate mortgage. Exactly. My question is, if it's okay to deviate from your plan, go for a 30-year mortgage and do extra payments on the principal with the understanding that you always do an extra payment a month to, basically level out so you're paying the same that you would on the 15th. That makes

sense to be tracking. Well, it's certainly not illegal, but would we suggest it? No, we would not suggest it. And here's why we've done research and 100% of the 15 year mortgages pay off in 15 years or less. Almost none of the people that do your plan pay off in 15 years or less. As a matter of fact, the FDIC says from the Federal Reserve that statistics that 97.5% of mortgage are not systematically prepaid, meaning doing what you're doing. Systematically would be monthly adding the amount to make it a 50, the equivalent of the 15. When you add the amount of a 15-year payment to the 30-year payment, it will pay off

in 15 years mathematically. But no one does it because prom dresses and transmissions. Which is why you want to do that, right? Because you want the flexibility of not paying it. Not paying it. Fair. I mean, my, you know, I would argue my situation is a little different. Yeah, you're going to beat a 97% odd.

That's not a wise argument. I'm not going to set myself up to do that. Yeah. I set myself up to where I have automatic discipline. Yeah, I like that. And by the way, everybody thinks their situation is different. I just want you to know that, Harrison. I know you're not there anymore, but everybody thinks their situation's different.

No, it's not, you know, you don't have a situation that today that's going to exist 30 years from today. or 15 years from today. Now, if you are... The rate of change in this culture that we live in, do you understand what happened in the last 15 years? I mean, there was no iPhones. True that. You know, come on.

I mean, you understand what has happened. The rate of change... Cars used to drive themselves 15 years ago. You know, I mean, this is crazy, y'all. The world we live in. I mean, there was no such thing as a podcast. YouTube was only cats chasing lasers. That was it.

Oh, gosh. And now it's the primary broadcast medium. in the world. I mean, come on. Netflix was sent DVDs to your mailbox 15 years ago. Blockbusters was still open 15 years ago. You cannot, you cannot anticipate 15 years from now, much less 30 years from now.