Real Estate the Ramsey Way - Dave's Prediction For The 2025 Housing Market

Episode Date: March 10, 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 homeownership with confidence. Well, as predicted by the Ramsey team and me and George, the real estate market is beginning to thaw as the snow thaws. and I mean we told you in November after the election that probably what would happen would not be instantaneous and that gradually the market would begin to heal as springtime came around. So we are seeing in the real estate market an uptick and activity.

We are seeing interest rates down very slightly, just a little bit. and nothing, no big, dramatic anything in the real estate world. There's no sudden supply. There's still a shortage. There's no huge drop in interest rates instantaneous, which didn't expect to have happened. I didn't anyway. And so the real estate market is starting to move again.

And so the thing we've told you for 30 years, is still true that when it comes to buying a house, a home for your family, real estate's a great investment when bought properly and at the right time in your plan. And what happens at your house, in other words, what happens in your house is more important than what happens in the White House. And so Donald Trump's not going to buy you a house. Joe Biden didn't buy you a house. It's not their job, either one of them.

And it's your job to buy a house after you get out of debt, have an emergency fund, and when you can afford the payment on a fourth of your take-home pay on a 15-year fixed rate. And that's very doable once you get your crap together. But, you know, there's people worried about tariffs driving construction costs up. There's people thinking that the government's going to get in the housing business and drive supply up, which will bring prices down. Not going to happen. Tariffs aren't going to drive construction costs up, not appreciably.

even if there are tariffs and there aren't any yet. Hello. Basically, the White House has a lot less effect on the housing market than you think they do. Well, no, but the effect they do have is, and they are starting to have that effect, is to make people believe again so the economy starts moving. And when people are hopeful, they purchase things, they invest. They get off the side of the side. When they are hopeful.

and if you believe, whether you're Democrat or a Republican, if you believe the economy is going to get better, you will make moves that make the economy better. It's a self-fulfilling prophecy. And housing is one of the elements of that. And I do think that's going to happen, and I'm not going to give President Trump the credit for having grown the economy.

I'm going to say the American public grew the economy. But it is if he gave them hope and caused them to do that with, you know, cutting, spending, which they're obviously doing pretty rapidly and pretty wildly. It's kind of fun to watch. For a guy who likes to cut spending, I mean, I'm in hog heaven, right? So, you know, that's a good thing. And I know it's your grandmother's program or whatever they cut and some of you're pissed, but I really don't care. Cut spending. And you've been spending more than you make like some kind of drunken congressman. So that's wonderful. And if that kind of thing gives people hope, and if he

puts pressure on the Fed and causes interest to go down, that gives you hope and causes you to go into the marketplace. The real estate market's going to take off. So I am predicting a a healthy, good, functioning real estate market again by fall. I don't think it's going to be a boom or bust thing like it was after COVID. It was crazy. But I think it's going to get moving again, and it's been very stagnant. What do you think? Yeah, it's definitely been crawling, and I think it's going to take longer than we all want it to. And so for those folks who've been sitting on the sidelines waiting for something drastic to happen, quit waiting. If you're ready to buy a house, like you said, don't time the market, time your own financial life and go, now is the right time for us to buy. This is the time to buy. I'm looking at several pieces of real estate right. And I'm not doing that because Trump's in office. I was doing it before he was in office. And I will keep looking. But I'm only going to do the deal when the deal is right. And it fits in our parameters on how we do real estate. Right. And you're paying cash. And for those folks that are, you know, they're taking on the mortgage, Dave, and they're going, well, Dave, the rates are so high. What do you say to them about the rates?

You marry the house and you date the rate. So when it does dip down, you just refinance. You know, it's not that hard. Just don't, you know, don't buy too much house and don't be crazy. But your interest rate, if interest rates go back down to three, and I don't know if they will or not, I never thought they'd be there to start with. So what do I know? But anyway, if they do go down, it's not that big a problem, just refinance. And you have a little bit of cost. And within 18, 24 months, you'll get your money back. And you'll be rocking along making the better rate then after that. So don't let that keep you out of the market. If you're waiting on rates to come down, that's dumb.

Because as soon as they go down, you're going to see some stimulation in house prices. They're going to offset them going up. So, you know, go ahead and get in. You have disappointed. But you need to be out of debt. You need to have an emergency fund. place of three to six months of expenses, debt-free, and with a good, strong down payment, we'd like to see if you're not a first-time homebuyer, it should be at least 20% down,

because you can avoid PMI, which is private mortgage insurance, which is about $75 a month per $100,000 borrowed. That adds up. So, I mean, if you borrow like $400,000, that's $300,000 a month that you're paying for insurance for the mortgage company. to insure them in case they foreclose on you. That's what PMI is. It's a risky buyer fee.

It's a risky buyer fee because you didn't put down 20%. That's a good line, George. Thank you. I worked hard on that. I mean, I've been doing this 30 years. I never came up with that. That's pretty good. That's a win.

But there we go. But if you don't put down 20% and you still buy, we're okay. We're not mad at you. We're just saying you could save a lot of money if you did put down. So a good down payment where your house payment on a 15-year fixed is no more than a fourth of your take-home. pay, and your take-home pay is not after insurance in 401K.

Your take-home pay is after taxes. What are you taking home after taxes? That's the number we're talking about. So I'm going to talk about your check. I'm talking about what your, that's called take-home pay. It's not your, your check is different than take-home pay. You've got health insurance premiums and the 401-K. That's not in the mix, okay?

But anyway, yeah, because you need to be able to cash flow this thing and get it paid off and move along to the next step of wealth building. But real estate is good. It's not horrible right now. It's not booming, but it's definitely not horrible. It is way better than it was four months ago. Way better. I mean, I've got a couple properties on the market that zero people were looking at. And now people are in there every week and every day looking at them. And so, I mean, we're actually seeing activity happen, you know, on those properties. And they're not rentals. I mean, those are sales. So it's happening. Real estate is moving again. It's very, very quiet about it because there's all this other stuff in the news. And nobody's talking about real estate much. But we are here because you talk about it at home.

And you're thinking about, should I buy a house? Should I buy a house? What happened? Is Trump going to end the world? No, he's not going to end the world. No, he's not going to make your life better by sending you money. It's not going to happen. And I told you that was going to happen.

I told you that about Biden. So you guys got to be grown-ups and go for your own destiny. Yeah, quit waiting around regardless of what's happening in the economy. You can affect it a lot more than anyone else. So we've got a lot of resources too, Dave. Our team built a real estate hub with tons of resources, tools, calculators, articles, even a video course, Ramsey Solutions.com slash real estate. And we'll be talking about real estate investing here soon. Yeah, we're going to do a second time we're doing the investing essentials virtual event March 4th and 5th. George and I are doing that. Tickets are, that's a virtual event. Tickets are $199. You can get your tickets at Ramsey Solutions.com. It's two nights. The first night is two hours on investing and investing philosophies. The second night is two hours, and most of it is on details

on how to do investment analysis real estate, real estate investment analysis. Using real examples from your portfolio. I'm going to go through, I'm going to open my playbook. It's only the second time I've ever done that. And I did it this time last year, and it was a big hit. So they talked me and do it again. Well, stuff you've never talked about on the show because you're like, this is too nerdy. It is. I can tell you, the whole stinking night, these two nights are both nerdy. So if you're having trouble sleeping, you know, we can help you with that, okay? But if you're a super nerd, you're going to love this stuff.

If you're really into investing, oh, we're going to give you the meat and potatoes, baby. George, George. There's some meat on the bones. George is a super nerd. I'm just saying. He can do it. I love it. Can't wait.

March 4th and 5th at ramsysolutions.com slash events, the Investing Essentials virtual event. Ava joins us up next in San Jose. Ava, welcome to the Ramsey Show. Hi, thank you. I am such a huge fan of Dr. John and you. This is amazing. That's so kind. Can you clear something up for us, Ava?

Who's a, are you a bigger fan of? Just kidding, don't answer that. All right, go ahead. Okay, that's a tough one. What's up? What's up? So I am a newlywed in the Bay Area of California, and we make a pretty decent income,

but the housing prices out here are insane. So I want some advice on how. we can best save for houses when everything is upwards of 900,000. Okay. Okay. You get to, like, choose your own adventure. Do you want George and I to make up a pretty amazing story about what y'all could do? Or do you want us to tell you the truth?

You get to pick. I think I need the truth. We can make up great stories. We're pretty good at it. Okay, go for it. It's the government's fault. I don't know. I was just trying, I'm not good at that.

So the worst thing you're going to run up against, and George is going to walk you through it. Math doesn't care how in love you are. It doesn't care what the prices are. It doesn't care about anything. It's just math. The question you have to decide, the question that you have to answer is,

how unsafe and at risk do I want to put me and my new marriage and my new family in the pursuit of this thing that everyone has told me I have to have in order to be complete. That's the bigger question. Okay. How old are you two?

We're 23. Okay. The last I checked in the Constitution, there's no law that says 23-year-old newlyweds are entitled to a home in California. And they must be homeowners by 25 or else their life is over. You're the worst failure. It's not in there. How much you make? I agree.

Gross, 140. Together, yeah. Okay. Cool. So what are you taking home every month? About 8,000 net. That's after insurance, 401K, all that. And you guys are just getting started in your careers.

Yeah, yeah, I just started in February. So let's paint a broader picture instead of I can't buy a house in California today and go, okay, let's make a goal that three years from now, five years from now, if we want to stay in California, this is where our careers and family holds us, we want to be able to purchase a home. This opens your options. You go, okay, a home, that could mean it could be further out. Might be a town home, might be a condo. We just want to get our foot in the door of the real estate market and do it in a smart way. How much would we need to save up? Well, you might need to save up two or three hundred grand if your income stays the same.

But that's barring other things happening, like your income going up significantly. And so that kind of helps me go, okay, what are the facts? So the emotions are, oh my gosh, I'll never own a home. The American Dream is dead. Or we make so much money. We've worked so hard. How do we make $140,000? We can't even buy a house. I hate everyone. The whole system's against us. Let's burn it all to the ground. Like there's so much spent energy there that accomplishes nothing for your goal, which is what? You and your husband want to have a house, right? Yeah. Yeah, definitely. Our goal is to have something better than what we're in when we want to have kids. Amazing. And do you guys commute to work currently? I work from home most of the time. My husband commute's about an hour a day. Each way. And is that because where he works is an insane area to live?

Yeah, it just isn't feasible. I mean, it's closer to San Francisco. We live south of that and we have super cheap rent, so we're just not willing to leave that and spend $4,000 for something equivalent. Like, it just doesn't make sense at this point. What do you do for a living? I'm an M&A analyst, had an accounting firm, and my husband is an assistant project manager for underground construction. Can I tell you something, bananas? Go for it. I believe with all my guts that you could move to Dallas, Texas or Austin, Texas, or Nashville, Tennessee, and both of you all could find $70,000 year jobs. You know, it's funny you say that because I can keep my California pay and move to Dallas.

I just picked those cities randomly just because I'm from Texas and I live in Tennessee, but here's the thing. It's also where people are actually going when they leave California. Yeah, that's a huge, in that in Florida. But as George was saying, you guys want to ask yourselves in three years, what kind of life do we want to have? and I want you to throw in another variable, which is geography. And if you can bend on one of those variables, then there's suddenly a path emerges.

Where people get stuck and enraged and anger is they want everything all right now. I went all the way exactly the way I want it and I refuse to bend. And so I'm going to burn all of your world down because I'm not getting my way versus, no, we want to have this size house so that we can have a family. Okay, can we do that in Dallas? or we want to live in California because that's where all our friends and family are. Okay, it's going to cost us.

So we might have a condo, which, by the way, you can raise an amazing family in a condo, right? Or we're going to rent. Like, it just allows you some freedom. It opens up, George, when you said that, it just opens up your mind. It lets you step back a little bit from the current, to, okay, at 28 years old,

what do we want our world to feel like and look like? Let's do the best we can to get there. Okay. Yeah, that makes sense. Do you guys have any debt? No, so we just paid off my car in May, and that was our only debt. Awesome. We're all good there.

Amazing. And you're starting to build up some savings? Yeah, we have about $25,000 in a high yield. That's great. So let's call that your emergency fund. And so now we're on to Baby Step 3B, which is this down payment land. And so the question becomes, how much can we save, how aggressively do we want to save? And like John said, is this where we actually want to stay put?

Should we be searching in this area? Or do we need to search outside of here? Is it worth moving? Because to live in an ultra-high cost of thing area, which is where you guys are at, you kind of need an ultra-high income to match that. And so if you're going to work near San Francisco, yes, you might need to make 200 grand or more just to survive out there if you want to live right there. Yeah.

And I don't know about you. I don't want a long-term, you know, hour each-way commute because that's going to eat up your life. Right. And so I think we just need to look further out. Yeah. our goal is either to move closer to San Francisco in one of the surrounding areas that's a little cheaper or we were seriously considering Dallas because I could keep my job.

Okay. Well, that's fantastic. And so the other thing that I think a lot of 23-year-old couples make 24, 25-year-old couples is any one decision we make is our future forever and ever amen. Right. And George and I both are in jobs. what, six, seven, eight since we were 23, live in different places. I'm in a different state. I think George's a different state. Like, it's just hard to project where you're going to be

when you're 40. So we're going to make the next right move, always knowing the coolest thing about our life is we get to choose what happens next. We can change this. That's actually a really good perspective. It feels like we've been moving at a million miles per hour the past year being married and trying to figure it all out. There you go. All you have to figure out right now is what's the next right move and the next right move is cool. It starts saving for a house because we've been both know that. We don't know where it's going to be, but we're making good money. We can both just start saving up for it. Yeah. Yeah. That's a good perspective. And by the way, all this energy is going to be there. All the energy. And you can channel it into rage. You can channel it into

how dare they. You can channel it into entitlement or you can channel it into, all right, I'm just going to do the next right thing. But that energy's got to go somewhere. And man, I love people choosing. All right, I'm going to go be proactive about this. And I'm going to go make it happen. But, and by the way, George, can we call us out? Have you ever been to San Francisco area? Yeah. It's stunning. It's beautiful. The weather is just perfect. The weather in Malibu, perfect. I get why everybody wants to live there. It's easy to bag on it like, oh, it's crazy. It's all who would want to live there? It's amazing. And it comes at a significant cost. It's just both, both are true, right? It's like driving around and Rachel Cruz's Tesla versus your Tesla.

Very different experiences. One's amazing and one is a Tesla. I was one. I was like, somehow John's going to make this a dig at me. And he did it. It was a success. I can't even hate on that. And Ava and anyone else listening who wants some resources on this, our team created a real estate hub. It's totally free. Lots of tools and resources for those preparing to buy, wanting to buy right now, home selling, even real estate investments. And tons of great tools as well, totally free if you want to find an agent. You want to use our home buying calculators, home payoff calculators.

It's all there. Just go to ramsysolutions.com slash real estate. We'll also drop a link to that. in the show notes. And we created this to be a resource for you to help you during these crazy real estate times to parse through all the noise, what's actually true to help you get to that goal.