Real Estate the Ramsey Way - Housing Market Predictions for 2025

Episode Date: January 20, 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. So Rachel, there's a lot going on with the housing market. We're seeing some trends. You've got some input on it, so I'm going to let you take this and drive it on home. Yes, there's, yeah, I would say good towards the consumer when it comes to mortgages. So we are seeing a trend that more. mortgage rates are going down, and they're expected to keep dropping in 2025. So rates on a 30-year fixed-rate mortgage fell to 6.12% in late of 24, and they keep decreasing. And they're not going to go back to 2 to 3% rates like they had pre-pandemic, which was beautiful. It's not coming anytime soon. But again, we're continuing to see it drop, which we love. Housing prices, they're staying pretty steady. And again, they might level off, but with the low inventory, it's

kind of keeping that stable. And so they're not going to expectantly, like, drop drastically. So it's still this idea if you're on the sidelines and you're ready to buy a house. This whole idea of like, oh, there's a bubble. It's going to pop. I'm going to get a great deal. It's probably not going to happen. They are pretty consistent. And the federal home loan mortgage corporation even predicts modest price growth in 2025. So values will continue to rise. Inventory is slowing. So inventory grew 29.2 percent in 2024 compared to the previous year. Now, it is still below average or pre-pandemic levels, and more homes are on the market to give buyers more options.

And sellers still have the upper hand in most areas as demand. Little by little, it's getting better. Exactly, exactly. Buyer demands could rise. So if interest rates keep dropping, then obviously there's going to be more competition. People are going to get back into the market to buy. Foreclosures will stay low. Foreclosures declined 13% in 24.

and this trend is expected to continue in 2025. Again, they're rare out there. If you can find a good one, that's great, but they're pretty rare still. Some of the takeaways for what we're seeing in the housing trending in 2025 is for buyers. If you're looking to buy with rates trending down and inventory improving,

you might find more opportunities to get into the market. And you may have some more options when it comes to housing. But again, do not overspend. When you go to the mortgage company and to get a mortgage, they're going to offer you way more than what you need. So stay within your budget. If you are selling, this is still your market. And homes are priced fairly. If they are priced fairly, they're going to still sell pretty quickly.

And again, for everyone, you can't wait for the perfect time for the housing market. It's the perfect time when it's the perfect time for you. So if you don't have debt, you have an emergency fund in place. And, you know, you have at least a 5% down payment. Go ahead and get in. Because again, the housing values, the price of houses are not going down. You're not going to go get a deal next year. They are the same if not modestly increasing.

So the value of our homes are still, it is still going up. Which truly is good news because these are investments for us and we want them to be going up. Even if you're not in the housing market yet, that's a good sign for all of us. But Rachel, you made a really good point because when you go into this, you've got to know your numbers. is you've got to know what your parameters are because they will. The lenders will allow you to borrow sometimes up to 50%, maybe even more of what you're taking home. And so just because they say you're approved,

that is not your signal to go, all right, everything's all good. A banker says, I can afford this. Yeah, that's a red flag, people. You need to control that on your own ends. You know, and it is wild when we think about it because, I mean, and I know we all remember because it was just a few years ago, when prices just skyrocketed up. Remember that?

And there were some hot areas that were significantly overpriced. And they did kind of come down. Even last year, it was kind of this like, you know, correction. Austin, Texas was one. Like we saw some markets do that. But I remember being on the show, you know, two years ago. And Dave and all of us were saying there's not a big bubble, you guys. Because some people were saying that.

Yeah. It's just like this. It's going to be like, oh, nine. There's may foreclosures everywhere and all of this. And it's like, no, it is going to stay. And again, it may correct. It may kind of go back down a little. bit to correct. But it is going to be what it is. And it has stayed there, Jade. I mean,

it is wild. I'm not mad at it. I'm not. I mean, think about it. Because this is the thing, like, if you're on the sidelines right now, you're definitely on feeling some type of way because you're like, man, I wanted to get in on the market. But it's good news for all of us because it tells us that like the market is still strong and that things are doing well. And when you do get in, you're going to want your property to appreciate as well. That's right. I mean, Sam and I, South Florida was one of those hot areas. And when we got our, our first house was around 400,000, and it doubled when we, I'm like, thank you. It made me a baby steps millionaire. Like, this is what we want to happen. And so it's one of those things that when you're not in the housing market yet, it can feel so

frustrating. But once you get in, you're like, yes, like, I'm finally part of it and you want to see it ticking up. And so. That's right. That's right. Go to Ramsey Solutions.com slash real estate. And we do have a U.S. housing market trends. It's honestly right there on the front home screen. So if you're curious about what's going on in the real estate market and you want to see facts, and we pull these from reputable sources. This isn't just opinions out there. These are actually what's going on in the housing market. And it is something people are watching and want to know, hey, what is going on. Because you do hear a lot of either doom and gloom or overhyped here. I mean, so just to get the reality of what's really going on in the housing market. Make sure to go to ramsysolutions.com

slash real estate and for all of your real estate needs. If you are looking to buy and sell, use one of our Ramsey trusted real estate agents because, yeah, they will help you in this area. And it's a big deal, you guys. Your house is, for most people, the largest purchase you make. Oh, yeah. And to your point, the largest investment when it comes to it appreciating and all of that. And they help you do it the Ramsey way. Because, you know, when we're moving here, you know, the way we do things the Ramsey way is not necessarily the way they do things out in the world. And so it's like, I remember making an offer on a house here, and I was like, it's got to be contingent. Like, we've got to sell that house so that we haven't, like, we're not going to be one of those

people who takes out a bridge loan. And it's great to work with a Ramsey trusted person because they know that. You don't have to explain all that to them. They get it. They're not going to, they don't think you're crazy. Exactly. So it's so, so important to do things. The Ramsey way. Lincoln is up first in Orlando, Florida. Lincoln, how can we all? Hey, yeah, my question is my wife and I were going to be first home, first time home buyers, but we're renting right now. We're trying to save up that down payment. I want to buy now.

She wants to wait. We have about $80,000 saved up, and we have about $50,000 our 401K, and we save about $100,000 a year in that work. So she wants to continue just to wait and just continue to build that nest egg, and I kind of want to jump into a house. So that's my question. What do we do? The great conundrum. So you guys have no debt, the emergency fund, and there's this sort of discrepancy of should we be investing hard or should we be saving for this house? Exactly, yeah.

Could you meet in the middle somewhere? Yeah, she wants, her middle is 50% of the health price. Okay. And she's willing to buy, and I'm okay to do it now because I'm worried about house prices going up. So what's your total liquid down payment you have outside of emergency fund, non-retirement? $60,000. Okay, and what's the home price you're looking at? $300. And you've done the math on this to see, is this going to be about 25% of our take-home pay?

Yeah, it'll be about 20%. Okay. And that's on a 15-year or 30? 15-year. Wow, way to go. What's your household income? Yeah. After tax, around $14,000 to $15,000 a month. Wonderful. Okay. So if you guys bought now, you're doing it the Ramsey way and doing it the smart way. What's stopping you guys from continuing to invest once you're in this house? Nothing. I mean, we would just pay it off. Our goal is to pay off her house in four years,

so that would be the goal, but she just has a fear that, you know, houses have unknown costs, so she doesn't want to do it. Well, the unknown costs are known. I mean, it's maintenance repairs, get a sinking fund. You guys have the emergency fund. You're not going to have a $60,000 surprise repair if you do this the right way. You get a pre-payment. you know, you're going to get this thing inspected and appraised and all of that. And so I think a lot of this, there's a different fear happening here. And I don't know what's behind that for your wife. Because I felt like it was all about she wanted a 50% down payment.

Did I hear that right? Yeah. Which has nothing to do with the fear of unknown expenses. Yeah, her parents bought, when she's grown up, they're really house poor. And so there's only it is. Ding, ding, ding. So she's thinking, so here's what you've got to do, I think, George. I think you have to sit down with your wife, Lincoln, and go, okay, let's run the numbers.

based on where we are right now with a 20% down payment. And let's look at those numbers. And I'm talking like the real numbers. Shower in the budget, the whole nine yards show of the whole budget with this current situation. And then I think you run the same numbers on a 50% down payment. So it's 30% more down and how that's going to lower your price. And you put that in the budget. And then you go to what George is saying, LinkedIn, with the knowns and go,

okay, well, we're going to put aside this much anyway for House for Payment. or we've got an emergency fund. I think she needs to see them side by side, George. There's one thing for him to go, I want to do this. I think it's fine. She's got such a deep-seated fear there. I think the only way to get her on board, I'm curious to know what you think, George.

Lincoln, and what you're doing on this is to show her those two budgets side by side because it's not that big of a savings. Monthly, am I right? Yes, I agree. And here's the thing, Lincoln, I'm thinking about. With the housing market going the way it's been, what she also needs to be thinking about is 50%

a year from now may be a really a bigger chunk because that home value might go up. And you can look at home prices last three, four years. It is skyrocketed. And we know that history is going to show us home prices will continue to go up over time. And so it's going to be a moving target. And so we tell people the best time to buy a house is when you're financially ready. And you have checked every single box in the book today, my friend. And so you have Georgia's stamp of approval that you're doing this the right way. You're going to aggressively pay it off. How old are you two? I'm 24 and she's 27. Goodness, you guys are rock stars.

You're crushing it. Thank you. And if you walk her through, here's the worst case scenario. Okay, what is she really worried about? If you dig into it, have her answer that question. Say, what are the repairs you're worried about? Okay, we're going to get a good roof inspection. This roof's going to last 10 years.

All right, let's check the H-FAC. All right, that's going to be 10 grand if we had to replace the H-FAC. Those kinds of things, putting facts on paper will help get rid of that sort of scarcity mentality that she's grappled with for a long time now. So I did a little research, George. That quickly. This quickly, I like to do it. Now, this is a USA Today article.

It's about two years old, but this is just a quick examination here, Lincoln. So we're going to go a lot deeper than this. But a quick search says that it might help to know that the average American spends $3,000 a year on home maintenance. There we go. Now, that's again, let's... That's an average. It's an average. Some spend less, some more.

So, Lincoln, if you're armed with that kind of information and you sit down and her and we go, hey look, here's the average, and we can go get some more updated information there, get two or three different quotes. But if you look at that number and you're able to show her that, I think that would go a long way, don't you? Yeah, yeah, I do. I think she's fear of the unknown. And I'm a little afraid, too, because when we do dive into those numbers and the detail, I want to buy a smaller house and she wants to get a bigger one. So she's like, we just save more and get a better house. And then, you know, that's a whole other conversation. Yeah, but you guys are young. Let me tell you what Stacey and I did. Stacey and I got a what we thought was a fabulous little house for our first home. Wasn't a great house.

Wasn't even close to the dream house. And it was fine for what we needed at the time. It got us in there. We got some equity. We rolled that in. We moved to another state. Didn't get the dream house there. Got a better house.

And so you guys are young and that's going to take care of itself. I guess I just want to focus on what George and I've been telling you, which is you've got to do a better job at casting vision around. how this move is not going to result in her greatest fear coming true. That's all this is. This is less about money. This is more about understanding your wife's fears, appreciating them, and answering them. Yeah. And think about it this way. You got a paid four house four years from now. Great. That $300,000 house is now a $400,000 house. We can now upgrade, maybe even in cash, four years from now. You guys are in your early 30s at that point. You're doing great, man. And look, it's about $250 a month based on the average.

And put that in your budget, show her. Hey, babe, we're going to put $250 a month away for home repairs. On top of the emergency phone. On top, yeah. So that's safety on safety. Yeah, you just have to address that. I think she's going to be ready to go. But, hey, great young couple, George.

Amazing. They're in great, great shape.