Real Estate the Ramsey Way - Mortgage Interest Rates Have Dropped to Their Lowest Since 2023

Episode Date: September 30, 2024

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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. So CNN reporting mortgage rates fell this week to the lowest point since February, Jade. A lot of people are excited about that. 30-year fixed-rate mortgage average 6.2 in the week ended September 12. That's down from last week, 6.5. point three, which is well below the two-decade high of 7.7. Yeah. And let's see, last time it was this low was in February of 23, yeah. So it's been 18 months since it's, or more, since it was this low.

And it was on the way up, of course, in February and 23, just passed by this and went up, yeah. So mortgage interest rates seeming to soften. The U.S. housing market remains unaffordable for millions of home seekers, especially those with low incomes. Well, that's true, but the interest rate was not the sole cause of that. Price was the cause of that. And house price is going up faster than wages has caused that. And it's actually, I don't know.

I don't know. There's still a group, you know, this article continues the stupid mythology thing that, you know, a lower income person can live in Manhattan or Los Angeles. You can't. Well, yeah, I think. Can't afford it. There's like the outside economic causes for this. And then there's like the personal level, okay, where do I live? What do I make?

How do I manage my money? That does play a huge part in this. Exactly. Exactly, exactly. The choices that you're engaging in, but there's never been in modern history a time that you could afford to live in an super expensive city. If you had a low income. That's not changed. Yeah, that is, that part is true. That's not new. You know, I mean, it's in low income. Now, the definition of low income has changed because we make a lot more money now than we used to, but the housing prices are more used to be. So, but I mean, I remember in, you know, the 19. I'm coming out of college. If you wanted to live in New York City in Manhattan, in 1982 you needed to make, you know, up close to 100K. And so an entry-level college student with a bachelor's, I made $18,000 a year at my first job.

And so the chance I was, I could not afford to live, you know, entry-level job coming out of college, business degree. The pay that I was being paid, I could not afford to live. And I wasn't lower income, but I was lower middle income. I was a brand new college student out of school. So, I mean, of course I wasn't making the money that your parents made. Of course, yeah, it's not time yet. But you can't go to, you know, the only way I can go to New York is if I land a job making that or the only way I could live in, you know, most parts of L.A.

So they act like this is some kind of capitalistic, I mean, CNN or some of these articles, MSNBC act like it's a capitalistic crisis or something. It's not. That's always been there. Now, there is, what is frustrating or interesting that I don't have an answer for is why the market didn't pick back up with this tick down in rates. We've not seen the activity hit the real estate market. It didn't like light up. When this happened? Yeah, when it dropped it, when it dropped a full percentage, point in a half. Well, you and I talked about this a little bit even before the show,

there's still that demand, you know, the demand is high, but there's not a lot of homes on the market is what they're saying. Yeah, that's part of the problem. That's true. If there were, like if suddenly there were a bunch of homes to flood the market, I got to believe that prices would go down. And then the prices being down plus mortgage rates being slightly down would make people go, you know what, okay, now I can get in. But there is a part of that where, you know, like it says here, a key issue driving America's housing affordability crisis is a persistent lack of homes on the market. Supply simply not keeping up with the demand in many markets across the country for varying reasons. We've been saying that for three years. We've been talking about, oh, there's going to

going to be a bubble. Yeah, yeah. Prices are going to crash. And we said, no, prices are not going to crash because there's a shortage. When there's a shortage, you don't have a price crash. And part of that shortage, okay, so they're saying, yes, it's still expensive to build, right? Construction costs, zoning laws. This says even not enough land available for development.

And I guess that depends on where you live because here they're building, I feel like they're building everywhere I look here in Middle Tennessee. But then if you go down to South Florida, it's built up. I mean, they've got to tear down stuff in order to build things. So again, where is their land available? where there's land available. I mean, it's like, you know, again, in downtown Dade County, Miami, there's not land available.

In Manhattan, you know, there's not any land available. It hasn't been in a hundred and something years. Yeah, that's right. It's been that way. It's been 100% built out for 100 plus years. So, you know, there's a, yeah, there's a shortage. And then there's the part of, I mean, I think we all know this by now. There are a bunch of people sitting out there that have 2% interest rates and 3% interest

rates and unless they have the need to move, a lot of people are like, hey, I'm fine where I'm at. There's no need for me to. Why would I double my interest rate? Why would you do? And I, yeah, why would you? I wouldn't. And so that's accounts for, what do we decide? 20% of what's going on here. And I'll throw in one more thing. And this is just a wild guess. I have no idea if this is right. But let me tell you what it's based on, okay? I am firmly convinced as a student of economics, and I have a degree in finance. So I've spent a lot of time in the stupid economics. textbook over the years, that economics is really as much about psychology as it is math. We talked about this, the vibe session.

Exactly. And so, you know, when you think, it's a self-fulfilling prophecy half the time, when you think things are good, you go out there and move around in the marketplace and things are good. And so hope is actually an economic thing. I'm with that. It causes economics to prosper. Lack of hope causes it to pull back. Law and order.

Economics cannot exist where there is not law and order. Because you can't open an ice cream store if some mob is going to trash it. Okay? Of whatever that's upset about whatever they're upset about this week. Okay. And so when you don't have law and order and you don't have hope, economics freezes, like a deer in the headlights. and on a short-term basis, here's my, I don't know if this is right thing, that's all right.

I'm no question about that. But the thing I'm not positive about is how many people are sitting and waiting to see who gets elected in 45 days? 100%. 100%. People are like, if it's my guy, this is going to break me free. Like they think that. You know, that happened. I remember people thinking that if Obama got elected because he ran on hope, that they were going to get a free car or something.

Remember those videos? Yeah, I do. I do. And it's like, you know, and let me just help you all. Neither one of these people are going to fix what's going on at your house. Yeah. Neither one of these people are going to fix everything you want them to fix, whoever you are at the White House. Yeah.

Because no one does everything exactly like you want them to do. There's always going to be something you disagree with. And never in the history of the United States has a president caused your life personally to get better. you did that but here is the hook Ronald Reagan was a broker of hope now you can disagree with him you can not like him you can argue about the politics of it but he made the American people the hero

in his talks rather than I'm the hero elect me and so interesting and that is the it's gotten all twisted up but it is the genius of the Trump slogan if you just take the slogan all the all the rhetoric and all the acid and everything out and just listen to the words, make America great again. Now, it's turned in to make Trump great again.

We know that, okay? So nobody's confused about that. But I'm saying, if you could just say, independent of all the rhetoric and the crap out there, if you made people believe that you were going to make the country great again, then they would step onto that hope and they would go. Reagan did a much better job at that than anybody in a long, long time. He was a motivator. Yeah.

It's like a motivational speaker in the White House. I think you have to look at it. I mean, we're always teaching a way of life and a set of principles, and you've got to look at it as what you're doing is the main course and what whoever wins the election. That's the garnish. Because the truth is, yes, there could be times. We got so tied up in the worship of these people and even their ideas that they're sitting on the sidelines waiting to see if their guy gets in. That's what I'm saying. You got to be the main course. I mean, the truth, yeah, you could have said, oh, I saved more in taxes under this person. But if you continue to do the right things, you were doing okay no matter who was in office, is the point. Exactly.

So if you continue to do the right things. I have done stupid things and smart things under every one of the ones. That's right. And you might have a time where you get a cherry on the cake and sometimes you don't get the cherry. But you still got the dessert. And so you're like, all right, this is great. They don't get that option. Tyler's with us in Topeka, Kansas.

Hey, Tyler, welcome to the Ramsey show. Hi, Dave. Thanks for taking my call. Sure. What's up? My wife and I, along with our two boys, are ready to purchase a home financially. Emotionally, we're both at different places and having a hard time coming to an agreement on what to spend and even whether now is the right time. Okay. What's the problem? What do you want to do versus what she wants to do?

We both want to move into a home, but my wife really enjoys. the security of having a large amount of money in the bank. Okay. So what's it going to cost you? What are you looking to spend? How much do you have saved? Tell me more. We've got up to $80,000 for a down payment.

Buying probably no more than a $300,000 home. Okay. And is that $80,000 just the down payment, or do you have more money that you have set aside for your three to six months? Yes. What's your house to mean? which is you have an emergency fund in addition to the 80K? That's correct.

Okay, cool. And what's your household income? 140 to 160 depending on commissions and bonuses. Okay. There's no reason to not buy. I don't understand. No hesitation whatsoever. This is the time to do it yesterday.

Y'all go find your house. Every guideline you gave me fits and makes good common sense. It fits everything we're talking about. the only tradeoff is she wants to keep $80,000 in the bank and watch it go down in value while the house goes up in value. So you're trading a $300,000 house for what is now a $250,000 house because in 20 minutes, that $250 is going to be $300 while you sit around and watch your cash. Okay. Yeah, this is not the time to wait. You understand what I'm saying.

The 80 is still going to be 80 a year from now. the 300 is going to be 350 a year from now. Okay, I got you. And then it's going to be 400. And your 80 is still going to be 80. You probably need to sit down and explain that with the right attitude. Not my tone of voice, but Jade or Rachel's tone of voice. I don't know about mine. Maybe Rachel's.

Yeah, Rachel's always the friendly one. She's a nice personality. But the, uh, yeah, it takes great joy in that. But anyway, the, uh, uh, Uh, yeah, I, um, I think I would start with, you know, and some empathy. I understand how you feel, but 10 years from today, waiting is not going to be our best plan. Would you agree? You know, and say something along those lines and say, you know, 10 years from the day, the house that we can buy for 300, we won't be able to buy anymore.

And the 80 will not have gone up. And so the longer we wait, the less house we're going to. going to be able to buy. How old are you guys? Twenty-eight. Listen, I remember when me and my husband bought her first house, everything was in line, and I still felt just a little bit trigger-shy. It's a big purchase. It's the biggest purchase you're ever going to make. And so there is, you know, that apprehension there, but let her listen to this call, and the experts are telling you that you're ready. Yeah, you're in good shape. Listen, dude, if you were a broke guy trying to buy a house and your wife was trying to talk you out of it, I'd call you stupid and tell you not to do it right here

on the air. You know that. You've heard me do it. Yeah. I mean, because I love you and I want you to win, right? And so I'm, you know, I would love to do it. That's it. Yeah. I'm kidding. But the, not much. But the, yeah, so yeah, seriously, you guys are in really good shape. You've done a good job. Waiting is going to cost you. And the only thing, reason you're waiting now is fear. And in this case, it's false evidence appearing real. It's just you're doing something big you've never done before. in it, like Jade said, that is scary. It's valid to be scared, but it's not valid to let the fear rule you. Yeah.

Okay. Fair enough? Well, I appreciate everything you guys have done. You've really helped us out a lot. Hey, Tyler, how old are you, too? 28. All right, cool. You fit everything, man.

Everything you're lining up. I mean, you didn't call me up in your 19 years old. Right. And you have no money. And your broke friend at the happy hour drinking three beers with you told you to buy a house. You're not that guy. I mean, you actually have a clue. Well, then there's like,

the perception, right? Your perception really denotes what your behavior is going to be. And I think right now so many perceive that it's, it's impossible to buy a house in this market. You'll never be able to do it. And they are actually doing it. Everybody's telling them that all their friends are going, no one can do it. You're right. It's all gone. All the opportunity is gone. Everyone under 30 is going to die homeless. You know, this is the crap that's on the internet. And it's just crap because we meet 26-year-olds with a paid-for house doing their debt-free screen. That's true. So, I mean, we We meet people all the time that are doing it and making it work, but they're just not over buying. That's right.

And they're not buying crap they can't afford.