The Rachel Cruze Show - Why the Housing Market Might Feel Impossible Right Now

Starting point is 00:00:05 Do you ever feel like we've totally lost control of the housing market? And you start to wonder, gosh, was I just unprepared for adulthood? Or has real estate genuinely gotten so messy over the last decade? Well, we're going to talk about it and we're going to do a deep dive on the housing market. But before we get started, make sure to subscribe to this channel and share this episode with a friend. All right, let's go down memory lane, shall we? Just picture this. It's 2012.

Starting point is 00:00:30 And you're wearing a pair of Hunter rain boots and a J-Crew statement necklace. in life is good. In 2012, the median house price was around $175,000, and the average interest rate for that same year was about 3.6%. Now, as of early 2025, the median house price is around $412,000 with about a 6.8% interest rate. Blah. And in the last decade, there are really six main factors that affected the housing market, so we're going to dive in. So the first factor is that the Fed kept rates low in the 2010s to offset the 2008 crash. So after the big mortgage crash of 2008, 2009, they really, you know, said, okay, we need some homebuyers in here that are actually can be approved for loans and we want to get people back in. So rates were in the 2%, 3%, 4% for a really,

Starting point is 00:01:25 really long time, which was fantastic. I say a really long time. In my, in my perspective, it was a long time for others that felt short. But the idea that, I mean, for years, you guys, for almost a decade. Rates were like at a great spot and very, very affordable. But now with inflation, other factors that we're going to talk about, the rates have gone up, up, up. Number two, buyers are at risk for becoming house poor. So by 2012, the housing market began to really recover after the 08 crash. And banks again kind of started easing up, not as much as they did before 08, but a little bit on who gets approved for a mortgage. So it is harder to get a mortgage than it was back before the 08 crash.

Starting point is 00:02:06 But again, there's a level of like this easing up. And what can happen is when you have a budget to buy a house and you're like, okay, this feels reasonable and especially if you go by the Ramsey plan, your payment should be no more than 25% of your take-home pay on a 15-year fixed rate, putting at least 5% down on a house. So like, it's a pretty conservative formula that we use. And what happens is you're like, okay, this feels good.

Starting point is 00:02:28 This feels manageable. And then you go to the bank and they're like, oh, you're approved for so much more than that. And what ends up happening is people overbuy what they need. And then they end up saying, oh my gosh, I have so much of my income going to my mortgage and not, you know, going to other things. And so we do see people being housed more and more. And especially since the spike of prices rose so quickly over the last few years, people kind of got into that emotional mindset and they bought, bought, bought pretty high up. And then now they're feeling the pain. Number three, the housing supply

Starting point is 00:03:02 shortage. So everyone thought there was going to be a bubble when all these prices really started going up the last two to three years. And they're like, oh my gosh, these, you know, these prices are completely out of control. And there's going to be a bubble. It's going to pop. But we kept saying on the Ramsey show and here, like, there's not a bubble. Yes, prices are insane. And they keep going up very, very quickly. But there's not a bubble because there's more buyers in the market than there are actual houses. And so that supply and demand is what always keeps you in check. And so again, if there's more houses, on the market than buyers, that's not good. But there are still more people buying houses than actual houses out there. Number four is the rise of remote work. So the whole change after COVID of working from home, a lot of corporate employees started looking for more spacious living. They wanted an extra home for a home office. They didn't need to be as close to a metro area, so they wanted to move out more to the suburbs. Everything kind of changes in that way. And that means there was a big increase in competition, especially for young families in more metro suburban areas. And so we did see that rise. And that's a lot of the housing pricing rise is that, again, people were looking for more

Starting point is 00:04:11 space. Another factor that has become more prevalent over the last few years is the need for affordable quality health care, which is why I love and want to recommend Christian health care ministries. When you go against what society thinks is, quote, normal. It might seem weird at first, but that is okay. We want you to be weird if that means you're doing things in intentionally, including how you spend your health care dollars. And one way you'd be intentional is with Christian health care ministries. CHM isn't health insurance. They're a health cost-sharing ministry that's helped hundreds of thousands of families like yours

Starting point is 00:04:41 take care of health care costs without sacrificing their freedom. Program started as low as $98 a month. So find out more and join at chmistries.org slash budget. That's chministries.org slash budget. Number five, the rise of institutional investors. So hedge fund companies, private equity firms. I mean, there's a lot of people out there that are going in and snatching up a big bulk of houses. And we're seeing this more and more.

Starting point is 00:05:11 And they're putting them up for rent versus selling them to buyers, which creates that life cycle again of owning a home. And even the rise of Airbnb and VRBO, I mean, a lot of people are going into this. So we are seeing companies go in and buying a ton of houses. I don't think it's like a big factor in this. is definitely one to consider. Number six is the cost of living increase. So inflation, it is around. We have felt it really since COVID. And it was a little bit delayed after all the COVID stuff happened. But because of supply and demand, because of supply chain, everything that was happening, we really felt the brunt of this, right, 12, 18 months after COVID really hit because it was like,

Starting point is 00:05:55 yeah, everything froze in the economy. And so because of that, things were not being produced. We were not seeing things happen. And even for housing, you know, builders couldn't get subs. They couldn't work. Every material was so, so pricey. And because of that, they had to raise the cost of homes anyways. So, again, that had a lot to do with what we're feeling in the real estate market today. Now, on the top of this list of factors, obviously the real estate market also fluctuates

Starting point is 00:06:19 depending on where you live, what cost of living looks like for you locally, all of it. But for a general state of the union, kind of a temperature check when it comes to the real estate market. One of my favorite resources is Ramsey's real estate home-based market trends page. So because of this, it gives you this kind of bird's eye view of the market conditions. Because again, real estate, it's one of these things that just feels like, oh my gosh, everything's so high, it's so crazy. I don't know, I don't know, I don't know. So they update this dashboard consistently, again, for you to kind of get a pulse of what's really going on out there. Ramsey has countless real estate tools that you can access in the market trends home base. And so again, check out that

Starting point is 00:06:58 website. I'll put a link down below to get more information on it. Make sure to check that out when it comes to real estate. All right, you guys, remember to take control of your money and create a life you love.

The Rachel Cruze Show - Why the Housing Market Might Feel Impossible Right Now

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