[Music]
anxiety hitting the real estate market
desperation is at an all-time high the
real risk is affordability and recession
[Music]
real estate reality check starts now
hey guys welcome to our real estate
reality check brought to you by our team
here at ramsey solutions we're so glad
you joined us tonight to talk about this
crazy economy that we're in and all the
real estate issues that are out there
and man there is a lot to talk about
you know a couple of weeks ago i had a
retreat with our ramsey personalities
for those of you who don't know what
that is that we've got about eight
people on our team that write
best-selling books and speak for a
living and are thought leaders in
different spaces so we were we're on a
retreat and i decided we're gonna go
skydiving at least those of us that
wanted to
now skydiving
jumping out of a perfectly good airplane
that's just what's known as scary
the first time i did it you know i
really thought
i was going to be very afraid
like the like i was going to be shaking
like scared and they were going to be
the guy that had the push out of the
plane or something but i'm going to get
up there and i'm going to try it and the
weirdest thing happened
all of the preparation
all of the knowledge
the quality of the people we were diving
with and they were showing us how all
the equipment worked and how all the
failsafes were there
i just relaxed
and i ended up having fun
and the same thing happened when i dove
the other day you see the statistics are
this
three and a half million people jump
there's about three and a half million
jumps a year
for skydiving
only about 10 people lose their life a
year out of that that's a .28
fatalities per
100 000.
now
george campbell and rachel cruz ramsey
personalities are joining us tonight to
talk about this stuff
they however did not jump out of the
plane you didn't see any of their
pictures up here or you won't see any of
their pictures up here jumping out of a
plane
however they both drive teslas
and
statistically you're much more likely
for your tesla to catch on fire while
driving to work than you are to die
jumping out of an airplane
and yet they didn't want to jump out of
an airplane so this is me shaming them
one more time for not jumping
we had a blast and we have a lot of fun
teasing about them driving teslas and me
driving a big gas-guzzling raptor all
the time but the point is this
facts
and information
in a scary situation
can help us to calm down and tonight
we're going to set aside our feelings
and we're going to look at facts we'll
address the feelings but we really need
solid information
not some twit twitter economist on
telling us how our life is going to work
there's a lot of scary headlines out
there and there's a lot of feelings
there's anger and frustration and fomo
and worry and hopelessness and
uncertainty will i ever be able to buy a
house if i if i buy a house now is it a
mistake because the housing market's
getting ready to crash and i could have
got a better deal later or or if i don't
buy now is it going to continue to go up
and i'm going to get completely priced
out and i don't know what to do and
there's just all of this angst
and worry
and fear
and anger it's all over the place we're
hearing it on our radio show the ramsey
show we're hearing singing in our social
media comments and the people coming at
us and some of them are angry at us just
because we dare to say it's going to be
okay
because it is
going to be okay
and people are making decisions right
now it's pretty scary real estate
markets a lot of rumor a lot of
speculation out there and there's a lot
of stuff in you know flying around the
internet abraham lincoln once tweeted
you can't believe everything you see on
the internet
so if there's an economist that's not an
economist
on twitter
just calm down let's look at actual
data see you hear things in the real
estate market real estate has always had
this emotion around it this drama around
it this rumor mill this gossip around it
so did you hear the house down the
street he sold it for a hundred
thousand dollars under asking price
if that was actually the truth which it
might not even be the truth
the gossip mill is not reliable data
but if it was actually true did they
know about the mold problem in the house
or the septic tank didn't work or did
they know that there was a divorce
situation so there were motivated
sellers or did they know they were
almost in foreclosure and they had to
get rid of the house so they took a
beating on the price and so it has
nothing to do with an
indicator that the real estate market is
crashing
or did you hear about that house the guy
sold his house 200 000
over asking over appraisal with no
appraisal and no inspection did you hear
about that well that might be true
but that's not an indication of actual
value
that's an indication someone moving into
that market that had a lot of money was
in a hurry and got freaked out and
overpaid for a house
you can't take those things as economic
indicators it's a bad idea
when we don't have facts
we make up stories in our brain
we add drama if your teenager is out on
a date and isn't home by curfew well
they must be dead in a ditch somewhere
when the reality is they're over there
making out with their boyfriend or
girlfriend
hey
don't allow crazy headlines and drama
and talking heads to affect your long
term
money goals
we know
that hope deferred
makes the heart sick but when desire
comes it is the true of life tree of
life
and
hope
come one of the things that gives me
hope or gives you hope is perspective
when we can look at data
that gives us hope when we can look at
or maybe not or we but when we can see
things in their light of time we can
zoom back and see things the way they
really are
then the distortions
of the drama are pushed away
the classic on the internet today is the
fishing photos
you know we get these uh great guys they
bring up their fish and look at the size
of this trout that trout must be 300
pounds
there are no 300 pound trouts let me
tell you how you do this by the way
there's a little trick to it okay you
hide your hands because your hands will
show the actual scale of the fish
you hold the fish out from you
so that this throws the thing and then
you fill up the whole frame
with the fish and you use a wide angled
lens so this is actually a
normal
trout
and so when something gets up in your
face like this like all of this emotion
about real estate you lose your
perspective and you start freaking out
and boom
the bigger fish is in your face it's a
problem
now just because you held the fish close
to the camera doesn't mean that that's
actually the size of the fish this is
all about
perspective
it's because of perspective when it
comes to real estate my perspective
comes from data
i own several 100 million dollars worth
of real estate and i've been buying and
selling real estate my whole life i got
my real estate license and still have it
44 years ago i grew up in a real estate
person's household so i have ridden the
wave of these types of economies for
many many many years
i've watched this stuff happen it gives
me perspective now i
i'm looking at the data i want to show
you the data tonight and then you get to
decide
i've made my conclusions based on the
data and based on my perspective and
it's not right here in my face it's over
time and it's given me a lot of hope and
i'm really pretty calm about it and i
really hope i can convince you that the
way we're looking at the data is correct
okay tonight is our real estate
state of the union this is what's going
on today and what we see coming and why
we see it coming and then you can draw
your own conclusions from the data we've
certainly drawn ours i've predicted
things based on data that i've seen in
the past and i've been right
most of the time but not every time i've
messed up plenty of times so you get to
decide like grown-ups after you look at
this information if you think it's right
or not
now one thing we do know is we know that
house prices have been skyrocketing
in 2020 house prices went up 29
that's an unprecedented number and so
what happened was we came out of the
pandemic quarantine and the economic
suppression people were trapped in their
homes they decided they didn't like them
and they needed to go buy a new home and
so home buyers came out of their homes
chasing another purchase like a baptist
chasing a casserole man they were
getting after it and so we saw this
unprecedented spike
in
prices
values went up dramatically
in 2021 it continued but not as much up
18
were projected not 29 or 18 in 2022 were
projected to be eight percent this year
and they're projecting
all the economists that are looking at
this a three to a four percent increase
next year
now three to four to five percent
somewhere in there is the average
increase in real estate prices
residential single-family homes for the
last 50
years really even longer than that
so that's about average if we can stay
in that four to five percent range that
would be a normal market buyers buying
sellers selling people making moves
without all the freak out
and without any kind of crash
in the real estate market
we're hearing a lot well dave it's like
2008 it's worse than 2008 this is going
to be bad i've never seen anything like
this
and there's all this drama and all this
this octave change in people's voices
indicating their fear and their anger
and everything else around it so let's
look at some facts
let's talk about supply and demand this
is how basic economics works
anytime
there is more supply
of something than there is demand
the price goes down
anytime there is more demand
than supply a lot of buyers chasing few
goods the prices go up
if there's a toilet paper shortage
remember that one
prices will spike up
what's driving our prices at the pump up
now is there's a shortage of oil and we
can argue about that but it appears that
the spigot has been turned off by
washington there's a shortage of oil you
want prices to come back down on oil and
gas it's pretty simple flood the market
with lots of oil and gas turn you know
pump everywhere right and you get lots
of gas out there prices will come back
down at the pump it's a pretty simple
formula real estate is for sure
a supply demand price
pricing in real estate
one thing drives house prices at the end
of the day supply demand
when demand exceeds supply house prices
go up like we had these huge number of
people come out after covid boom we had
a 29
increase in order for prices to go down
supply has to exceed demand
and real estate well we've had a
shortage of homes for about the last two
decades
that's pretty crazy
and because of low supply
high demand
people have been willing to pay
a lot of money for stuff
and so it was like a guy sitting there
with a house and he's going i don't
really care if i sell it or not but word
is there's people running around here
paying 200 000 more 300 000 more than
appraisal so i i don't really want to
sell my house but if you're going to pay
me that much i'll sell it
i've got a shih tzu named rufus and i
don't really want to sell him but for 10
million you can have rufus
rufus is a goner we're going to give him
to you for 10 million i'm telling you
sorry rufus we love you buddy but guess
what nobody's going to be offering me
that
but that's kind of the way it has been
is these ridiculous offers caused people
who really weren't even sellers
to become sellers they were drawn into
the market
in this situation now let's look at
supply demand let's look at the actual
data and this is the data i want you to
pay attention to so you can decide now
where you want to go from this all right
now
current supply
is about half of what it was in 2007.
dave it's just like 2007 it's just like
2008 the market's gonna crash it's too
high it's too high it's going to go down
well
there's
3 million houses almost 4 million houses
for sale in 2007
and there's about 800 000 for sale right
now
so our current supply
is approximately one-fourth
of what it was in 2007.
building starts also in 2006 we're about
2.1
million
and this year they're going to be about
1.38 million about 1.4 million so about
half a little
more than half on that so used housing
guess what
new housing and new housing got totally
disrupted right with all the supply
chain stuff the factory shut down with
the covid suppression the economic
suppression associated with quarantine
and we didn't have lumber and so lumber
prices went crazy now lumber prices on
new housing have averaged in about the
mid 600s for a long time for decades
right so 600 per board foot right
and
guess what because we didn't have any
lumber because the lumber factories
weren't making lumber there was a
shortage no supply lots of demand price
goes up threefold 1700
per board foot comes down comes back up
to 1500 and now it is leveled off and
appears to be that production has caught
up coming out of the factories and the
lumber crisis the inflation caused by
lumber prices the messed up supply chain
called caused by lumber shortages
seems to be rolling out smoothing out
and be over but this has affected the
building starts as well
can't get labor can't get materials
can't get houses out of the ground so
we've got a shortage of new houses we've
got a shortage of used houses and guess
what there's been no foreclosures
yeah look at four foreclosures you know
they shot way up in 2007-2008
we go over here to kovid look what
happened
no foreclosures there was a moratorium
on foreclosures none
the government stopped it and then the
banks extended sup by their own decision
another year we have about two years
that major banks have
taken almost no houses and those people
are sitting there paying no payments
they're living there for free right now
and we got about two years backlog of
foreclosures it's going crazy out there
okay so we're going to see all of those
foreclosures come back into the market
but it's still not going to provide
enough inventory to where we don't have
this dramatic
shortage
now we've got a dramatic shortage not
enough supply
and remember supply has to exceed demand
for prices to go down
now let's look at demand is demand going
down well one of the things we know is
is that the millennials have come of age
in 2007-2008 the people in their mid-30s
were gen xers
today the people in their mid-30s prime
home buying age mid-30s are millennials
and there's five million more of them
than there were
higher demand than there was during 2007
2008. higher demand lower supply higher
domain you see what's happening here
and then guess what in addition to that
we've got 12 million more households in
the united states in 2022 than we did in
2007. today we're looking at 128 million
households back then we had 116 million
difference 12 million so we've got that
many more people that have set up house
that need a house five million of them
are millennials
and so this is what's going on we're
seeing this pressure on demand add to
that that in 2007 2008 we almost had
zero institutional investors in the
market
buying up houses today we've got these
big conglomerates
buying single-family homes like crazy
last year according to forbes they
bought 28 of the houses that were for
sale in america
and these are institutional investors
taking these houses off the market these
are the top 10 cities where they were
doing this stuff where they're buying
the investors are going in and buying
and this is q2 our q1 of 2021 to q1 now
all right so atlanta jacksonville vegas
orlando nashville columbus ohio big time
that's the percentage of homes selling
just to investors meaning what's left
over is for everybody else and we
already had a shortage
so this is driving demand as well now
we've got some cities that aren't the
investors are not interested in these
are the worst cities in america as far
as the investors are concerned because
they're the lowest investor rate and so
if you look down here chicago
minneapolis portland seattle you're
starting to see
uh cities that have high taxes cities
that had archaic crazy covered uh
freedoms taken away and you're seeing
cities that have a lot of violence in
them and a lot of out of control
law and order issues and so the
investors are shying away from those
cities because of the environment in
those cities politically and they're
going crazy over here in these sun belt
cities where those things are not
happening
so we've got higher interest rates
we've got high prices at the pump
high prices in the grocery store
and those things are all pinching
most people's budgets and most people
already just barely had enough room in
their budget to go buy that house that
they wanted to do and so they're feeling
this and that's where all this fear is
coming from
i feel like i can't get that house
and i'm making a little more money and
i've got some things going but not
enough to offset everything
and it just feels tight it feels kind of
scary like i don't know if i've been
boxed out of the market or not and it
gets all this emotion going
so
here's the thing there is those people
some of those people are not going to be
buying houses right now
they're not going to be part of that
demand
but those numbers that i just showed you
represent a ton more demand than we have
supply that's why i am saying this
conclusion i came to
that we're not going to see
crash of housing prices
we're not going to see
house prices crash because the supply
demand just won't allow it there's too
many buyers chasing too few houses and
that's going to hold the market now we
have seen the economy slow down
and i do i do think it's going to slow
down i don't think it's going to be as
crazy wide hot as it has been i think
we're going to continue to see these
price jumps in real estate
but that's a far
cry from
2008 and we're going to see this huge
drop
that was unprecedented the only time
in the last 100 years or so close to 100
years that we've seen house prices go
down
across the board in the united states
was during 2008 and it was a different
set of economic circumstances during
that time
so in summary let's look at this all
right supply there's a shortage of used
inventory remember 3.8 versus uh 3.6
versus 800 000 for sale home starts are
down remember 2.1 million down to 1.38
remember that and foreclosures have been
non-existent down they're barely
starting to come back and then let's
look at the demand against that supply
there's 5 million more millennial buyers
in their mid-30s there's 12 million more
overall householders and investors are
buying one out of every four houses that
are sold all of that is a pressure
against this shortage that's going to
tell you that we're not going to see
a crash in housing prices this looks
nothing like
2008
this looks nothing this looks more like
all the other times in history we've
seen houses go along and what's
happening the biggest problem we've got
is we're going to have a housing
shortage that's going to be prolonged
over a long period of time and real
estate is going to start to be a real
key part of your plan going forward so
we want to get you towards that house we
don't want you to do it crazy we don't
want your emotions to keep you out of
control
this is
supply demand is not going to allow this
market to crash if you purchase properly
this is one of the best times in history
to buy right now a lot better than a
year ago because crisis prices were
crazy and it's a great time to sell but
it's going to be more of a normal
selling environment instead of an
auction where you put your house on the
market and get 85 offers in 42 minutes
okay it's not going to be hopefully
that's gone because that's not healthy
for the market it's not healthy
so
if you're ready now's a good time to buy
if you're ready now's a good time to
sell
so i asked a couple of our ramsey
personalities to join me george campbell
and rachel cruz to have a discussion
about some of the things we're hearing
on the ramsey show and some of the
things we're hearing within our social
media comments uh the ones that aren't
trolls and the ones that aren't just out
of control but i mean some people have
some honest questions some honest
concerns rachel cruz number one new york
times best-selling author and speaker
you see her frequently on national
television also my daughter george
campbell uh he's the host of the fine
print one of the ramsey networks uh
great podcast that goes out you'll see
both of those or hear both of those on
the ramsay show with me on youtube
podcast and 638 radio stations around
america as we talk about money and
that's where we've been hearing from you
guys where you were on this professor
dave great job amazing great charts and
graphs the graphs i thought wow it's
amazing i thought meteorologist i'd like
to be a great weatherman you know oh
that's even better yeah then i'd have to
predict that
but you get to keep your job even if
you're wrong dave he's a good feeling it
was great really a whole nother field
tonight he just know he was like i just
want graphs i want graphs did you get
graphs i got graphs the graphs
i love it no but we really did tonight
we were excited about this event because
we've all heard
a lot of the fear a lot of the
magnified
conspiracies or the things out there
which i've done in those holes are you
hanging out rachel i know i know well
we've heard it all though we've heard it
all and so we're like we want to give
facts and again address where you guys
are at because there's a lot of fear
and a lot of pain i mean inflation just
came out at 9.1
so you're feeling it in your everyday
budget you're feeling it in your lives
and then this real estate confusion not
knowing what's going on all of it so if
we can just give some peace some calm
and guidance
that is our goal but
i think the number one thing that i'm
hearing at least from even friends i'm
hearing on social media on the radio
show is just the simple frustration of
how expensive homes are right now and
it's like man what we could have bought
in 2019 versus what we could buy now
it's a it's a different game it's a
different game and so it is very very um
normal and we don't expect anything less
than the frustration of that so
i was talking about that and combating
the discouragement out there uh so just
know we hear you we see that we know um
but man there's but there is a different
way there's a way to still buy a home
there's a way to be smart about this it
did not completely take your life
absolutely yeah as we look at these
comments on social media many of them
angry you all need to settle down with
that but as i see it i go okay there's
legitimate frustration here because the
same house that was 250 000 you had your
site set on might be 350 400 000 now and
you just feel like it's a moving target
you'll never be a homeowner and i get it
it's discouraging you feel like you're
gonna need to delay your dreams you
might have to work with what we call
gazelle intensity for longer than you
planned you're competing with some crazy
cash offers with these california sucker
fish but i want to encourage you guys
with the market cooling down it's
actually a better time to buy because
you're not having to compete appraisals
and inspections are back so i want to
give you some encouragement that it's
been better than it was the last few
years for buyers out there we are seeing
the market soften because of mortgage
rates going up and again it's that some
prices have gone down but the value of
the homes are saying are
staying continue to appreciate and
what's interesting is yeah that now
we're going back to normals what it
feels like where you're getting an
appraisal you're getting an exp
inspection i mean all of that it feels
like it's going back to normal so got
that frustration right now
and that frustration is building up um
catch yourself if you say things like
well what goes up must come down
uh
that's actually not an economic
principle okay
um as a matter of fact if you look at
the charts and graphs we'll show you
even a little bit later on the house
prices what goes up has never come back
down yeah and and the other thing you
got to remember is this the thing like i
was talking to a guy you and i were
talking to a guy on our show uh earlier
earlier in the week and
he said well i mean i bought this house
for 200 just it seems like 20 minutes
ago now it's worth 500 and i just don't
think you can continue to do that well i
mean guys i started selling real estate
in 1978. first house i sold was on east
ridge drive in antioch tennessee for
thirty eight thousand seven hundred
dollars today okay now you sound like
that
but i mean the point is okay the point
is that 38 000 house today would sell
for four hundred thousand dollars yeah
and the fact that it is we went to two
hundred thousand didn't mean it had to
come back down just because it went just
because it's uncomfortably large
emotionally to you
does not mean it's going to come down
that's fair i know but it feels it feels
unstable though because it went up so
fast it feels though the feeling well
because it's
not used to yes but if you look at the
data over time it's always gone up yes
and there's no indication but cause
prices went up that they have to come
down that's not a principle and in so
much of this feelings take over so
whether it is the frustration or the
discouragement and that's when people
make bad decisions financially is when
you're making it out of that fear and
out of that discouragement so
pumping the brakes and even plugging in
honestly to the emotion of just
contentment which i know is so hard when
you're frustrated but there is something
to be said about our standard of living
in america today where we're at and what
we expect and what we want and all of it
uh it's changed right what you wanted 36
months ago to what you can have now it's
changed and so what does it look like to
really grieve dr john zolone talks about
this grieving the picture of what you
had i had this picture of what our next
home was going to be and right now what
the math is showing us is it's not going
to be that and so i do want people to
take the time to grieve that because it
is hard it is really really difficult
but there's also a level of contentment
and joy that i don't want you to lose in
life because the market's gone crazy
yeah there's fomo and then there's what
i call jomo the joy of missing out
because you're not going to be broke in
a home because you had to get in because
you felt pressure from family and a lot
of people you know we're on instagram
and watching hd tv and it feels like
well we just it's our american right to
be a homeowner and have a beautiful home
and it's not right to throw away money
on rent because renting is a sin and
when you sit back and go my life's
pretty great overall you know we live in
the greatest country with so much
opportunity and the us economy is very
strong it will continue to be over time
and when you can just pause and go i'm
gonna get there but right now i need to
focus on what i can control which is my
money and my life i know but it is hard
because i'm like there was an instagram
real sound that went around and it was
like can we just normalize normal homes
like there are normal homes out there
that are not this like perfect black and
white everything matches all the time
you know so so there is something to be
said of like okay
what what is our expectation of what
things have been sold to us though but
seriously i'm like we grew up in a
generation though
i can't afford it
i mean i grew up over there on
and the people in this neighborhood were
rich people where we're standing right
now and we used to say
we can't afford to live over there
because mathematically we couldn't
afford to live over there
and so we had to do something different
from our life with our life if we wanted
to live over there it wasn't going
because we couldn't move over there they
didn't get to pick those houses up and
move them over to us it didn't work that
way right and so there's a reality too i
can't afford it the problem is when you
test drove a bentley
a chevy's hard to buy
it's it's hard i mean
i'm in a tesla
electric car
no you won't no we looked up data we
need our own graph here in a second to
stick up for the fact that we didn't
jump out of nowhere based on dave's
logic we are more courageous and brave
for driving in our tesla than davis for
jumping out of that that's exactly right
we're risk takers
y'all are risky you're just a couple of
gamblers yeah we are crazy
there's a lot of truth to what you're
saying and to reset those expectations
and go i can't have that single-family
home in that pristine neighborhood i
might need to get that condo right now
or i can't have it that's what we can
afford no doesn't mean no no means not
now yeah and it's the location right if
you drive 20 minutes one way or the
other but again it's that idea that what
it was may not be reality now godliness
with contentment is great it's great
gain you gain so much so much and you
make wise decisions
when you are content and you're steady
and you're looking at all of the facts
and that's that's really really key and
that's not happening right now you let
all that build up and you go buy too
much house
you're going to set yourself back a
decade yeah because people that are
house poor meaning their house payment
takes up a large percentage of the
budget because all of this emotion
drove that decision you're trapping
yourself and you're going to set
yourself back see if you're 35 years old
or 34 years old this is your first rough
economy i mean not counting the coveted
shutdown which was kind of this this
quarantine thing but i'm talking about
where there's inflation recession high
interest rates real estate prices where
all these negative things that are in
the news right now
if you're 34 years old this is your
first grown up
bad economy
and that's not to put you down for being
young but if that's you and you're
watching this or it's your kids and
you're watching this your grown kids you
know this is the first time they've
experienced those emotions yeah for the
millennials it's the first time some of
them have experienced these emotions
they've never really faced this before
and so you don't know what we know that
have been through about three or four of
these
that it's going to be okay
this too shall pass but right now you
know you just look at it with the fish
up here it sucks pretty bad yeah because
it's like this price of homelessness is
coincidence
his rent has gone crazy high too and so
everyone's going well why should i rent
when i can just put that money towards a
mortgage that's the same argument but
they're not equivalent to say that
renting and home ownership it's the same
number i should just jump into a home
right it's very expensive to own a home
there's so much that goes in with it yep
absolutely okay it's okay to write not a
sin just want to put that out there to
be content if you're renting i know it's
not fun for a period of time not for a
lifetime but until you can get squared
around yeah absolutely so that's one
thing that we're hearing a lot of is
just the frustration of where the market
is and that it is it's frustrating
something else we're hearing a ton is
the word recession
and the
um we're looking at q2
uh closed in june so we're going to know
here in the next week or two or even
sooner
if we are technically in a recession and
so that word is a fear-based word people
say there's certain there's certain uh
words around money that when you say it
it's like
that sounds terrible and sounds bad and
what's gonna happen and so actually this
was the instagram post that kind of blew
up because i we did one together and i
was like okay what happens to the
housing market during the recession you
were like you explained that people did
not like your answer so let's let people
not like you again here in a moment
that's what i'm here for it's my gift
explain a recession and what happens in
the housing market
people didn't like my answer because
they're wanting to see a house price
crash some of them yeah and you're not
going to see that and if you don't like
that then you can decide for yourself
about this stuff so you can be mad at me
but i didn't do it i mean it's just this
is analysis of data okay what a
recession is and by the way there's well
let's just talk about what it is
it's measure of the goods and services
sold
in america so all the total of all the
goods and services sold the size of the
economy in america is measured by gross
domestic product the gdp
when the gdp gets smaller
two consecutive quarters
that's called a recession
now last quarter
it dropped one a little over one percent
so it shrunk a little bit
and most of us watching it felt like
with the fed coming in and rising
raising interest rates and some of the
other things that were slowing the
economy down slowing the metabolism of
the economy down that the goods and
services would shrink yet again and so
we would have two quarters in a row that
it shrunk if you have two quarters in a
row it's a recession now if it shrinks
1.5 percent and 1.25 percent this is not
a deep
recession this is a rainstorm
this is not a hurricane
okay
and so it appears right now now actually
we're through with the quarter so we
just don't have the data to tell you
what happened in that quarter so today
we're in the third quarter
so we're we're probably not in a
recession today but i actually thought
this two two quarters in a row were
going to shrink and i said that on the
air and i think i now may have been
wrong i think that's a possibility
no no i think it's a possibility
say it again no america to here
you're so bad
about this this is what you're doing
with your daughter on here
so
the point is that it's it may not be
down one percent it might be up one
percent the bottom line is is we have a
weak economy yes whether it's receding
slightly or expanding slightly it's weak
but recession has never
there's no data there's no graph you can
find that due to recession house prices
went down
not one time
2008 nope 2008 house prices went down
and then there was a recession that's
what caused this part of it right it
caused a recession but the recession
didn't cause the house prices to go down
yes what we had was a whole bunch of
broke people bought houses and they sold
those mortgages with hedge funds and in
securitized in mortgage-backed
securities mbss and boom they crashed
the economy because broke people quit
paying their bills because they were
making bad loans out there and that that
was the cause of 2008 and then that
caused a recession right recession
didn't cause it so no other time can you
find recession and then house prices go
down because you can't find another time
when house prices went down yeah except
during this time which is just
fascinating though because i think
people think all of this is so
correlated right that it all because it
is and it isn't because a recession one
of the biggest factors that usually it
causes right is the job market and
what's weird about this is that the job
reports just came out and
and it's looking good like you're like
oh my gosh so so it's just a very
interesting
bowl that we're dealing with
economically is what it feels like a lot
of negative news
and some of it is kind of propping each
other up yeah yeah and so like the job
thing is crazy because the labor market
has been disrupted and now that's
pushing back and holding the recession
back
and so but it's about you know if you
had enough people get laid off if you
had a deep hurricane recession and
enough people lost their jobs then you
could see demand for housing go down
right over a long long period of time
and if it actually fell below supply
long enough you would see house prices
or values come down but we've never
actually seen that happen yeah ever
which is why it's never happened once so
the recession obviously is a big topic
and then we also hear about mortgage
rates oh yeah because they've risen
about doubled yes and so i just checked
the rates right before we went live
freddie mac 30-year fixed rate mortgages
right now about five and a half percent
15-year fixed rate or about four and
three-quarters and so that feels high
to folks who have only been home
shopping when rates were two and three
percent but historically that's rates
that were about around the 2000s and
interest rates do not cause home prices
to go up or down there's just not a
direct relationship there as a matter of
fact i mean we go back to the dinosaur
ages why not you want to pick on me
again
i mean we'll go back there when the
dinosaurs roam the earth but i got my
real estate license as i said in 1978.
so i was selling real estate in 1978 the
rates went from uh nine and three
quarters to ten percent it was the first
time we saw interest rates go above 10
was in 1978 in modern history anyway for
homes
and they under the carter administration
they went on all the way up to 18
in 1981. and so i was selling houses as
a young guy at 18 interest rate the
interesting thing was we were selling
houses not many of them
the demand was really really low the
market just slowed way down a lot of the
sellers stepped back and sat on the
sidelines and just we're going to wait
the storm out because they weren't going
to try to sell a house to somebody when
they're 18 interest rate and they were
going to try to get some kind of lowball
offer a few sellers here or there in
those days were giving houses away
because it's the only way they could get
them to move but overall we have these
high interest rates and here is house
prices
the orange one house prices did not go
down during the most extreme crazy
interest rate increase in history they
didn't go down at all they steadily have
increased all the way up into the 90s
regardless of what the interest rates
were so i mean by the time you know we
came around to 1983-84
interest rates came down to 14 i sold 78
houses that year at 14
fixed rate now that's just wild y'all
that's crazy but all that was was the
demand was sitting back there from those
buyers that didn't buy at 18 and when it
came down just a little bit they
immediately like after covid came back
into the market and kept going bottom
line is though the supply demand curves
did not cross and so you continue to see
these house prices increase regardless
of interest rates regardless of interest
rates interest rates will not cause home
prices to go down there's no time in
history they have okay and so what's
interesting george i'm going to loop you
into my age group thanks i feel like
we're together in this because our home
buying right time was like here so this
is from a millennial generation this is
what we've known and i think what you're
talking about earlier the perspective
yeah right that like this is starting to
feel high and that's we're seeing the
market weaken
and soften a little bit because people
are like oh my gosh interest rates are
going up oh my gosh they're so high
they're so high because this is this is
what we've known
right through right right about there
uh and when you look there they came
below 10 the year i went on the radio
huh yeah in 1992 and they've been down
below 10 and and back there we were
saying we'll never see six percent again
and we were completely wrong it stayed
down below six percent forever it's been
down here so and you know they pushed it
down to try to revive the economy to
cause people to come out and buy
because super low rates after 2008 and
so that's where you see these lines
cross right here this is 2008's right in
there right and so but you got this
spike here and that's what's causing all
this emotion absolutely yeah so my thing
is you don't have this perspective
that's a trout in your face right 100 so
seeing the home prices and that they're
going to continue from what we're seeing
from the data of supply and demand
continue to keep going up not at this
rate not like that but we'll continue to
see it go up so even if you bought a
home if you had the ability and you said
hey all of our finances are in order
we're ready to buy a home and it's a
wise move
then
buying here is still okay even with the
high interest rate because you can even
refinance if it goes back down to like
the crazy well can you imagine just
bought a house at 10 today what that
house would be worth
you know and how many times you could
have refinanced it over the years from
sit down to six right and then down to
three and then down to two yeah and so
if if you have let's say you're buying
it a high interest rate we'll just
refinance later right if it goes back
down yeah because the only reason you
wouldn't buy now is you think there's
going to be a price correction
and i'm giving you all this data and all
these reasons to say i don't think
there's well and i think it's important
to say too that prices
could
because i mean like if you go on like
zillow correction well yes because when
you go on zillow or something you you
there are places that you're like oh wow
it's gone down the price has gone down
but the value of the home has not
appraisals because people are still
thinking oh i can i can
i can ask here when my when my house is
appraised here so this is what's correct
well that's the auction the auction
element is gone right and so if you were
asking a hundred thousand more than
appraisal and you've adjusted your price
down to appraisal and you call that
prices are going down well that's not an
indication price values are not what i
think that's what people see though
because when you go on these websites
that you don't use that to say the
economy's crashing or house prices
prices are going down you're making them
wrong assumptions because technically
though prices are going down because the
original price yes the original price
was not even at the value
it's like when beanie babies were real
hot i could sell my beanie baby for 500
the craze is over and now my beanie baby
though listed at 500 might go for 400
and people go oh my gosh there's a crash
it's not a crash the beanie baby was
never worth 500 dollars
but that's what's happening i'm getting
messages like that well george market in
my city my city's special because i'm
seeing price cuts everywhere which means
there's a crash in my city and i'm going
no people have just wanted to get in on
the top of the market and it's not the
top anymore and they're going to have to
come down so what happened was i was
playing with golf with some guys in my
neighborhood the other day and we've had
a huge in nashville we've had a huge
influx of californians
have come in here and when you sell a
house in california it's a big price and
then you come into a city like nashville
or a city in you know jacksonville or
something like that you can buy
twice as much house three times as much
house for what you sold your other house
for in california and so the
californians are just flush with cash
and then there's this bidding war and so
the house is actually appraised at 800
000 and they're paying a million yeah
yeah and these guys are playing golf
with goes he goes yeah i put my house on
the market and i decided to take it off
the market and i couldn't get that price
for it and i said well how much he said
i had it priced like you know 200 000
over market i was looking for one of
those california sucker fish
california we love you i feel like we're
picking on california that's what he was
looking for he was looking for a buyer
that was willing to pay more than value
okay those are starting to go away so
those prices are going away down to
actual value that is not an indication
the real estate market's correct right
absolutely indication that the crazy
white hot auction is over yes so let's
talk about though the specific regions
uh because we do hear that a lot into
the economy of a certain area of a city
because because again we're getting
these calls and these questions all the
time well y'all are saying this but in
my city we're seeing x y and z in my
city this this and this because there is
a level that yeah depending on where you
live
factors could be slightly different
depending on the situation of the city
and tonight again this is we're looking
at the at the macro level but there is a
micro
level of the real estate market that
we're seeing you can't use what happened
on your street or in your particular
economy to say the entire real estate
economy is overheated and is going to go
down in value but
if you look at a city that's prospering
like uh i don't know phoenix arizona
okay i was on a radio station in phoenix
today earlier today doing an interview
it's quite hot it's a strong economy
it's been a strong economy it's a very
diverse economy there's no macro or
micro problems with that economy
it's going to continue okay to boom okay
and continue to move i don't see any
issue with it at all but you've got
other cities where there's things going
on in that particular city that are
political they're about the crime or
they're about the economics in that city
and some of those things are going to
drive prices in that individual city
down for instance i don't see any
softness big time yet but i'm hearing
some stories anecdotally i don't have
any research on this but houston texas
is largely the economy is largely driven
by energy
and the spigot got cut off so those
people are it's a hurting
and so we may see some softness some
actual downturns in values the supply
demand curve could flip upside down in
houston but if just because you your
uncle in houston has that happen doesn't
mean that phoenix is crashing
and so you know politics and real estate
are local and so that's there and the
other thing we're seeing is in the past
two years we've had this mass
exodus of people across america it's
crazy i mean the this is affecting the
supply demand curve in the local markets
as well the supply of houses versus the
people buying so in california illinois
new york massachusetts uh alone okay
they've had almost 900 000 close to a
million people move out of just those
states in the last year now in the last
two years i'm sorry last two years okay
and they largely have moved into north
carolina south carolina florida
tennessee texas and arizona who have
picked up
700 000 of those 900 000 alone this is
the largest migration
in the united states in modern times the
largest turning over of the tables of
people in mass moving out and they're
moving out of the political environment
they're moving out of the tax
environment they're moving out of the
violence they're moving out of whatever
it is they're running from in these
states that isn't working and they're
running too
low tax states and they're running to
taxes states that didn't have archaic
over the top taking away of your
freedoms during covid uh and so people
noticed that they said i'm not living
here anymore and they moved this is the
largest migration in recent history in
modern times we haven't seen anything
like this since the dust bowl
and so these numbers are are
unprecedented and that's going to affect
positively these economies and
negatively the other economies in terms
of house prices potentially now we've
not seen any california house prices go
down yet and i don't know what they're
doing in these other states off the top
of my head but again you've got this
this exodus
it's the first time
in in recorded history that california
got smaller
in population it's the first time it's
happened so that this is very real and
it affects economics well what's
interesting too is a lot of these states
like you think about a chicago you think
about a new york california even
massachusetts
it's expensive to live there so like you
were saying earlier
they're taking this money of a house
that they sold there and they're coming
to a texas they're coming to a tennessee
where they can buy such a bigger
property and the interesting thing is
that there seems to be a waning in this
it's just about over yeah and so again
we're gonna see you know my buddy trying
to sell a house to a california sucker
fish he couldn't find one
but uh but you know half the houses sold
around there were the california people
you know we've got a whole bunch of new
folks new neighbors and friends from
california
we welcome you no we do you know our
neighborhood i know we're getting
specific about us but my neighborhood
it's there's a lot of new builds
happening in one section of it so people
are moving in and anytime we meet
someone now we're like hey welcome you
know where are you from and they're like
sorry california people i don't i don't
know why we're picking on you but
they're like we're from california we're
sorry and i was like no you're fine no
i'm glad you're here it's great but
again what you what but they always say
oh my gosh the home that we got here is
amazing compared to the home we had
there so again it's all influx and it
depends on your city your situation uh
of what's going on but i think it's i
think that fascinating it's fascinating
okay now another you touched on this
earlier but it's important to talk about
though is foreclosures there's another
trigger word that you hear in the
financial space and that is a scary word
foreclosure um so talk through that and
what we're going to be seeing here in
the next few months
well the first thing you need to
remember is you're probably going to see
an increase in foreclosures because
there's not been any i just told you
that uh one of my good friends is a
foreclosure attorney another one is a
bankruptcy trustee
which are tied together bankruptcies and
foreclosures right and uh he said the
other day he normally from this large
bank that he works with he would do
about in a normal world in the old days
he would do about 50 foreclosures a
month for that bank
and and he hasn't done hardly any in two
years
and they called him the other day and
were asking him about his staffing
are you ready to take on a bunch of
extra volume and he said what do you
mean he goes well we're getting ready to
start sending you about 250 foreclosures
about five times normal per
month
so all that is is they got this big
stack from two years on their desk and
they got to start getting them executed
they're gonna start getting them out
there and so that's gonna that's gonna
push all that out there so some people
are gonna hear foreclosures are on the
rise
going to go down it's going to go bust
and no all it is is they're trying to
catch up for the last two years when
they done it that's all it is well
that's like the scare tactic the the
news headline yeah right that you're
going to probably see here to that point
people think of short sales and
foreclosures but they're very different
a short sale is when you're upside down
in the home there's a lot of people who
aren't upside down because of the home
appreciation there's lots of equity but
they can't afford the mortgage payment
which is what's causing the foreclosure
so it's an important note to make well
and i hear people say well i'm going to
wait
until there's a lot of foreclosures to
get a good deal though and then
that's not always the case either close
to value for it and now they're getting
foreclosed on and if they finance close
to value there's not going to be a deal
foreclosure doesn't always mean deal yes
i used to buy foreclosures for a living
and and you know just because it says
foreclosure doesn't mean it's a good buy
and it doesn't mean it's a good house
either
so you've got you know it could be it's
okay to look at and to look for deals i
i love a good deal too i want everybody
to get a good deal
but you know don't be fooled that the
foreclosures coming into the market are
an indicator of the market crashing it's
going to happen and it's not going to
crash okay because it's just a backlog
it's about it's the dam is breaking
they're going to come downstream and
we're going to see them start hitting
the market that's all that is if you're
ready to buy a house don't wait around
for a foreclosure right so we've talked
a lot about graphs in charge and i was
kind of jealous because y'all are up
there being the weatherman and weather
woman so i have my own if it's okay
i made a charge
i didn't the team made it for me but
here's what's interesting uh we just
talked about a lot of things that you
can't control let's go down the list
real quick here we've got interest rates
we've got the economy we have lumber
prices we have the fed
inflation
recessions
investors
gas prices and lastly california oh my
gosh y'all stop picking a lot
a lot of things out of control about
california i'm just going to leave it
there
now let's look at the very long list of
things you can control
you
that's it
i wish there was more but at the end of
the day i want to refocus it back to
what we can do about all of this crazy
real estate market and how you can
become a homeowner the smart way so
let's talk about that yeah so buying and
selling some of you watching may be
thinking okay when do i get in is it a
good time to buy to buy a home or to
sell my home and you know it is right
now what we're seeing
is that home values are not going to go
down so here's the thing home prices we
think based on the data we showed you
and you get to decide we've told you
that several times you just be mad at
somebody if you're gonna be mad at
somebody but you decide okay home prices
we think are gonna values are gonna
start to go up in 23 in a four to five
percent range for the next five years so
that means five years from now house
prices are gonna be more than they are
now four years are gonna be more than
they are now three years are gonna be so
if you're gonna buy and you're in shape
to buy you're ready to buy and you're
waiting on prices to come down
i wouldn't do that i would go buy right
now
and if you're gonna sell it's a great
time to sell there's a shortage of
houses yeah now do expect a more
normalized process don't expect an
auction
uh the california sucker fish is not
gonna be in the market okay so i think i
think you're gonna have a normal process
you're gonna put your house on the
market for what it's worth and you're
gonna negotiate some and it's gonna take
a little time if it if it stays on the
market more than one weekend don't be
shocked it's probably a 75 to 120 day
period of time to sell a house in a lot
of markets there's still some white hot
markets you may have those auctions
still happening yeah or you put the
house on the market in multiple offers
over the weekend but we're probably
about past that i hope we are
so it is a great time to buy oddly and a
great time to sell oddly yeah assuming
you're in a position to do either one
right so you know that you're in a good
place to buy a home we always teach once
you're out of debt and you have a fully
funded emergency fund and that is
because we want your home to be a
blessing not a curse and so it's hard if
you're living paycheck to paycheck have
tons of payments a lot of debt no
savings and you go and buy a home that
home costs a lot even after you buy it
everything all the maintenance around it
all of it home ownership is expensive so
we want you guys to be in a great place
financially before you go and do that
and we would love for you to have a
strong down payment ideally 20 which i
know is a lot but in that case you can
avoid pmi private mortgage insurance but
it's okay if you're a first time home
buyer for 5 10
and then we teach a 15-year fixed rate
mortgage that fixed rate is really
really important
and again 15 years because we want you
to pay off your mortgage as quickly as
possible and then making sure your
payment is no more than 25 of your
take-home pay which again i know is
conservative and that formula
freaks everyone out and they get very
angry with us because of this formula
and we do take the more conservative
approach when it comes to home buying
because again we want your home not to
completely own you we want you to be
able to buy a car and go on vacation
there's more to life of that yes and
when
when your mortgage payment has taken up
so much of your budget and you know if
it's 50 of your budget then you only
have 18 left of your income to invest to
give to spend to save all of that and so
again not letting your house take over
your financial plan completely because
we want you to enjoy life too yes
absolutely and we found in our
millionaire study that the millionaires
you know we look back at the data and it
goes oh they all paid off their homes
early they didn't last
before we run out of time we've got some
don'ts yes so rachel covered the dues
when it comes to buying a house here's
some don'ts don't buy too much house use
wisdom and facts not your feelings to
make this decision it might mean scaling
back on the house going to a different
area doing a condo or townhome i'm okay
with that uh don't do a dumb mortgage
type rachel talked about the 15-year
fixed that's the only one you should be
doing there's a lot of variable rate
arms fha va tons of fees in there don't
do these types of mortgages
again don't skip inspection and
appraisals luckily that's more
normalized now to do those don't skip
that because you've got a bad foundation
or a bad roof that's going to cost you
big time and lastly don't sit on the
sidelines if you are ready to buy
financially now is the time so when
you're selling a house again right now
is a great time to sell
because there's a shortage and georgia
we got some dues if you're going to sell
a house absolutely so rachel talked
about getting a good agent on the buy
side you need a great agent on the sell
side as well a good agent isn't going to
allow you to go under underpriced the
market they're going to help you
navigate all this do the comps stage the
house get good photos get the inspection
get the appraisal and help you adjust
your expectations
yeah and don't have a relative sell your
house or your friend who just got his
license or your mother's friend on
facebook or just got her license oh my
goodness gracious this is your largest
asset you need a professional real
estate agent that does a lot of
transactions and doesn't hasn't done two
uncle larry doesn't need to sell your
house uncle larry doesn't need to help
you find a house i'm sorry larry we're
not here to help you okay from
california yeah i don't know where
larry's from but poor larry but yeah
it's just a problem and so you really
need a professional that has done a lot
of transactions the kind of economy
we're in it's not amateur hour yeah
we've got a team of real estate pros
that are in your area our team vets them
here at ramsey solutions they're ramsey
trusted and you can find those on our
website if you're looking for a good one
and george you ran into this the other
day with the agent oh my goodness yeah
this home got listed in our neighborhood
and i'm looking at it going what are
these janky photos they're trying to
sell for eight hundred thousand looks
like i was taking on a nikon coolpix i
go to the description it says agent
related to the seller and i went and it
shows uncle larry
with the picture so you gotta work with
a pro it can severely affect how much
you get for your house so if you're a
seller don't get desperate understand
that you're it's going to take a little
time
and set your house at the proper price
and go through the normal marketing
procedure with a good agent
so you guys i hope tonight i hope this
has helped i hope it's helped you you
know come with facts with data making
your decisions your best financial
decisions are going to be with a lot of
peace and a lot of facts versus just
feelings and emotions so again my hope
for tonight is that we've inserted some
hope uh that you've been able to see
okay i can do this or my life my home
buying process it may look a little bit
different
but it is still possible over a course
of time and that again the world is not
ending we have a lot of confidence in
that and that it's gonna be okay yeah
and for people who are wondering okay
you said there's one thing i can control
and that's me and that starts with doing
a budget paying attention to what you're
doing with the income that you have
coming in it might mean getting more
income it might mean shaving some things
off but you got to do a budget to even
figure that out we've got a great app
called every dollar you can start your
budget for free and do that to figure
out how much house can i afford what are
some things we can shave off in order to
afford that house one day
the bottom line is this if you pan back
from the fish
he's just a fish he's not a monster
and life is not a snapshot
it is a film strip
and so what we're seeing is one or two
frames
in the film strip and don't let the
scariness of that moment in the film
cause you to do something desperate
or silly or greedy
or out of control
what rachel said earlier is right
godliness with contentment is great gain
and what we're trying to do tonight is
to help you with your vision where there
is no vision
the people perish and so if you can pan
back and say gosh look back there at
1982 when rates were 18. look at this
spike here look at how there's no
correlation in these numbers look at
these supply numbers and these demand
numbers if that can if that data
along with just a spirit of peace
can help you guys then we've done what
we wanted to do tonight
thank you so much for being with us
[Music]
[Music]
[Applause]
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