Buying In This Crazy Housing Market? (Watch This)
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[Music] what's up guys welcome back to another episode of real estate the Ramsey Way the housing market has uh seen some pretty weird times lately and while things aren't as crazy as they were just a couple of years ago it's still not a Walkin the park out there interest rates are up prices while steady are also high and there just aren't enough homes for sale bottom line is you really need to be informed on what's happening in the market and how it affects you so stick around and listen to my conversations with folks struggling with things like affordability and refinancing in this unusual Market Caitlyn joins us up next she's in Arizona Caitlyn welcome to the show hello how are you good how can we help today yeah I just had a quick question in regards to overcoming a negative mindset so I'm 29 I live out in Arizona I'm a single mom and as you know our housing market has been gelle intense to say at least um and I'm paying about 60% of my take-home paying rent I yeah I can't buy in this market I don't make enough I pulled down to about 40 last year um and I just feel like I'm spinning my wheels and that Treading Water feeling is really starting to get to me so I was hoping you could provide some insight on that if possible yeah I mean I I'll be honest Kaitlin I'm like I I would feel that too if if more than half the paycheck is going to housing that's a that's a big chunk so tell me uh a little bit more about kind of the situation because you are obviously in an a more expensive I don't know if it's an area or apartment or what it is is there other options for you to to change locations just to at least catch your breath and bring it down to at least you know we recommend 25 30% but even if it went down to 35% that would change your world right yeah um I live in a two-bedroom apartment right now um and I pay about 2,000 a month I had looked at going down to a one-bedroom the only trouble with that it was it would only Save Me Maybe 300 bucks a month but I actually work from home um so I need and I have my son here with me too so I don't know how we would make that work yeah no to B yeah yeah yeah I oh sorry I was going to just say have you have you driven you know 20 miles either direction of where you currently are just to see other prices uh right now I'm already kind of on the edge of um what I would consider to be a safe area um so I can look maybe a little bit deeper into Phoenix but I just want to make sure we're still safe and everything's good like that so um I I could I mean I I work remotely so I could probably Buy in other states and other markets but my son's father's here and I really just don't want to leave um my home state so for sure for sure understandable and how much do you make a year I pulled down about 40 uh last year okay what are you doing for work uh I work at a call center for an insurance company okay so there's there's only two ways we can go about this and we can we can spend less and we can make more so do you have any payments in your life that we can get rid of do you have any debt I don't have any debt um I do have that going for me I don't have any debt and I do um anticipate my income going up um actually I had a conversation yesterday with my supervisor that made me feel like maybe something close is on the horizon um for getting my my pay up um I think it's just this waiting period between uh making more money and trying to find something cheaper to to rent it's just it's mentally been draining me I think but um well especially as a single mom I mean you're you got your how old your how old's your son he just turned six his name is Mason I think he might be listening that's awesome hi that's awesome oh well you're doing an incredible job Caitlyn I mean you know the the hard thing is it's nothing that you're doing wrong it's just that the numbers are kind of stacked against you and so like George said you know an option of bringing in more I mean right now the job market is just insane and so I would push and look to see if you can even I mean 40 Grand you know you're you're you're doing fine but man people are paying just insane amounts of money right now for jobs and and since your is not like very specifically specialized you know what I mean like I feel like you could um do all sorts of things uh even with the experience that you've had in this insurance role um so you know I don't know if it's looking for something else or a different apartment but one of those two things really probably it needs to shift for your own sanity Caitlin you know what I mean like temporarily yeah to have the numbers work for you um is going to be a big deal do you have an emergency fund Caitlyn I do yeah okay three to six months in there uh I still have my baby one I have a a $11,000 emergency fund and then I have about 4,000 000 in my my actual uh emergency fund so I still need to build that up okay I think building that up may help with a little bit of that Financial Peace and anxiety about what if something happens if one check doesn't come in what are we going to do and if you get that in place then I'm going to start saving up for a house slowly and I know it's hard because there's not a lot of margin right now but that feels like it's the long-term goal and I'm hoping that all this craziness is not forever and so a year from now hopefully we're looking at a very different picture and you are work from home and so that does open you up but I know you've got to will stay close to home because of the uh situation with your son and so there's not a ton of options here other than let's look at the budget let's do a budget audit where can we save every single insurance premium every single expense I'm going through that with a fine Toth comb going how can I shave off 10 bucks 20 bucks 30 bucks yeah absolutely and then the income I mean the yeah income and apartment um situations would change too you know yeah but you're doing a great job kayin you really are you're doing a great job for for where you're at um incredible no debt you have savings I mean all of it you really are but that 60% it oh that that hurts me it's a tough situation and this inflation stuff I mean it's hitting people all over their pocketbooks from rent to gas to food and so there's just batting down the hatches and let's get to work let's get the second job if we have to Let's trim the subscriptions that we're not using right now and all the little luxuries that we once enjoyed might need to go away temporarily yeah for a season because they're saying you know I I read a report and they think in the next 18 months with just even the um the supply chain all of that but I'm like I mean the hard thing is after two years I've just learned who knows like who knows that's right I remember April of 2020 doing Instagram lives I did one like every other day just to answer questions and I I said I guys I think by August all this this will all be over it's all going to be over here we are so I'm not predicting anything but uh I think you just have to prepare with where we're at the reality of what's going on and what and what sucks is that that means cutting back some because the numbers everything is going up yeah and if you're single you don't have kids there's more options because we can go all right let's get you a roommate now it's more difficult when you have a family when you've got kids involved it's not that simple right but if you work from home that can open you up to a lot of options too you may not want to live on the outskirts of town but temporarily for a year if we have to sign that lease to go all right we can now breathe and still hit our other financial goals I'm okay with that and it's amazing what peace of mind even does right like we can talk about the numbers and the percentages and all of that all day long but there is just something to be said about when you do have margin it gives you a level of Peace like a level of like you can take a breath and sometimes it's worth s the things you never thought you would do I never would live this far from wherever right people make these claims and then when Life Starts hitting you and you think okay is it now I would rather live far farther away yeah and actually have peace of mind and margin and enjoy life a little bit more than everything just getting sucked out of the paycheck so much out of our control too and so I always like to go what is in my control so in Caitlyn's situation if I'm anyone listening right now I'm going all right let me make a list of ways I can make more and ways I can spend less I'm going to make a list of five things and I'm GNA go okay which one can I go do this week this month and just start trying things what can I sell on Facebook Marketplace that's been sitting in the closet for a while what is that second job I can take for a few months to just supplement my income temporarily yeah and so if you start doing all that and that's why I love the budget audit it's kind of a real nerdy thing but you go man I'm way overpaying for auto insurance let me connect with Xander and oh my gosh I just saved 100 bucks right there and you start doing that in all areas we've talked about this on your show Rachel with cable and internet and yeah how can we start shaving all this down our phone bills to where now we have 200 bucks a month yes in margin we can breathe a little bit and it's not easy I'm not trying to make it sound like it's just but it's the stuff that's the kind of the auto the autodraft the auto pay where you're just like oh and then you look up two years you're like wow I've never pushed on that or seen that you know what I mean and and doing that it does it gives you gives you some more margin yeah you got to advocate for yourself and get yourself in a better financial position and that's why our plan works in good times and bad I mean imagine if she had all these debt payments looming in her life y great work Caitlyn you done a great job good job Tanner's with us in Washington DC hi Tanner how are you I'm good how are you better than I deserve what's up so my question is I'm curious about the flexib of spending more than 30% of your takh home pay on rent found that pretty difficult to do especially in like an urban area like DC I live in downtown um I make around 990,000 a year post grad 23y old um I got about 20,000 in cash and 7,000 uh in an investment account and M myly debt is around seven 7 and a half th000 in student loans and I spend about $2,000 a month in rent which is my biggest expense expense by far but I still find myself able to save um and spend less on other things I'm just curious your take on on that approach okay well we tell folks to put 25% of their take home pay aside for housing and uh no math Works in every city and in every state you don't get a pass on math because you're in Washington DC even though Congress thinks you do I was getting ready to say a lot of people think they do yeah a lot of people in DC think you do but you don't and the the purpose behind it is not that 25% is Magic Tanner uh the purpose behind it is don't be house poor if you find yourself able to save and uh able to invest because you keep all other parts of your lifestyle so low then then you're okay but if you're you but what happens to most people is when they've got a high cost of housing in their budget it squeezes their budget and there's not room to uh save up to buy the next car so the next car becomes debt and there's not room to save up for for Christmas and Christmas becomes debt and there's not room to save up for a couch and the couch becomes debt and because it's all going out in house payment and so in effect what you did is you uh you you you didn't you know by by squeezing yourself you did that now you're telling me you've made room in your budget and you're doing okay then you know if whatever you want to do brother but here's the thing whatever you spend on rent is gone mhm I mean you're just setting fire to $100 bills in the middle of the floor and so the more $100 bills you burn in the middle of the floor the fewer M less money you got man I mean it's a pretty simple equation yeah yeah definitely definitely reduces the ability to buy down the road for sure yeah yeah I mean because you're giving it to them in rent and so I don't know how you fix that exactly necessarily in your situation maybe you're commute is longer maybe there's a roommate involved or uh or maybe you just say I'm going to it's going to cost cost me this and it's my choice and I'm an adult well yeah you're allowed to do all that but our reason to give you giving you the 25% guideline it's not a rule it's a guideline is so that you don't become house poor because if you're for instance going to get a mortgage folks in America um the stupid mortgage company will approve you for almost double that I mean they'll approve you close to 50% of your take home pay 36% of your uh ratio you know and so and that's not based on take home pay the 36 that you can get a house payment up close to half of your dadgum take home pay and there's just no way that budget Works people and well I'm in California well California they got to do math too even though your Governor doesn't think so you got to do math you know it's not it's not an option math is math and it's not it's not a a a moral construct it's a it's a math thing well to win Tanner in professional World Financial World you've got to sacrifice everybody who wins has to sacrifice something and what we've done here with this 25% you are now having to choose do you want to sacrifice money as Dave said by by burning those extra100 between the 5% that we're talking about or do you want to sacrifice a little bit of your time now you're live in downtown DC that's premium and I get it you may work on the hill who knows what you do but you're there for a reason but if you move out into the suburbs of Northern Virginia I know it well yes it's a it's a headache uh but we'd rather you sacrifice the right thing and that's why we put this I want people to understand what we're teaching here it's not to be hard and fast on a rule it's to help you learn what you need to sacrifice and in my situation if I were in your situation Tanner I would be sacrificing my time not my money yeah 23 years old yeah yeah you know I will tell you this Ken I did it worse than he's doing it sure worse yeah he's in good [ __ ] my wife and I get out of college and here's how stupid we were we go and rent a we we have two dogs we're just out of College we got two little jobs we go and rent a three-bedroom townhouse sure luxury right thing sure that's like five times what we needed MH because we thought it was cool do you remember what were in the extra rooms uh nothing sure cuz by the time we finished paying the freaking rent we had no money yeah yeah so what we ended up doing was moving into a little one-bedroom uh apartment and a questionable uh I don't know what those ladies down the hall were doing in a questionable situation and um you were hoping you weren't on a Vice episode man I'm telling you and uh we lived there for a year but it was one3 the rent that we were paying before onethird and so that'd be like you you had an $1,800 rent and we moved down to a $600 rent right you know kind of thing today in today's dollars it was a lot less than that and back when the dinosaurs roam the Earth but yeah but oh my gosh wow I did the exact same crap no I get it but I wanted something nice and I had a job and I'd gotten out of college and I'm I deserved it a lot of 23 year olds that are in a very similar situation to Tanner now just think about this if he gets a roommate and now he's saving let's just call it $1,000 a month okay splitting the rent he's paying off that student loan debt of $77,000 really really fast and now he's just stacking money that's cash stacking cash man so much the housing market isn't known for being easy to predict that's why it pays to have a pro in your corner who's earned the ramsy trusted Shield Ramsey trusted real estate agents are the top experts in their areas plus they have experiened navigating a changing market so don't step into the ring alone find a real estate agent you can trust at ramseys solutions.com SL agent or click in the show notes Debbie is with us in Detroit hi Debbie welcome to the ramsy show hi thanks for taking my call sure what's up um my husband and I made a huge mistake we moved into a house about uh two months ago and with the housing market being so crazy and lots of competition for homes we made a mistake of buying a house for more than we wanted to spend um we paid over list and appraisal and we're now in a house that um we just feel like we can't afford the mortgage payment um it also has a pool that is much more of an expense than we thought it would be the house um needs a lot of repairs and some things have come up in the last couple of months that we didn't realize were going to need to be repaired right away um so my question is should we plan on selling it or stay for at least two years um and then not have to worry about capital gains but if we sell it now um we would probably walk away with you know losing about 40 Grand there is no capital gain when you lose money right but on the odd chance if we if you broke even if you break even there's no capital gain capital gain would only occur if you made a profit right so it doesn't sound like that's a problem yeah but if if we sold it for what we bought it if we just broke even we'd probably lose about 40 Grand with closing costs and everything so what's your house payment um well that's the other thing too it's more than what we thought it would be with um the property taxes are going to be more than we had planned for so with property taxes and insurance it's about $2,300 a month and what's your monthly take-home pay in your household about 9,000 okay all right well you're slightly above what we would tell you but not a huge amount um it doesn't sound like this your your house payment's not 40% of your take-home pay um this sounds more emotional than mathematical okay just we feel like we've been bleeding money ever since we moved into the house because of the pool and the repairs that have been needed and what have you spent on repairs I'm sorry what have you spent on repairs um well with the pool it's been uh over $1,000 um with the repair we just had a garage door repaired that was over 700 we need what' you pay for the house um we paid 410 for it and you had $1,500 worth of repairs and you're panicking yeah well you make 100 you make $140,000 a year yeah well yeah yeah this is emotional it doesn't sound like you're bleeding out it feels like you got a little scrape on the knee but it's just a lot it sounds like it's more stress of just we're having to I think you were super impulsive and you did something that you wish you hadn't done and that's what's killing you the Math's not killing you okay I mean we should it's not ideal uh but um I I probably would just breathe a little bit here um okay you know I I okay here here's the thing the house payments not out of control the repairs are not $28,000 in one month they were 1,400 in one month and you make 140 there's nothing here that's causing red Sirens to go off and fireworks and panic in the numbers okay now I understand you have a deep sense of regret because you feel like you impulsed and overpaid uh but so I don't want to trade $1,400 repair and a house payment that's slightly over the margins we teach which are conservative for a $440,000 loss right well the other thing that I'm worried about too is um we moved with our jobs because now we can do our jobs from anywhere after coid and there is a chance that my salary could be decreased based on where we're living now well if that happens and you can't afford the house we can talk about selling it then but we don't sell a house on what might happen the house might get hit by a tornado too yeah but we're not going to sell it because it might right Debbie do you guys have any other debt other than this mortgage uh we do have a car payment um we owe about 12 Grand on a car we only have one car and then we um just from the move we've got about 6,000 on credit cards so it sounds like there's some other pieces to this puzzle that are causing this stress do you have an emergency fund um we have about 25,000 in savings okay right now I would write a check and pay off the credit card and cut it up and pay off the car a day right okay and you guys need to get on a budget you are not in control with your spending today's question comes from Jimmy in Kentucky my wife and I are on baby step three and would love to buy a home but we're nowhere near able to put down money on a house we are concerned that the market will continue to increase before we can get a down payment saved up can we use my VA loan to take advantage of the 0% payment down payment to get into a house sooner and refinance in three to five years Jimmy I'm going to say no I mean VA loans they're just it's just not it's not a great option I mean there's so much with the fees everything that that that is in that uh it makes it a difficult it's a difficult mortgage and between FHA VA and conventional it's the most expensive unless you are disabled if you're a fully disabled veteran then they wave a lot of the fees and stuff but it is not it's not a good deal for you and basically what you're doing is you're trying to find a way to game the system you know you want to scam the system and the system isn't broke and it means delayed pleasure and yes house prices are going to continue to go up they're not going to continue to go up like they have been the market has slowed down substantially that is not going to price you out of the market Jimmy what will price you out of the market is doing it dumb and moving into something when you're broke and you have no down payment and you're not ready to buy you're going to get in a problem you're you know that the the you know you're going to create friction here in your life it's not going to be fun and you're going to turn we want you to have a house we don't want the house to have you yeah and that's what ends up happening so much we talked about it on the show yesterday with George that you know your home it's such an emotional thing right it's like where your family is it's where you sleep at night it's where you do your meals I mean like it is it's such an emotional part of your life and so many people rush into that so it's it's an emotional part of your life and it's the most expensive part of your life it's usually the largest purchase you ever make and so because of that it's like you people make not wise decisions when it comes to their money with their houses because they just let their emotions get ahead of them whether it's fear whether it's long for something plus there's all these stupid people that are around you telling you all the time to buy something you got to buy house you got to buy house you got to buy house you got to buy house you can't be a renter you got to buy house every oh God oh God oh God you're going to get priced out okay okay and you know what is your Beautician and Economist the lady doing your NE Nails is not an economist oh my God you know so stop listening to these broke people with their craziness uh because I've heard that for 30 years yeah for 30 years I've heard I'm going to get priced out of the market and I can tell you real estate's considerably more expensive than when I started the show 30 years ago but but you know and it'll be more expensive 30 years from now when you're still doing the show so but the uh uh God willing the Greek don't rush but the you oh my gosh the uh uh that's but there's a lot of outside pressure family members and everybody else oh you had bought a house yet you've been married 26 seconds and you had bought a house oh my God and there's all this craziness out there well that and then on top of all the emotion of just the recent yeah real EST I mean all of it right so it's it's it's I don't know there's a lot going on 2020 was one of the highest increases in house prices in history yeah of all time I mean in in modern history and 29% it went up oh my that's unbelievable unprecedented as they say in the coid language but yeah oh my gosh yeah that's just crazy and so uh it scares a cred out of you but it's not it's not that's not going to be what happens going forward it's also not going to crash for those of you waiting on the prices to go down well let me but let's talk about this because I've been there's there's been so much I feel like even in the recent probably like week or two about the real estate market because there's I read an article this morning the Seven Cities where it continues to increase substantially right so there was so I read that and then There Are Places though that they're seeing you're seeing prices go down go down and so the important thing there is to remember that that still buyers or I'm sorry sellers some of them are still in the mindset of oh I can make yeah so much they're still looking for a sucker coming from another city so when you're seeing those prices I just want to know your thoughts on it is it going back to just true home value of what the what the house is really worth versus the inflated prices yeah and so when when do you know what your house is valued at like a true value after all the craziness of it going up so fast is it that you can you still run comps like do you know what I mean because going up so fast is a reality okay so the definition of market value for Real Estate when I was in appraisal class y a thousand years ago is still in college is still the definition and every real estate test you ever take to get your real estate license is when a willing buyer meets a willing seller and neither are under duress okay Webster I'm going to call youster well I mean so here's the deal so you have a buyer and a seller and neither one of them are freaking out okay the seller is not motivated by a divorce or a bankruptcy or something else okay okay the buyer is not over motivated because the last three houses they put offers in they didn't get and so the marketplace is so white hot that the buyer is under duress and so some of these buyers were paying above market value but their purchase does not enter into an appraisal that that property is not an actual indicator of value okay because the one of the parties was under duress yes you can't use a okay a foreclosure on your street does not affect the value of your house because one of the parties was under duress okay so that's not a value that's a price how are you so how people out there that are wanting to buy or like how do you run comps now because I'm like usually you just run comps if you run you run comps and if one of them sticks up and shows they all are going to stick up right maybe maybe I mean if you if everybody was a white hot buyer in the whole area then the value probably has gone up yeah because the marketplace was iness in that sense but if you got some one-offs like you know we we talked about during the thing I live in a neighborhood where uh like like almost all the houses that sold in it's a nice neighborhood uh sold recently were California people moving in with California equity and the Tennessee people are sitting there going I got I got a sucker on the hook here yeah they're going to way overpay because they can't get a house there's a shortage and so they're going to they're over paying substantially overvalue and and so enough of that happens then other people get greedy and they're like I didn't really want to sell my house but if I could sell it for that I'd sell it what the heck and and one of the guys I was playing golf with we talked about that during the streaming thing that we doing he goes I put mine on the market I put an extra 200,000 bucks on it looking for one of those California sucker fish I'm GNA hook me one you know and it didn't sell yeah and he said I haven't been able to hook one so the market has calmed down the market has calmed down and the migration from California or New York or wherever into these other uh markets you know Southeastern markets primarily is slowed down y but we've had a million plus people displaced from just California and New York yeah just those two states moved out into other markets and that it adversely affect what is a real value but real value should be based on a calm reasonable wise transaction by both parties yes and even that goes up 3 to 5% a year remember folks you never want to let the housing market control your housing decisions only your personal situation and finances should do that if you're prepared to buy or sell a home then it's a good time to do it even if the market is changing if you're not prepared then it's not a good time even if the market looks favorable and if that's the case it'll be worth the wait to get in a better financial position to do things the right way Trust me thanks for listening make sure to share this with the people in your life that are getting hung up on what's happening in the market and tune in to the next episode where we really get tactical about the steps it takes to purchase your next home
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