Like many people his age, Ethan from South Carolina is waiting for the perfect moment to hop onto the property ladder.
In an email to The Ramsey Show, the 28-year-old said he and his wife earn more than $200,000 a year and have roughly $180,000 in savings and investments. They’re just waiting for home prices to slide lower before snapping up their dream home.
But according to finance personality Dave Ramsey, that’s a big mistake.
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“Interest rates are going to do what they’re going to do,” he told Ethan during a recent episode. “House prices are not coming down … there’s no fix on the horizon for that.”
Here’s why the veteran property investor is so confident about the resilience of the property market in 2025 and beyond.
‘Seventh-grade economics’
In theory, home prices are correlated to interest rates. When the cost of borrowing money for a mortgage rises, housing affordability craters, dragging demand lower.
However, Ramsey highlights the fact that interest rates have been elevated for a while but that so far, the impact on housing has been minimal.
As of late April, the average 30-year mortgage rate is 6.81%, according to the Federal Reserve — significantly higher than the 3% rate during much of 2021.
However, the median sales price of a U.S. home has declined a mere 5.8% from its peak at the end of 2022, according to the Fed.
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Put simply, home prices have softened, but not nearly as much as expected. To understand why, Ramsey points to another factor: supply.
“There’s a serious shortage of housing,” he says, which is effectively putting a floor on the price of a home.
According to him, this supply-demand imbalance is “seventh-grade economics.”
The formation of new households has exceeded the rate of home-building for an extended period. That, according to calculations by the Brooking Institute, has created a shortage of approximately 4.9 million housing units as of 2023.
With that in mind, Ramsey and his co-host Jade Warshaw encourage Ethan to pull the trigger right away.
“I would say the right time to buy a house is when you can afford it,” Warshaw says.
Ramsey, meanwhile, believes Ethan could miss out on home price appreciation in the years ahead if he waits too long.
“The next round of real estate prospering these houses are going to shoot up again,” he says.
However, this advice overlooks another important characteristic of the housing market — that housing is local.
Housing is local
The national housing market is highly fragmented and influenced by several local factors. The market for condominiums in New York, for example, is strikingly different from the market for cottages in rural Nebraska.
Over the past year, San Francisco, Austin, and Miami have seen home prices decline between 7.7% to 10.9%, according to Realtor.com.
Factors such as over-construction in Texas, insurance costs in Florida and migration out of California could be some of the reasons driving these changes.
National statistics do not necessarily reflect these granular details for each market.
With that in mind, potential homebuyers should speak to local property experts and experienced investors to understand their local market before making what could potentially be one of the largest purchases of their life.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
