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As of September 2023, Utahs Housing affordability is sitting at the worst levels on record while home prices are continuing to climb and mortgage rates are hitting 22-year highs. And at the same time, Dave Ramsey is saying right now is the best time to buy a house. Is this guy absolutely crazy? Or is there a chance that the advice he's giving is actually correct? Well, that's exactly what we're going to dive into. We're going to talk about the idea of buying right now with Utah’s housing affordability at all time lows, mortgage rates and home prices climbing or sitting on the sidelines and waiting for something to change.

Dave Ramsey recently came out on record saying that right now is the single best time to buy a house. And the reason he is seeing that is because interest rates are up and the housing market has more or less slowed, especially year over year. Now with that said, he does mention the shortage of housing and how it can actually be tough out there to get a home under contract.

But he goes on to say, "...if you can find one, regardless of what the interest rate is, you should actually buy it." Now with that said, he does have some stipulations in place. He believes that you should be completely out of debt before buying any home on top of having your emergency fund in place. Now, we're going to talk about those items here in just a minute, but I want to keep talking about the idea of buying right now with interest rates high. Because Dave believes that high interest rates shouldn't necessarily stop a first time home buyer from buying a home. And that's because he says, "If later interest rates come down, you're not stuck."

He says, "Just refinance, dump the old mortgage that you had at 6% or 7%." And essentially refinance into a new loan. Now with that said, I agree with Dave to some extent. I believe that interest rates shouldn't necessarily keep you from buying. Now, I know there's a lot of people out there at the moment looking at high interest rates and comparing it to where they were a couple of years ago, with interest rates in the high twos and low threes. Because quite frankly, you can have payment shock when comparing it to back then. As a potential homeowner who has considered buying another property, I can speak from experience as someone who has an interest rate at 2.99% currently.

And then looking at where interest rates are today at 6% and 7%, and thinking not only is the home that I'm buying more expensive, but my payment is going to be considerably more because interest rates have more than doubled. But the reason Dave believes that you shouldn't worry about the interest rate actually makes a lot of sense. He believes that if you buy now, you have today's interest rate locked in. If interest rates go down, then essentially you should be able to refinance and take advantage of that lower rate. But on the flip side, if interest rates go higher, you've essentially done yourself a favor by locking in today's rate and not having to worry about higher rates in the future.

Now, I know what a lot of you are thinking. All the keyboard warriors out there are at the moment are typing, "Well, what happens when your property value crashes and you end up owing way more on the home than it's worth and you're not in a position to refinance?" That could absolutely happen, and that's something you need to factor into your equation. If you're somebody buying with a small down payment and home prices move sideways slightly down, even if interest rates go lower, there's a chance that you're not going to be in a position to refinance. So that's absolutely something you have to keep in mind.

And I know there's also those out there saying, "Well, I'm not going to buy now because as interest rates go higher, home prices are going to come down and I'm going to be able to get a home for a lot less money." And I will say there's a possibility of interest rates going higher and home values may be coming down a little bit, but we've already seen interest rates go up and home prices have actually not really gone down. They've more or less stabilized and gone up in many markets out there. And that's primarily due to the lack of inventory out there in the market.

Dave mentioned there's actually a shortage of housing, and that hasn't changed. In fact, in many markets out there, it's only gotten worse as inventory levels continue to decline. So yes, there's a chance that rates go higher. Yes, there's a chance that home prices go down slightly, but I don't see in any way that home prices are going to crash. Now, I know a lot of people out there are saying, "Jeb, it's better to buy a lower priced home with a higher rate than it is to buy a higher priced home with a lower rate because you can always pay your home off quicker when you owe less money on the home."

And that's absolutely correct. Ideally, you would like to buy the cheapest home possible or the least expensive home possible with a higher rate than buying the most expensive home at a lower rate for that very reason. But here's the thing, while most people think that, no one actually executes. No one follows through, at least based on my experience, and pays down their mortgage any quicker than they would have otherwise. And it's exactly why most people lease their cars versus buying them because they're more interested in the lower monthly payment.

And with that said, the higher priced home at the lower rate is likely going to have a much lower rate than the lower priced home at a higher interest rate. So while many people out there want to believe that they would rather have the lower priced home at a higher rate, when it comes down to actually pulling the trigger, people look at their monthly payments more than anything else. And with that said, at some point, interest rates are going to come down, which is likely to improve housing affordability, some.

But along with that improvements in rates, you're likely to see a jump in buyer demand, which is likely to lead to more competition and higher prices in the future. Which goes back to Dave's point that buying now is probably the best time. And that's because as we see interest rates come down in the future, we're going to see more buyer demand come back in the market and it's going to push prices up further, giving less and less people out there an opportunity to become homeowners. So with that, I do agree with Dave that right now is probably the best time to buy a home versus waiting for lower prices in the future.

But there are some things that Dave believes that you need to have in order to be a buyer in this market that I don't necessarily agree with. I believe all of these things are really good principles if you can do them. But for many areas of the country, especially those high cost markets like California, New York, as well as parts of Florida, it can be very, very difficult to follow these principles and getting too caught up in the principles might actually keep you from becoming a homeowner. Now, Dave believes that you should be debt-free with an emergency fund.

Now, I agree that you should have an emergency fund. You should have funds on the side in reserve, on top of your down payment, on top of your closing costs for a rainy day. If you lose your job, if something happens to the house, you have some money there to be able to make your payments, to be able to make those repairs. That's a really good principle to live by. You absolutely shouldn't be buying a home if you have no other money outside of your down payment and closing costs.

In fact, if you're one of those people out there that's getting down payment assistance, you're getting the seller to pay your closing costs and you have no other money, you shouldn't be buying a home. Now, I know those are really strong words and probably something that you don't want to hear if you're in that position, but the reality is you could be setting yourself up for failure by not having those funds in place. In addition to that, he believes that you should have a good down payment.

He strongly believes that you should have at least 20% down, that you should be financing a 15-year fixed loan using only 25% of your take home pay, your net pay after all your taxes and deductions are taken out of your check. He only wants you to use 25% of that and finance it on a 15-year loan. This is absolutely not feasible for many areas of the country out there.

And in my opinion, this philosophy, if you will, is completely outdated and more driven to the areas that have more affordable housing where you can buy a home for $150 to $200,000 in Utah. Now, I'm not here to tell you how much you should be spending on your monthly mortgage payment or how much you can afford to buy as those are things that you need to figure out by doing a budget yourself, running the numbers and seeing what you're comfortable with monthly.

But with that said, I wouldn't live by Dave's rules either when trying to figure out if I should become a homeowner. It's all about the right time in your life versus doing what someone else is telling you to do or not to do because they think it's a great idea. You have to remember, Dave is in a different position than you are. He's a multimillionaire, and he's now in a position where he can buy a home using only 25% of his net pay, and his net pay is more money than most people will ever see in their lifetime.

And he's here standing on a podium at a different position in his life trying to give advice to the masses, when if the masses followed it, no one would become homeowners. But there is another rule that I do agree with when it comes to Dave's advice, and that's being in the home for a period of time because home prices have moved up so much over the last couple of years. You want to have a longer term time horizon, not because the housing market's going to crash, but because there's a really good chance that home prices move sideways for an extended period of time.

And by having that longer term time horizon, it allows you to withstand any bumps in the road versus someone buying a home now thinking that they're going to sell it in a year and use that money to buy another home. Hopefully that actually all works out and you're in a position to do that. But if home prices move sideways or slightly down during that period of time, you might end up in a home that's underwater or having to stay in a home that no longer fits your needs because you didn't have that longer term time horizon.

And along with that longer-term time horizon, you want to make sure that you have money in the bank. That you're comfortable with that monthly payment and you're not stretching yourself. 

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