Speaker 1: Welcome to How the Money. I'm Joel and I am Matt.
Speaker 1: Today we're asking the question, is it a terrible time
Speaker 1: to buy a home? Yeah, dude, there are a lot
Speaker 1: of different things going on within the housing market, Like
Speaker 1: what what a time to be alive? First of all,
Speaker 1: because I don't know we all like being alive. If
Speaker 1: I'm thinking specifically of the past two years, man, the
Speaker 1: past two and a half years that we have experienced,
Speaker 1: what a time to have a personal finance podcast and
Speaker 1: be able to just learn about this stuff up close?
Speaker 1: And uh not only with the stimmy checks way back.
Speaker 1: Uh so that's when we started our Friday flights, right, Like,
Speaker 1: what's back when the stimulus checks were hitting and folks
Speaker 1: were wanting to figure out what am I gonna get mine?
Speaker 1: What's that going to show up? That was the big question,
Speaker 1: right Like we were all kind of way, I mean, like,
Speaker 1: it is money going to really just show up into
Speaker 1: my account? That kind of thing. But the housing market,
Speaker 1: that's been another thing that we have seen just on
Speaker 1: a tear recently, and things are changing. I don't want
Speaker 1: to be self aggrandizing and make it sound like personal
Speaker 1: finance podcasts are more important than normal but they're the
Speaker 1: best out there. But I do think these pasts there's
Speaker 1: so important a couple of years listening to a personal
Speaker 1: finance podcast because the facts on the ground are changing
Speaker 1: so rapidly in so many areas of our lives. When
Speaker 1: it comes to inflation, when it came to simmy checks,
Speaker 1: when it comes to it, and never changing housing market.
Speaker 1: It's like it's more important to get kind of some
Speaker 1: up to date information and advice. That's what we're here for. Certain,
Speaker 1: that's the point of the show. It's certainly pertinent. And
Speaker 1: I guarantee that listeners out there who have found our
Speaker 1: show in the past couple of years, I guess I
Speaker 1: can't guarantee you, but but I'm pretty sure they're in
Speaker 1: a better place now then they would have been. Yeah,
Speaker 1: that's what I love about what we do here at
Speaker 1: How the Money. But yeah, we're talking about the housing
Speaker 1: market during this episode, specifically if right now is a
Speaker 1: terrible time to buy, and we're going to answer that.
Speaker 1: Plus we're gonna be able to to guide people through
Speaker 1: a way of thinking about a home purchase so that
Speaker 1: they make the right decision for themselves. But first, man,
Speaker 1: I've got a frugaler cheap for you. You may have
Speaker 1: noticed during my lunch breaks, I like to get outside.
Speaker 1: I enjoy eating my lunch out side, seeing the trees
Speaker 1: here in the birds chirp, and then I I oft.
Speaker 1: Sometimes I try to go for a walk around the block.
Speaker 1: And over the past few weeks when i've come back,
Speaker 1: I've come back with figs. I've offered you a figure too.
Speaker 1: You're not a fan. My daughter lovesick, she would pick out.
Speaker 1: Next time I will go, I'll bring a couple back
Speaker 1: for her and you can take this home. But I
Speaker 1: am pulling these figs off of a neighbor's tree. So
Speaker 1: this is I guess neighbor of the family we rent
Speaker 1: our carriage house from. And this fig tree, it's massive,
Speaker 1: it kind of hangs out over the sidewalk. And there
Speaker 1: have been these gorgeous giant figs just right for the picking,
Speaker 1: and so I have been picking them. So my question
Speaker 1: to you, am I being frugal or cheap by stealing
Speaker 1: this person's fruit. That's a really good question. That's a
Speaker 1: really good question. And maybe I'm wrong here. I think
Speaker 1: most of them the fruit goes on eaten or it
Speaker 1: gets eaten by animals. Right, So I think so. My
Speaker 1: guess is that if it's some sort of giant fig
Speaker 1: tree that's producing, they produce a ton figs if they're big,
Speaker 1: that a lot of them are going Uneaton, or maybe
Speaker 1: even all of them are going Uneaton. So I think
Speaker 1: if it's like hanging over the street, I don't think
Speaker 1: it's a big deal to pluck a few. But you know,
Speaker 1: if you want to knock on the door and say, hey,
Speaker 1: I'm your neighbor, Matt and so, like the other day,
Speaker 1: we're starting to walk to school and the quickest way
Speaker 1: for us to get to the to our kids school
Speaker 1: is to walk through our backyard and through someone else's backyard.
Speaker 1: And I was like, this is just gonna save us
Speaker 1: so much time. But kind of walking down somebody's driveway
Speaker 1: on the back end to make sure you're above boys. Yeah,
Speaker 1: so I go knock on the door and they're like,
Speaker 1: who is this weird guy? And I'm like, I'm a
Speaker 1: new neighbor. Can we walk into the driveway And they're
Speaker 1: like of course, And they were cool about it, but yeah,
Speaker 1: we're I to knock on the door. They I'm guessing
Speaker 1: they would probably be like of course, yeah. But there's
Speaker 1: also just like you said, who's this weird guy? There's
Speaker 1: an element of man. You don't need to ask, just
Speaker 1: take them, like obviously I'm not eating them. Uh, if
Speaker 1: there was somebody out there, if there's like an old
Speaker 1: lady and she's out there, you know, knocking the figs
Speaker 1: into her, ask it and it looks like she's gonna
Speaker 1: make a pie or I don't know. That's why I
Speaker 1: picture making thig pies, which I don't even know if
Speaker 1: that's a five could be a young man making fig pies, Matt,
Speaker 1: I will that is true, But I will say a
Speaker 1: few weeks ago, when they first started turning ripe, I
Speaker 1: was kind of eyeing them and I wasn't taking more
Speaker 1: than one fig initially, right, because they slowly begin to ripen.
Speaker 1: But like a week or two into it, I mean,
Speaker 1: I'm looking at dozens of ripe figs and I thought, no, literally,
Speaker 1: nobody is picking these at this point, and I gave
Speaker 1: myself permission to then start gathering more than one. I'll grab,
Speaker 1: I'll grab two or three, and it's my it's my
Speaker 1: fruit serving fortunch. I think you're a bo bored on this.
Speaker 1: I think it's okay. I'm not gonna judge you keep
Speaker 1: picking your figs. They're delicious. But I found out about
Speaker 1: it when and neighbor told me about a pear tree
Speaker 1: that's kind of on some sort of public property or
Speaker 1: something that bears a lot of fruit. And so we're
Speaker 1: gonna run in the snacks and pairs when one of those,
Speaker 1: one of those they're coming into season now nice, I think,
Speaker 1: because he had a pear tree in his frint yard
Speaker 1: and he told us he was and he was like,
Speaker 1: by on the way, there's one around the corner you
Speaker 1: should grab. I'm from So so do you know, okay,
Speaker 1: while we're talking about forging for wild fruit, do you
Speaker 1: know the trick with pear trees? You will pull that
Speaker 1: pair and you will take it home and you're like, oh,
Speaker 1: I'm excited to eat this and you go to bite
Speaker 1: into it and you're like, oh man, this is not
Speaker 1: a good on the window. You wait one week. Evidently
Speaker 1: we learned this from our buddies Tim and he's got
Speaker 1: a pear tree in his yard and this thing evidently drops.
Speaker 1: I mean, he made it sound like hundreds of pears.
Speaker 1: But what you do you you pull them, you gather them.
Speaker 1: You let him sit around for one week, and after
Speaker 1: a week they taste like the pairs you buy at
Speaker 1: the store and you don't eat them right away. So
Speaker 1: if if you've got one of those pear trees, uh,
Speaker 1: just give it a second. If it's a fig, if
Speaker 1: you happen to be walking around you see your right fig,
Speaker 1: go ahead and grab it and eat it right away.
Speaker 1: Yeah no, no, you throw caution in the wind. If
Speaker 1: someone's looking at you, weird, Just to eat that fig anyway, right,
Speaker 1: get ready to take off, run and supposed to wash
Speaker 1: him first though, right, Well, yeah, I bring him home
Speaker 1: and I'm watching him here in this thing. The first time.
Speaker 1: I was like, I want to see how good these
Speaker 1: jokers are, and I ate one during my walk I think,
Speaker 1: here me fine. Yeah, all right, well let's let's mention
Speaker 1: the beer we're having on this episode, Matt. This one's
Speaker 1: called Odette and it's by Fair Aisle Brewing. It is
Speaker 1: like an oak aged beer that food or smells fantastic.
Speaker 1: So we give our thoughts that the real end of
Speaker 1: the episode looking forward to this one. But let's move on, Matt.
Speaker 1: Let's get to the question of hand. We're asking, is
Speaker 1: it a terrible time to buy a house. And it's
Speaker 1: been said that timing is everything, right, I mean in
Speaker 1: in almost everything in life. Your timing matters a great deal. Sometimes,
Speaker 1: like I don't know, I'm thinking about people who graduated
Speaker 1: during the Great Recession, and it's like, well, in my
Speaker 1: degree doesn't feel as useful right now as it might
Speaker 1: have just a few years ago. I was thinking about
Speaker 1: the first time that you asked Emily out on a day.
Speaker 1: That's true, we were ready. She's like, who you you ugly?
Speaker 1: I don't think so, but you know, over time she
Speaker 1: got to know me and she was like, he's beautiful
Speaker 1: on the inside. But a year later, it's like the
Speaker 1: personality is what kept exactly she kind of came around. Well,
Speaker 1: something else that made me think of was like NASCAR
Speaker 1: or Formula One drivers they need like perfect timing in
Speaker 1: order to make a move to pass their competition. A
Speaker 1: split second right and ill timed attempt it can it
Speaker 1: can result in falling further behind in the race, or
Speaker 1: we're maybe some sort of like awful crash that takes
Speaker 1: you out of the race completely. Well, the housing market
Speaker 1: has has kind of been shaking up in a big
Speaker 1: way as prices have risen substantially and now higher rates
Speaker 1: are making things even more unaffordable. All the rates have
Speaker 1: actually come back down to earth just a little bit
Speaker 1: in recent weeks, but the market feels like it's it's
Speaker 1: kind of stalled out, heading for a correction. And although Matt,
Speaker 1: the two of us, you know, you and I would
Speaker 1: be pretty shocked if the current market oddities ended up
Speaker 1: in anything resembling the crash of two thousand and eight, like,
Speaker 1: we don't think it's likely to happen, but the fundamentals
Speaker 1: are just so different this time around. But there's still
Speaker 1: a lot of uncertainty when it comes to the housing
Speaker 1: market right now. And so if if you were making
Speaker 1: offers last year, you kept missing out, consistently, kept getting
Speaker 1: out bit because there were thirty nine offers every time
Speaker 1: you try to buy a house and people paying a
Speaker 1: hunter more than list price. That's not happening right now.
Speaker 1: So is now the time for you to finally build
Speaker 1: to buy that house. That's kind of what we want
Speaker 1: to discuss in today's episode. That is right, man. Yet,
Speaker 1: you know it's interesting too that we're talking about timing
Speaker 1: uh in the housing market today because timing the mark
Speaker 1: it isn't something that you necessarily hear us talk about
Speaker 1: it's not something we're in favor of, at least when
Speaker 1: we're talking about the stock market, right Like, we would
Speaker 1: prefer to see folks dollar cost average every two weeks
Speaker 1: for decades and then just leave the results to the
Speaker 1: overwhelming odds that cares if it's a ten year bowl
Speaker 1: run or currently in a bear market, it doesn't matter,
Speaker 1: just keeping keep going. Exactly, you don't have to worry
Speaker 1: about timing because you're likely going to be just fine.
Speaker 1: But you know, you don't dollar cost average into a house,
Speaker 1: and so timing matters a good bit more when you're
Speaker 1: plunking down tens of thousands of dollars for just the
Speaker 1: down payment on a house, on the most expensive purchase
Speaker 1: that you're ever going to make. And so for that reason,
Speaker 1: I think timing does come into play, uh slightly more
Speaker 1: than it does when you're talking about investing in the
Speaker 1: stock market. And so this episode is intended to help
Speaker 1: you to find some some firm footing as you're considering
Speaker 1: your next move when it comes to housing. So we'll
Speaker 1: we'll talk about renting versus buying in general, but we'll
Speaker 1: also discuss you know, which factors you should be most
Speaker 1: keenly paying attention to UH in a market that is
Speaker 1: shifting in a in a big way right now. Yeah,
Speaker 1: market conditions for housing, they're changing and tappening fast right then.
Speaker 1: Like I said, uh, mortgage rates have been all across
Speaker 1: the board going shooting above six percent now back down
Speaker 1: to the five percent range. And so these ships are
Speaker 1: happening quickly. Home purchase agreements, when you look at the stats,
Speaker 1: they've been blowing up left and right there. So a
Speaker 1: huge majority of contracts that are being entered into are
Speaker 1: now the buyers are not backing out, more so, way
Speaker 1: more so than we saw last summer in spring. Uh.
Speaker 1: And like I said, those those houses, Matt, that we're
Speaker 1: getting multiple offers, right. I mean when you sold your house,
Speaker 1: you had a ton of offers, there were a lot
Speaker 1: of people, there's a lot of interest. I did, yes,
Speaker 1: and so that was that was a good thing. Now
Speaker 1: if you were to list that same house, UH, you
Speaker 1: might get crickets at least for a few days or
Speaker 1: a week or something like that. It's not nearly not
Speaker 1: nearly as frothy. But yeah, now these homes are sitting longer.
Speaker 1: Price cuts are happening with more regularity, and basically things
Speaker 1: are just mellowing out, and we would say that's actually
Speaker 1: a good thing, right. Uh. It also creates more certainty
Speaker 1: though for buyers and for sellers, And so now you
Speaker 1: might start to wonder, however priced is this home that
Speaker 1: I'm interested in? Or should I wait until rates go
Speaker 1: down even more? Or you might be asking if I
Speaker 1: wait just a bit longer, am I going to get
Speaker 1: a more significant discount? And we can't answer these questions
Speaker 1: with perfect accuracy. So much depends on a whole slew
Speaker 1: of factors, especially given like the wild cards of FED policy.
Speaker 1: What is going to continue to happen with mortgage rates?
Speaker 1: And then this specific location where you live, So much
Speaker 1: of the reality on the ground is going to be
Speaker 1: determined by things that are out of our control. But
Speaker 1: we'll do our best to kind of give you an
Speaker 1: overview of what's happening alongside with our thoughts on on
Speaker 1: how you should proceed. Uh. If buying house is something
Speaker 1: that you're still keen on doing, that's right. Yeah, And
Speaker 1: I'm not going to give away the punchline, but I
Speaker 1: feel like a part, like a t l d R
Speaker 1: of this episode is that, like the question the true
Speaker 1: question though, right asking is do these things even matter?
Speaker 1: Because we're gonna talk about a host of personal factors
Speaker 1: that we need to be considering. But you know, even
Speaker 1: though we are seeing price cuts to homes, housing prices
Speaker 1: are still through the roof when you when you back
Speaker 1: out and look at it, you know, they've increased something
Speaker 1: close to year over year on average. Uh, most counties
Speaker 1: in Florida, they've been going up at a rate like
Speaker 1: in the thirties and in the forties, and the median
Speaker 1: monthly payment has gone up. Although that year over year increase,
Speaker 1: it's actually finally starting to slow down, uh, due to
Speaker 1: a combination of rapidly increasing prices and mortgage rates doubling
Speaker 1: overnight virtually. Like, that's what what has created this new reality.
Speaker 1: But when home prices go up that much in such
Speaker 1: a small period of time, it's bound to cause some
Speaker 1: turbulence in the market. Um. You know, first we saw
Speaker 1: bidding wars, and now we're seeing folks who are apathetic
Speaker 1: to the market. A lot of folks have thrown in
Speaker 1: the towel, they've deleted Zelo from their phones altogether because
Speaker 1: they have decided that, you know what, it's not time
Speaker 1: for us to buy a house. Things aren't working out.
Speaker 1: But what we're saying is to think again, Uh look,
Speaker 1: look twice, because now actually might be the perfect time
Speaker 1: depending on a number of factors. For We'll get into
Speaker 1: all those factors, and man, it makes me think of
Speaker 1: maybe being like in Atlanta Falcons fan, and how five
Speaker 1: games into the season you're like, I don't really need
Speaker 1: to follow the team anymore because they're basically had a
Speaker 1: playoff contention already, and so you might not realize whether
Speaker 1: they've gone on like a three win streak or something
Speaker 1: like that because you stopped watching because they were so
Speaker 1: bad in the beginning of the season. And that's what
Speaker 1: happened with a lot of folks when it came to
Speaker 1: canceled cable. I'm not going to follow them anywhere, right,
Speaker 1: dang it? Well no, I'm listening on another all the
Speaker 1: winds and follow on Twitter. But that's just the kind
Speaker 1: of the reality for a lot of people is as
Speaker 1: they got priced out of the market, they just kind
Speaker 1: of tuned it out all together. And like you just mentioned,
Speaker 1: interest rates, you know, have which were on the rise
Speaker 1: for for quite a while, impacted the cost of housing
Speaker 1: in a significant way. Uh, you know, most folks who
Speaker 1: buy a home, they out a mortgage on that home,
Speaker 1: and so it's not just the skyrocketing price the house,
Speaker 1: but it's also the increased costs of financing. And so, yeah,
Speaker 1: when when the Fed Fund rate goes up by three
Speaker 1: quarters of a point, here's the thing. A lot of
Speaker 1: people assume that mortgage rates are gonna skyrocket, but that's
Speaker 1: not exactly how it works. They don't move in tandem
Speaker 1: when the Fed moves their rate up, and so the
Speaker 1: reality is the those rising interest rates impact the economy,
Speaker 1: and that is what's impacting what happens with mortgage interest rates.
Speaker 1: So rates have actually gone down in recent weeks, and
Speaker 1: and that means that you can afford just a bit
Speaker 1: more house for the same amount of money. Not as much,
Speaker 1: of course, as when rates were below three percent, obviously,
Speaker 1: but I feel like we're starting to see a housing
Speaker 1: market that's got a little more balance to it, uh,
Speaker 1: less frothy, less apathetic, maybe a bit more of a
Speaker 1: healthy market in general, that's true. Yeah, it seems like
Speaker 1: things are resuming some sort of normalcy. But buyers are
Speaker 1: not the only ones who've been shocked by rapidly increasing
Speaker 1: housing costs, will actually talk about what's happening to renters
Speaker 1: and also discuss the most important factors you need to
Speaker 1: consider before purchasing a home. Will get to all of
Speaker 1: that right after the break. Alright, best, but let's keep
Speaker 1: talking about real estate, because do it. It's it's still
Speaker 1: a hot topic of conversation, even if you're on Zillo
Speaker 1: for thirty and at the left every day because you
Speaker 1: got priced out of the market. Well, here's the thing.
Speaker 1: It's not just that buyers have gotten priced out of
Speaker 1: the market. Renters have also seen a huge uptick in
Speaker 1: prices too. There's just been no reprieve for anybody when
Speaker 1: it comes to housing costs, and rents have kind of
Speaker 1: actually lagged the housing market in most places. So here's
Speaker 1: the thing. Even if you have opted to forego a
Speaker 1: home purchase because it was getting it was getting too pricey,
Speaker 1: that doesn't necessarily mean that you've avoided the rising cost
Speaker 1: of housing, right You're still kind of impacted by it
Speaker 1: in a in a different way. So instead of watching
Speaker 1: prices rise as you're looking through the apps, you probably
Speaker 1: just got a rough email from your landlord before your
Speaker 1: least expired telling you that your your rate is going
Speaker 1: up something like eight and the difference is largely determined
Speaker 1: based on where you live. Right. So, for example, the
Speaker 1: Wall Street Journal had a great article about a bunch
Speaker 1: of different markets and where rents and home prices have gone.
Speaker 1: Uh So, in Atlanta, for instance, rents rose about twelve
Speaker 1: percent last year, while home prices went up by twenty
Speaker 1: two percent. And that was kind of like similar in
Speaker 1: markets like Charlotte, Vegas, Austin, and Phoenix, and there were
Speaker 1: other There were other cities I think, like Miami, where
Speaker 1: rents went up quite a bit more than housing prices.
Speaker 1: But you know, while those rising rent prices have been
Speaker 1: tough for a lot of folks to stomach, home buyers
Speaker 1: in lots of the country have seen the price tag
Speaker 1: increase even more. So basically, I don't know, it's just
Speaker 1: bad news all the way around for anybody cannot escape. Yeah,
Speaker 1: who's trying to live anywhere? Right, that's right? Besides like
Speaker 1: a tent in your friend's backyard. Uh and maybe they're
Speaker 1: asking you to chip in a little bit water for
Speaker 1: all those outdoor showers. I don't know. And so the
Speaker 1: question right like, will can rents continue to rise? Well,
Speaker 1: that's a complicated question, and there are too many factors
Speaker 1: to weigh in in order to nail down an answer.
Speaker 1: Because the fires continue to sit on the sidelines opting
Speaker 1: to not buy a home, it's going to mean more
Speaker 1: demand for rental units, raising prices. And that demand, like
Speaker 1: it's already pretty intense, you know. Plus rental units just
Speaker 1: aren't being built fast enough. But as the housing markets
Speaker 1: continue this offten and more people are less in their
Speaker 1: homes for sale, now we could see prices decrease enough
Speaker 1: that buyers start to get interested again. So much of
Speaker 1: this hinges on things outside of our control. You know,
Speaker 1: we certainly don't have a crystal ball. We can't prognosticate,
Speaker 1: you know, what's going to happen with rents tomorrow or
Speaker 1: home prices tomorrow, um, especially as we look out even further.
Speaker 1: I mean, it's harder, it's harder to know, especially like
Speaker 1: the wild cards that I mentioned, Matt, those are those exist.
Speaker 1: So what we had talked about a year ago was, hey,
Speaker 1: the housing market, because of the shortage of homes, is
Speaker 1: likely to continues to see price increases into the future.
Speaker 1: But what we weren't factoring in with some of these
Speaker 1: outside influences that we're gonna that we're gonna come in
Speaker 1: and change the dynamics of the situation. But let's talk
Speaker 1: about the kind of the rent verst By conundrum right now,
Speaker 1: because both buyers and renters are in a tough situation,
Speaker 1: we'd recommend that you don't overly focus on the market
Speaker 1: and the numbers. Basically, if you're wondering if now is
Speaker 1: the right time to buy a place, it's it's just
Speaker 1: even more important to figure out what you want your
Speaker 1: life to look like moving forward. So you gotta think
Speaker 1: about the lifestyle factor, right I mean, owning a home
Speaker 1: is a time and a money commitment. You're talking about
Speaker 1: fixing leaky toilets and a whole lot of other not
Speaker 1: so fun things. They become a part of your life
Speaker 1: when you own a home. Man, We've got this like
Speaker 1: toilet that keeps running, and I've got to figure out
Speaker 1: how to fix this thing. I've kind of checked and
Speaker 1: it's it's not the flapper you give it the old jiggle.
Speaker 1: You can sometimes you can running well. I mean it's
Speaker 1: not just toilets too, right like, because I feel like
Speaker 1: that's kind of a that's what we think of. But
Speaker 1: I mean, like Essentially, when you buy a home, like
Speaker 1: you have to become versed virtually, I think, in all
Speaker 1: systems of a home, not because you have to be
Speaker 1: able to know how to do something beyond just the
Speaker 1: jiggle on the toilet handle, but to know what type
Speaker 1: of repaired person to call, and to know whether or
Speaker 1: not they're ripping you off, and to know whether they're
Speaker 1: doing a good job. Like, these are all things that
Speaker 1: you have to kind of familiarize yourself with, and that
Speaker 1: might be up some people's alley where they're like, oh man,
Speaker 1: that sounds great, Like I already know all the systems.
Speaker 1: I grew up kind of doing that stuff as a teenager.
Speaker 1: But you also might be saying yourself, I grew up
Speaker 1: in a in an apartment in the city and never
Speaker 1: how to do any of that kind of stuff, So
Speaker 1: I have no clue. These are the kind of things
Speaker 1: you need to keep in mind. Yeah, homeownership could be
Speaker 1: more daunting for some people than others, right based on
Speaker 1: kind of their knowledge level and comfortability level with figuring
Speaker 1: that stuff out. Plus you know, monthly mortgage payments and
Speaker 1: and monthly rent amounts. They're just not apples to apples
Speaker 1: comparisons right, And a lot of people think, well, as
Speaker 1: long as I'm getting into a house, you got a mortgage,
Speaker 1: it's less than my rent, I'm coming out ahead. But
Speaker 1: that's that's truly not the case because of all the
Speaker 1: expenses that are associated with owning a home, and and
Speaker 1: despite the popular notion renting is not throwing money away,
Speaker 1: that is kind of a common perception, especially for people
Speaker 1: who want to get good with their money. They start
Speaker 1: to think, well, if I continue to rent a house,
Speaker 1: then basically what I'm doing is I'm flushing money down
Speaker 1: the toilet every single month. Well, that's keep going back
Speaker 1: to toilets. Yes, exactly, but that's just not true at all, right,
Speaker 1: because you're paying for a physical place to live, for
Speaker 1: a roof of your head, and you're also paying for
Speaker 1: you know, more flexibility, uh, the right to not have
Speaker 1: to fix anything in that house when it goes when
Speaker 1: it goes wrong, except for changing light bulbs and stuff
Speaker 1: like that. You basically or if you broke it right, right,
Speaker 1: but that's gonna that's gonna put that onus, on on
Speaker 1: the landlord. And there's a lot of value in that.
Speaker 1: So we want to make sure that that misconception doesn't
Speaker 1: continue in perpetuity because renting makes sense for a lot
Speaker 1: of people. Yeah, so as you are trying to decide
Speaker 1: if buying a home makes sense for you, it's important
Speaker 1: to remind yourself to that a home is not typically
Speaker 1: a great investment. This kind of goes and intended with
Speaker 1: what you're saying, jel about flushing money down the toilet,
Speaker 1: But like we would suggest that you not think about
Speaker 1: primary residents in those terms as an investment despite the
Speaker 1: fact though that recent history debunks our claim because of
Speaker 1: the past couple of years, that doesn't guarantee that homes
Speaker 1: are going to appreciate this rapidly moving forward. There's like
Speaker 1: no better investment over the past two years than have
Speaker 1: been housing it. But that is not normal. I mean
Speaker 1: people had not expect that, and especially even over the
Speaker 1: past ten of twelve years, Like the stock park has
Speaker 1: been on a tear, but so has the real estate
Speaker 1: mark every Yeah, everything has been on it and so
Speaker 1: you feel like you've missed out. But the reality of
Speaker 1: that that is just not normal and it is highly
Speaker 1: unlikely for to continue at that base. But specifically that
Speaker 1: I mean when you are looking at housing versus just
Speaker 1: say the stock market generally speaking, like when you take
Speaker 1: a longer view of the typical returns, homes return about
Speaker 1: four percent on average, while the stock market is closer
Speaker 1: to ten percent. And so because of that, we want
Speaker 1: you to treat your home as a primarily as a
Speaker 1: place to live, not as an investment. And so if
Speaker 1: renting is going to be a better lifestyle move for
Speaker 1: you, you you might actually be happier and also be able
Speaker 1: to see higher returns from investing passively within the stock market. Yeah,
Speaker 1: that's right. And and you know, by the way, now
Speaker 1: when we talk about the affordability of buying a house
Speaker 1: and we're talking about mortgage rates, we're talking about mortgage
Speaker 1: rates right now in the five percent range. And I
Speaker 1: think a lot of people are like freaking out because
Speaker 1: when you're when you're looking at the past couple of years,
Speaker 1: when you're even looking at the past decade, that's high
Speaker 1: by by those standards, But when you're looking at the
Speaker 1: long arc of mortgage rate history, it's still ridiculously low,
Speaker 1: um near historic lows. To get a five percent rate
Speaker 1: that's locked in number to thirty years. And so it's
Speaker 1: important to out that that it's like, yeah, mortgage rates
Speaker 1: are high. Well, in what context are we talking about high?
Speaker 1: Because in reality they're still pretty reasonable. And here's the thing.
Speaker 1: If you buy a home, you can always refinance at
Speaker 1: a later date if rates do go down. But we
Speaker 1: just don't want you to buy a home with the
Speaker 1: hope that you're gonna be able to write finance in
Speaker 1: the future. Right, with the hope or the expectation buying
Speaker 1: at the extreme edge of what you can afford, saying
Speaker 1: a couple of years from now, pretty sure, I'm going
Speaker 1: to lower that rate and then it'll all be fine
Speaker 1: and dandy. Like that puts you in a precarious financial position. Um,
Speaker 1: but just let that be the icing on the cake
Speaker 1: if it does happen, right, if you're able to a
Speaker 1: nice little bonus, Yeah, you're like, oh cool, now I
Speaker 1: get to lower my rate my monthly payment by a
Speaker 1: couple hundred bucks because I got to refinance as rates
Speaker 1: went back down. But yeah, running the numbers based on
Speaker 1: comps in your specific market is what's going to be
Speaker 1: able to help you decide whether renting or buying is
Speaker 1: a better financial decision for you given the current conditions.
Speaker 1: That's right, Yeah, And aside from whether or not you
Speaker 1: can afford you know, the monthly payments that you might
Speaker 1: get with the mortgage. You need to make sure that
Speaker 1: you have enough cash save up. And you know, we're
Speaker 1: not just talking about money for a down payment here,
Speaker 1: Like we want you to have funds saved for home
Speaker 1: repairs in addition to a nicely stocked emergency fund. And
Speaker 1: you know, I I say this knowing that this sounds
Speaker 1: like a big hurdle, but don't buy a house if
Speaker 1: you haven't been able to save up enough to make
Speaker 1: this happen. It's just gonna put you into precarious of
Speaker 1: a position. And we just don't want you to experience
Speaker 1: that financial that financial stress, because it's a real thing.
Speaker 1: It impacts all areas of your life. Like I've heard
Speaker 1: interviews with folks who fought in Iraq and they've come
Speaker 1: back and they've made poor financial decisions, and they said
Speaker 1: how that was more stressful than actually fighting in the war,
Speaker 1: and and and you think, how in the world is
Speaker 1: that possible. And he was actually talking about how well
Speaker 1: he wasn't trained to deal with this, when when you're
Speaker 1: fighting in a war, when you're in the military, you're
Speaker 1: trained to handle that kind of thing. Months by experts exactly.
Speaker 1: And this this isn't something we're often trained for. And
Speaker 1: we find ourselves in these sticky situations and often times
Speaker 1: we don't feel that we have anywhere to turn to
Speaker 1: and it feels like, you're our lives are about to
Speaker 1: be up ended. Yeah. That's why when when some listeners
Speaker 1: reach out and they're like, I'm I'm scrounging to save
Speaker 1: up three and a half percent to put down on
Speaker 1: this house, typically we'll tell that person you're not ready
Speaker 1: to buy a house. And it's because if you're just
Speaker 1: scrounging up that three and a half percent to put down,
Speaker 1: you haven't saved up money. You don't have any more
Speaker 1: money in the fund, you don't have money in some
Speaker 1: sort of that's it. That's gonna be all your money. Yeah,
Speaker 1: and like where you plink that down, right? You know,
Speaker 1: money in an ally bucket to pay for the thing
Speaker 1: that toilets that are gonna break, or the right I
Speaker 1: got a nick niter in my stove that I need
Speaker 1: to replace soon because it's malfunctioning. Those are the kind
Speaker 1: of things that, like you, you you you have to plan
Speaker 1: for um, you can't know, you don't necessarily know what
Speaker 1: is going to break, but you have to have the
Speaker 1: money on hand to be able to pay for it
Speaker 1: when it does. And you another thing that people need
Speaker 1: to think about when it comes to that conundrum or
Speaker 1: printing versus buying is where their credit scores at. Because
Speaker 1: how healthy your credit score is is going to have
Speaker 1: this direct impact on the affordability of that house because
Speaker 1: it's gonna have an impact on the interest rate that
Speaker 1: you're gonna qualify for, and therefore what's your monthly expense
Speaker 1: is actually going to be. So having a credit score
Speaker 1: that's a up seven uh is kind of a minimum
Speaker 1: goal we want you to aim for, but having a
Speaker 1: score of this at least seven sixty is what we
Speaker 1: prefer to see because that is what's going to qualify
Speaker 1: you for the best terms with basically every lender out there.
Speaker 1: And if you're not sure what your score is, check
Speaker 1: you can check it out for free on a site
Speaker 1: like credit Karma. Will link to that in the show notes,
Speaker 1: but they also give me tips on on how to
Speaker 1: improve your score, which is helped to be like you're
Speaker 1: gonna see minus over here if you just if you
Speaker 1: just tend to this, you're gonna score coach. Yeah, you're
Speaker 1: gonna be able to raise that score, therefore saving you
Speaker 1: in money in the long run. And you can check
Speaker 1: out episode two eight seven for more on our thoughts
Speaker 1: about working towards a solid credit standing. Yeah, the good
Speaker 1: news just for our economy overall, is the fact that
Speaker 1: since the Great Recession, since the housing crisis, like fifteen
Speaker 1: years ago, we've seen the quality of mortgage borrowers increased dramatically.
Speaker 1: So like the credit scores that we're seeing that folks
Speaker 1: are coming to the table with, they are much much
Speaker 1: higher than we used to see I guess, you know,
Speaker 1: at least fifteen years ago. And so that's just I
Speaker 1: don't know, it's a it's a silver lining for for
Speaker 1: folks who are are worried about just all of the
Speaker 1: other sort of market conditions that seem to be changing
Speaker 1: under our feet. And something else too that's worth mentioning.
Speaker 1: When you are considering whether or not you want to
Speaker 1: continue renting or if you want to buy a home,
Speaker 1: oftentimes you'll hear folks talking about taxes, and we basically
Speaker 1: want you to forget about the tax breaks that come
Speaker 1: with owning a home because one reason besides throwing away
Speaker 1: money on rent, that you'll hear as a reason for
Speaker 1: buying instead of renting is for that mortgage interest tax deduction.
Speaker 1: But that's kind of a that's a flawed reason to
Speaker 1: buy a home because in doing so, you're you're letting
Speaker 1: the tax tail wag that home purchasing dog, and so
Speaker 1: buying something solely for tax purposes it sounds smart, sounds sophisticated,
Speaker 1: but it is often not. And secondly, I'm gonna invest
Speaker 1: in that that individual stock because I know it's gonna
Speaker 1: go down and then I can claim losses on my
Speaker 1: tax return. It's like, no, no, you gotta earlier losing
Speaker 1: the overall game. You'd rather make money on your investments
Speaker 1: and then pay taxes on the income. But also because
Speaker 1: of the significant standard deduction that Mox folks are able
Speaker 1: to take, they don't actually receive any tax benefit from
Speaker 1: owning their home with our simplified tax code that we've
Speaker 1: seen over the a few years ago, roughly for an
Speaker 1: individual in twenty six, for for a couple. So talk
Speaker 1: to a tax professional before buying a home and hoping
Speaker 1: that it's gonna significantly reduce your tax burden. Yeah, I
Speaker 1: think it's something like of of folks it's a ridiculous amount, Like,
Speaker 1: don't qualify everybody that everybody should be taking the standard
Speaker 1: deduction because most folks they're not going to come out
Speaker 1: ahead by itemizing. So if you're saying, oh, that's the reason,
Speaker 1: because it's gonna help me all my taxes, the reality
Speaker 1: is it's unlikely unless you're in that ten percent of
Speaker 1: folks who actually will qualify, And you're gonna want to
Speaker 1: make sure you know that before you got for this,
Speaker 1: and and even if even if you do qualify for
Speaker 1: that mortgage interest tax deduction, you know, it might be
Speaker 1: a pittance, it might be a small amount, and it
Speaker 1: doesn't mean that you should tie yourself to the transaction
Speaker 1: costs to the buying of a home just because of
Speaker 1: some sort of you know, small tax benefit. Yeah, yeah,
Speaker 1: exactly mortgage interest deduction. Oh you got an next with
Speaker 1: three or eighty six bucks? Cool, let let me just
Speaker 1: go ahead and just give that directly to the plumber exactly. Yeah.
Speaker 1: Um yeah, that's one I'm still trying to figure out,
Speaker 1: Like why is that? I don't know, it's if it's
Speaker 1: not the flapper and toilets yourself basical. I feel like
Speaker 1: I fixed a bunch of toilets, but two toilets in
Speaker 1: my house are doing this, and this one's got your
Speaker 1: stuff to throw me for a loop. So next time
Speaker 1: I come over for when I baby sit, maybe I'll
Speaker 1: take a peek. Okay, yeah, great, Hopefully, hopefully you'll figure
Speaker 1: it out, and when I can't, we'll keep everybody posted
Speaker 1: toilet saga. Well, that one other thing we need to
Speaker 1: talking about. When you're talking about buying versus renting, so
Speaker 1: much of that decision is so dependent on your timeline.
Speaker 1: Because let's say you're like, yeah, I want to buy
Speaker 1: that at home, but I don't know if I'm committed
Speaker 1: to this city or even to this house for for
Speaker 1: very long. I could see myself you're moving closer to
Speaker 1: my folks or something. You've got a pretty transient job.
Speaker 1: I'm gonna be here for maybe a couple of years. Yeah,
Speaker 1: you likely don't need to be buying it. No. Yes,
Speaker 1: buying a house is typically a bad idea. Granted, a
Speaker 1: lot of people have been the accept into this rule
Speaker 1: over the past couple of years as home prices have
Speaker 1: increased exponentially, But how long you plan to live in
Speaker 1: a house has a massive impact on whether or not
Speaker 1: you should get it makes me think about buying a
Speaker 1: new car because we're mostly against. We don't think it's
Speaker 1: a great idea, at least financially speaking, for most folks
Speaker 1: to buy a new car. There are some exceptions to
Speaker 1: that rule, and one of the things that makes buying
Speaker 1: a new car a less bad deal is if you
Speaker 1: hold onto it for a long time. So if one
Speaker 1: of our listeners says, hey, I really want to buy
Speaker 1: a new car. I like knowing what i'm owning. I
Speaker 1: don't want to buy somebody else's problems, but I only
Speaker 1: want to own that car for two years, we would say, no,
Speaker 1: don't do it. That's a terrible idea. But if they said, hey,
Speaker 1: I'm down to own this car for twelve or fifteen years.
Speaker 1: I want to own it for the long haul. Uh,
Speaker 1: and I've got the cash to pay for it, we
Speaker 1: would say, great, it's not actually that bad of a move.
Speaker 1: So much of it depends on your specific circumstances, but
Speaker 1: also on your timeline. And so if you're looking to
Speaker 1: buy a home, you want to make sure, especially when
Speaker 1: we're talking about housing prices doing what they've done over
Speaker 1: the past couple of years, you want to have an
Speaker 1: even longer timeline of ownership in order to make sure
Speaker 1: that you're not screwing up in this major purchase. We
Speaker 1: would say it's suggest a minimum minimum of five years,
Speaker 1: but more likely something like a seven to ten of
Speaker 1: year timeline where you're gonna want to own that home
Speaker 1: to make sure it's not some sort of big financial mistake.
Speaker 1: You want to be able to depreciate those costs over
Speaker 1: a longer period of period of time, because you can
Speaker 1: take any smart home purchase and if you sell it
Speaker 1: a year later, it's gonna look like a dumb purchase
Speaker 1: because you're not able to escape these like fixed costs
Speaker 1: of real tor fees, of closing costs. And that's not
Speaker 1: even taken into account fluctuations in the market. That's assuming
Speaker 1: that things go up a little bit and maybe you
Speaker 1: are able to pocket some of that equity. But what
Speaker 1: if things go down, then you truly are going to
Speaker 1: be in a hole. Bringing tens of thousands of dollars
Speaker 1: to the closing table is no fun, and you know
Speaker 1: that could be the reality if you buy a house
Speaker 1: right now and try to sell next year. Exactly. Yeah,
Speaker 1: But even though like it might sound like we're trying
Speaker 1: to talk you out of buying a home. We're still
Speaker 1: actually bullish on the future of the housing market because like,
Speaker 1: like there is a housing shortage that won't get fixed overnight.
Speaker 1: We're talking about being millions of units short, which does
Speaker 1: impact some cities more than others. But there just is
Speaker 1: not enough construction to keep up with the population growth.
Speaker 1: It's not keeping up with with income growth, is not
Speaker 1: keeping up with household formation. That are just a slew
Speaker 1: of factors that are contributing to that reality. Uh, like
Speaker 1: like district zoning laws. There's folks who don't want to
Speaker 1: see density in their backyard. There's all the all the
Speaker 1: nimbiism out there that's happening. So basically, the housing shortage,
Speaker 1: it remains and it's going to impact buyers for years
Speaker 1: to come, even though we're currently going through a bit
Speaker 1: of a market shock right now because of the higher
Speaker 1: prices that we just talked about and so all that.
Speaker 1: I just wanted to put that out there as well,
Speaker 1: because we're kind of talking about, Oh, you probably shouldn't
Speaker 1: be buying a home if you consider how you should
Speaker 1: be looking at your home not as an investment, but
Speaker 1: instead as a place to live. Oh, you probably shouldn't
Speaker 1: be purchasing because, oh, your credit score is not all
Speaker 1: that great. We're like, we went through all these different factors.
Speaker 1: But that being said, like we still think that the
Speaker 1: market over the long haul, over the long term is
Speaker 1: going to be higher a couple of years from now
Speaker 1: than it is right now. It makes me think about
Speaker 1: an article I read recently about Pokemon cards, and apparently,
Speaker 1: you know, some people were making just massive amounts of
Speaker 1: dollars on these rare Pokemon cards. And what did the
Speaker 1: people who created the Pokemon cards do. They printed more
Speaker 1: of those cards, and they actually they devalue that market.
Speaker 1: And to some of those people who are selling the
Speaker 1: cards on eBay, were pretty bombs. But for other people
Speaker 1: who just like are enthusiastic about Pokemon cards, they were happy.
Speaker 1: Here's the thing, uh, the housing correction. We can't build
Speaker 1: enough units quickly enough. It's not like Pokemon where they
Speaker 1: can just like turn on the printers and just like,
Speaker 1: uh create the thrust uh two times or three times
Speaker 1: the amount of Pokemon cards out into the world. Like,
Speaker 1: that's not how it works with housing. We are still
Speaker 1: millions of units short, and that shortage is likely to
Speaker 1: continue for for a while. So I agree, man, I
Speaker 1: think the housing market is going to continue to appreciate
Speaker 1: over time. You just can't expect it to look like
Speaker 1: it's looked over the past couple of years. But regardless
Speaker 1: of where that leaves you, you're probably wondering, well, what
Speaker 1: do I do now I'm thinking about continuing to rent
Speaker 1: or I'm thinking about actually purchasing a home. We are
Speaker 1: actually going to run through a number of things that
Speaker 1: you should be thinking through if you are in either
Speaker 1: one of those positions, and we'll get to that right
Speaker 1: after this. All right, let's keep talking about buying house
Speaker 1: some kind of the current market. How that kind of
Speaker 1: changes the equation for a lot of people right as
Speaker 1: the price just skyrockets, it just it's just priced a
Speaker 1: lot of people out of the market who did want
Speaker 1: to buy a home. Although we're starting to see a
Speaker 1: correction that that could improve the likelihood that some of
Speaker 1: those people who weren't able to buy a home a
Speaker 1: few months ago might be able to now. But um,
Speaker 1: we're gonna give our tips for for buyers. What are
Speaker 1: the next steps you need to do in order to
Speaker 1: buy a home in this market? We'll talk about that
Speaker 1: in just a second. But first let's let's talk to
Speaker 1: the renters for just a second, Matt, because uh, maybe
Speaker 1: after running through all those factors, some of our listeners said, Okay,
Speaker 1: wait a second, and buying a home isn't for me.
Speaker 1: It's not just this crazy market. But maybe yeah, maybe
Speaker 1: I can looking at the disparity in my market, I
Speaker 1: can save hundreds and hundreds of dollars a month renting
Speaker 1: and then I don't have to put up with all
Speaker 1: the bogus toilet up and nonsense that Jolande to put
Speaker 1: up with. Maybe it's more of a lifestyle thing. Maybe
Speaker 1: as they thought through what they're thinking, I just don't
Speaker 1: want to deal with that. I like, I want like
Speaker 1: you said, you're you touched on the flexibility and the
Speaker 1: just the lifestyle that that allows you. Maybe I want
Speaker 1: to have my options open if that's the case you
Speaker 1: want to rent. Or maybe they said, I don't have
Speaker 1: enough of a down payment even to really put the
Speaker 1: storm radar or by credit score stinks like those are
Speaker 1: those are good things that you can be working on. Uh,
Speaker 1: if you're interested in buying a home in the future.
Speaker 1: But there is no shame in waiting, and so let's
Speaker 1: see if we can provide maybe those listeners with some
Speaker 1: tips to help cut their current rent down to size.
Speaker 1: And the first step we'd encourage folks to take is
Speaker 1: to attempt to negotiate their rent. We don't want you
Speaker 1: to take a rent increase lying down. We would say,
Speaker 1: knowing the market where you live helps you know whether
Speaker 1: you should chop the open market or whether you should
Speaker 1: push back in a friendly way in order to to
Speaker 1: seek to garner a lower monthly rent amount. And if
Speaker 1: you want kind of just in depth tips on that,
Speaker 1: we actually interviewed an expert Justin Pogue back in episode
Speaker 1: four sixty nine. But there are a ton of levers
Speaker 1: that you can pull used to your advantage to make
Speaker 1: sure that you are not getting hit in the chin
Speaker 1: with an exorbitant rent and increase. There are ways for
Speaker 1: you to push back and lessen it or maybe just
Speaker 1: eliminate it altogether. Sure, Yeah, I mean, and real quick,
Speaker 1: I'll say, like, I think one of the best things
Speaker 1: you could do is just be honest. Right if you
Speaker 1: see uh one of those rent increased emails showing up,
Speaker 1: I think just sharing and being honest and saying, hey,
Speaker 1: this is gonna impact me in a pretty serious way
Speaker 1: this is going to impact my ability to continue living here.
Speaker 1: Is there any way that we could maybe meet in
Speaker 1: the middle, or even better yet, is there a way
Speaker 1: that maybe we can keep it where it was? Maybe
Speaker 1: I know, you hire a law service. What if I
Speaker 1: start mowing the law I'll see That's that's where that
Speaker 1: creativity kicks in. What if we sign into your least
Speaker 1: like maybe that gives that that landlord a little more
Speaker 1: peace of mind that they're not gonna experience any vacancy.
Speaker 1: Maybe it's a win win if you are able to
Speaker 1: make life easier for your landlord. Coming from two landlords,
Speaker 1: we will seriously consider that because that's oftentimes when you
Speaker 1: have a renter in a place and they pay on time,
Speaker 1: they're not trashing the place. These are good renters. These
Speaker 1: are the kind of folks who you want to keep
Speaker 1: around for the long haul. And so I guess what
Speaker 1: I'm saying is I don't want you to be afraid
Speaker 1: to start that conversation, because, like we often talk about
Speaker 1: with when it comes to like discounts, the worst somebody
Speaker 1: can say is uh no, thank you, Like I don't
Speaker 1: you know, they shouldn't belittle you. They're not gonna make
Speaker 1: fun of you or anything like that. Hopefully you have
Speaker 1: an upstanding landlord who's gonna treat you fairly, who's gonna
Speaker 1: treat you right. Uh. I think another way to keep
Speaker 1: your rent in check is to find a way to
Speaker 1: share the burden of rent, you know. I think that's
Speaker 1: probably one of the best ways to maybe really get creative.
Speaker 1: And so this means considering a roommate when maybe you've
Speaker 1: not had a roommate in like since college. You know,
Speaker 1: maybe you've had your own place for a number of years. Actually,
Speaker 1: we talked about getting a much older roommate on a
Speaker 1: recent Friday flight. Or maybe, you know, instead of simply
Speaker 1: just resigning your lease or just kind of going to
Speaker 1: the standard apartment complex that everyone else rents, that it
Speaker 1: means knocking on doors of houses that have a carriage
Speaker 1: house that you could possibly rent. Uh. Joel, We we
Speaker 1: kind of got lucky and we through personal connections and friends,
Speaker 1: kind of knew the owners of the house where the
Speaker 1: carriage houses where we are currently recording. But before we
Speaker 1: had this lined up, we started thinking, man, there were
Speaker 1: a lot of carriage houses within that neighborhood. Literally, we
Speaker 1: were going to campass that plane. We were just gonna
Speaker 1: go doin the door and just start knocking, knocking on
Speaker 1: doors and politely, biggest smile ever, introducing ourselves, explaining who
Speaker 1: we are, you know what we're looking for. And I
Speaker 1: can't imagine if there was a homeowner who had a
Speaker 1: vacant space, how would they not want to rent to
Speaker 1: some folks who are going to be able to provide
Speaker 1: them some additional income while at the same time for
Speaker 1: us potentially scoring a deal on our rent. And while
Speaker 1: we're talking about neighborhoods, it's I think it's important to
Speaker 1: reconsider where it is that you're living, reconsider your neighborhood
Speaker 1: because maybe you're not taking advantage of the of the
Speaker 1: popular amenities that your neighborhood offers. Like maybe in a
Speaker 1: previous life, this is something that you took advantage of,
Speaker 1: This is something that you appreciated, but maybe now you've
Speaker 1: got kids and you're not going out to shows like
Speaker 1: you used to back before you got married. Too close
Speaker 1: to home right here, I know, yeah, I mean this
Speaker 1: is literally something we did because the cost of living
Speaker 1: change pretty dramatically when we moved to where we are now.
Speaker 1: I'm not going to say that that was the driving
Speaker 1: force behind our move. But it sure is nice. Yeah, No,
Speaker 1: it's definitely a plus. Right is to save money every month? Yes,
Speaker 1: And I think another last tip to renters is maybe
Speaker 1: think reassess your space because it might mean accepting a smaller,
Speaker 1: lower quality space or living arrangement in order to stock
Speaker 1: more money into your savings account in preparation to buy
Speaker 1: something for the future. And that might sound like a
Speaker 1: jerk thing to say, like, hey, moving to a crappier
Speaker 1: place that's much smaller and rodent infested or something that's
Speaker 1: not what I'm saying covered under the stairs. That's right exactly,
Speaker 1: you can be the next Harry Potter. But it's true
Speaker 1: that sometimes renting something smaller, living in fewer square feet,
Speaker 1: or something that's not quite as fancy, like doesn't have
Speaker 1: the awesome pool and the gym or something like that,
Speaker 1: maybe that you're not even taking advantage of how often
Speaker 1: are you actually using that those things will save you
Speaker 1: money avoiding those things and finding something that's less expensive.
Speaker 1: So we could say that like some extra discomfort to
Speaker 1: be able to reach your goal of homeownership more quickly.
Speaker 1: That's not deprivation, that is short term pain. For long
Speaker 1: term gain. Right. Uh, so do you really need a
Speaker 1: second bedroom? Can you move down to a one bedroom apartment?
Speaker 1: Or how how often are friends and family actually coming
Speaker 1: to stay with you that's why you keep that second bedroom.
Speaker 1: Maybe they could stay in a hotel instead. Maybe you
Speaker 1: don't need the extra square footage that you think you
Speaker 1: need that you're saying you need. So I don't want
Speaker 1: to sound unrealistic or unkind, but I think there are
Speaker 1: a lot of people in those the kind of situations
Speaker 1: where they have more square footage than they need. They
Speaker 1: could save money by downgrading, and that additional savings can
Speaker 1: go a long way towards helping them achieve, you know,
Speaker 1: those bigger goals that they have. That's right, Yeah, reassess
Speaker 1: the amount of square footage that you're paying for. No pain,
Speaker 1: no gain according to Doer's card. Uh, sleep on a
Speaker 1: bedter nails to just I think that just enhances your
Speaker 1: blood flow and makes you better human. The reason we
Speaker 1: wetion this is because we want folks to basically question everything. Well, like,
Speaker 1: we do not want you to get stuck in this rut.
Speaker 1: And just because you've had a place that's that has
Speaker 1: two bedrooms that doesn't necessarily mean you always from henceforth,
Speaker 1: from now until I die, I'm always going to have
Speaker 1: a place that's at least two bedrooms. Big. Maybe you
Speaker 1: do need that bedroom, right, Maybe you're you're working from home,
Speaker 1: you need that home office. Uh, and that space is
Speaker 1: worth every single penny. But we just don't want you
Speaker 1: to get stuck in a rut where you're just making
Speaker 1: these assumptions that things can't change. Everything is a trade off, yeah, exactly,
Speaker 1: and everything's on the table, like like you should be
Speaker 1: able to consider at least you should be able to
Speaker 1: talk about cutting things from your life without it causing
Speaker 1: too much emotional anguish. And I just want to say, like,
Speaker 1: now we we take our own medicine, right, and we
Speaker 1: have in the past where we have we have lived
Speaker 1: in spaces that were somewhat uncomfortable. Or when it comes
Speaker 1: to downsizing becoming a one car family, because yeah, it's
Speaker 1: it's we're still rocking the one car family, even though
Speaker 1: we're out in the burb. It doesn't and it doesn't
Speaker 1: make our lives hopefully we can eas right. It doesn't
Speaker 1: make our lives easier having one car, but it does
Speaker 1: mean we're able to focus more, save more on the
Speaker 1: things that matter. Having one older car allows me a
Speaker 1: lot more financial flexibility, and that's what I care about. Absolutely. Yeah,
Speaker 1: but okay, so again, you know, realize that purchasing at
Speaker 1: home it's a very personal decision. Maybe you're at the
Speaker 1: point though, where you realize that this is the next
Speaker 1: step for you. Uh. If so, that is awesome, Like
Speaker 1: we are so pumped for you. I can't think of
Speaker 1: any other purchase that's gonna positively, hopefully impact your life
Speaker 1: as much as buying a new place. Well, someone in
Speaker 1: our Facebook group recently talking about buying a lemon of
Speaker 1: a house and it just made me really sad, like
Speaker 1: she had a bunch of issues. So again, buying a
Speaker 1: house potentially fraught with peril, like it's it's not the
Speaker 1: easiest thing in the world. You've got to be prepared
Speaker 1: and don't go for the the absolute cheapest inspector home inspector.
Speaker 1: But yeah, that just made me maybe really really sad
Speaker 1: to me, that sucks. But you know, with with that
Speaker 1: in mind, we also want you to hopefully follow a
Speaker 1: few steps so that you don't end up in a
Speaker 1: stressful situation like that. Listener, And so the first thing
Speaker 1: you want to do, though, is to make sure that
Speaker 1: you get your personal fine is in order, because buying
Speaker 1: a home when your finances are in shambles, that's gonna
Speaker 1: be a terrible idea. And so what that means is
Speaker 1: that we do not want you with any high interest
Speaker 1: rate debt. It's a good rule of thumb. And we
Speaker 1: also want to make sure that you've got SETI income.
Speaker 1: I'm thinking about how like, we currently still have roughly
Speaker 1: two job openings for every person who's unemployed. And so
Speaker 1: what that means, generally speaking, is we've seen a lot
Speaker 1: of job turnover. And you yourself, if you're listening to this,
Speaker 1: you might have finding yourself with an employer that you
Speaker 1: haven't been with for that long. And I'm sure you're thinking, oh,
Speaker 1: they would never let me go, But we're that company
Speaker 1: to hit a rough patch. Chances are there, you know,
Speaker 1: last person hired, first person to go. Uh. And so
Speaker 1: even though you might feel like you are in a
Speaker 1: just a really solid position because you've got those checks,
Speaker 1: those checks coming in, but we don't want you to
Speaker 1: feel overconfident with the paycheck that you've only recently been learning. Yeah,
Speaker 1: and one of the things that's gonna put you in
Speaker 1: a stronger position when it comes to buying that house,
Speaker 1: Matt is having more money on hand for down payment.
Speaker 1: So yeah, like you said, paying off the higher interest
Speaker 1: rate debt, not having any credit card debt is the
Speaker 1: best position to be in when it comes to buying
Speaker 1: a home, but then also having a bunch of cash
Speaker 1: in the bank so that you can slap hopefully down
Speaker 1: We talked about down payments before the break, but uh,
Speaker 1: the more money you have on hand to put down,
Speaker 1: the lower your mortgage payment is going to be. That
Speaker 1: is just the reality, and that puts you in a
Speaker 1: better position to be able to actually afford more home
Speaker 1: if that's your goal. But it's something that we're keen on, right.
Speaker 1: We want you to have more skin in the game.
Speaker 1: A bigger down payment typically means you're a more thoughtful
Speaker 1: home buyer. And so if you're wanting to grow the
Speaker 1: money that you have right now in order to save
Speaker 1: up for a down payment, Uh, if you're talking about
Speaker 1: like a shorter term purchase, you're looking to buy in
Speaker 1: the next couple of years, Uh, if you're looking to
Speaker 1: buy in less than a year, A high yield savings
Speaker 1: account is really the only place to put that money
Speaker 1: if you're looking to buy in uh twelve, at least
Speaker 1: a year out from now, I bonds are a good
Speaker 1: place to put it. And if you're looking for something
Speaker 1: like a longer term you're like, I want to buy
Speaker 1: a house in six, seven, eight years, you can actually
Speaker 1: invest some of that money, so good in a broker
Speaker 1: to Yeah, if you are thinking that proactively and intentionally, UM,
Speaker 1: I think that's awesome. Yes, I agree. But that's the thing.
Speaker 1: If you are thinking that long term, you definitely want
Speaker 1: to make sure that money is invested so that's not
Speaker 1: getting eaten a way by infliction, that it's able to
Speaker 1: grow in the market, so you're not losing purchasing power. Yes, right, man.
Speaker 1: You count on that down payment because that is money
Speaker 1: that you already have, that's money in the bank, and
Speaker 1: you can kind of lean back on that to alleviate
Speaker 1: any of the risk of potentially, you know, not necessarily
Speaker 1: continuing continuing to earn the money that you are earning,
Speaker 1: where you're counting on the future those future earnings, uh,
Speaker 1: in order to score the house that you're wanting. Another
Speaker 1: important step when you are looking to buy a home
Speaker 1: is that you gotta set a budget. A good rule
Speaker 1: of thumb is going to be twenty five to thirty
Speaker 1: of your monthly take home. Some folks, in an attempt
Speaker 1: to get in before things get too crazy, have purchased
Speaker 1: homes that maybe we're a bit more than they could handle.
Speaker 1: Real estate agents, mortgage brokers, they kind of they love
Speaker 1: to tell out the recent price surge as as a
Speaker 1: reason why you should maybe buy a little more than
Speaker 1: you actually feelfortable with right now in the present moment,
Speaker 1: Like it's an investment, so it's okay, and it can
Speaker 1: barely afford this thing, and values are going to go up.
Speaker 1: I promise it's still you're you're gonna make money over time,
Speaker 1: even if you are at the outer edge of your
Speaker 1: affordability comfortability. And obviously these are generalizations, and there are
Speaker 1: fantastic realtors and lenders out there, but there is a
Speaker 1: reality that this is something that you might have heard yourself, uh,
Speaker 1: and that would leave you left in the lurch. Some
Speaker 1: of that advice is, you know, it's based on recent history, uh,
Speaker 1: and some of it is self serving. But there are
Speaker 1: going to be real downsides to dividing off more than
Speaker 1: you can shoe. If you end up spending more on
Speaker 1: a home, then you can actually comfortably afford I remember
Speaker 1: my dad telling me that the first time they bought,
Speaker 1: when they moved here to the Atlanta area from the
Speaker 1: Pacific Northwest. Someone at his work, even just a co worker, said,
Speaker 1: by something that's kind of at the outer edge of
Speaker 1: what you can afford, because of course you're gonna get
Speaker 1: like raises and pretty soon that's gonna feel really comfortable
Speaker 1: and you're gonna be glad add that you don't have
Speaker 1: to move and upgrade and all that stuff. And I
Speaker 1: get why someone would say that, but it's terrible advice
Speaker 1: because what happened to my dad. He got laid off.
Speaker 1: And when that happens, now, not only is that house
Speaker 1: unaffordable or barely affordable on that current salary, it's completely
Speaker 1: unaffordable when you don't have any income coming in. So
Speaker 1: that's one of those things where a lot of people
Speaker 1: will tell you that, like, well, clearly it's going to
Speaker 1: be a good investment. Yeah, that's assuming everything goes perfectly
Speaker 1: right and then nothing goes wrong. And I've experienced personal life,
Speaker 1: in your personal life, in the market, in the economy
Speaker 1: as a whole, because if we actually do turn and
Speaker 1: go into a recession. Let's say housing prices go down
Speaker 1: ten percent, you lose your job and you're forced to
Speaker 1: sell after you bought at the top of the market,
Speaker 1: and now that you you don't have a job, like
Speaker 1: you could be in a tough situation. And you know,
Speaker 1: it's not that a lot of people haven't made a
Speaker 1: lot of money in the last couple of years. They have.
Speaker 1: But you also have to make sure you're not taking
Speaker 1: on more risk, you're not biting off more than you
Speaker 1: can chew. And and here's the other thing, Matt, you
Speaker 1: need to make sure you're getting granular with this. I
Speaker 1: like that you said twenty of your monthly take home pay,
Speaker 1: And we think that's a really good way for you
Speaker 1: to think about it, your post tax income. Like you
Speaker 1: you want to make sure you're budgeting not just on
Speaker 1: like a certain percentage of my my gross gross pay,
Speaker 1: Like that's that's not what you want to be looking at.
Speaker 1: You want to be looking at the granular numbers of
Speaker 1: your actual budget and what you can afford. And we
Speaker 1: think of your take on pay is probably the best
Speaker 1: way to think about that. Yeah, that helps you to
Speaker 1: kind of cut through the clutter because you're like, well,
Speaker 1: my boss say is like, I know, I make a
Speaker 1: hunter in fift K, and so just we can surely
Speaker 1: we can afford this house. And it's like, well, maybe
Speaker 1: you are participating in an employer match. Maybe you've got
Speaker 1: a lot of money going towards retirement. Maybe you've got
Speaker 1: a lot of money going up, you know, due to tax,
Speaker 1: which is great, we want you saving money for your future,
Speaker 1: but that definitely decreases the amount of money that you
Speaker 1: have on cash, that you have on hand in order
Speaker 1: to cover your monthly expenses. Right and again, your loan officer,
Speaker 1: they might approve you for a loan that goes far
Speaker 1: beyond that number. That doesn't mean it's smart. And so
Speaker 1: when you're when you're figuring your actual postax income, it's
Speaker 1: so much easier to know what you can actually afford,
Speaker 1: you know, whether we're talking about rent or a mortgage.
Speaker 1: But if you're looking to buy, it's helpful to go
Speaker 1: ahead and get pre approved, get qualified for a mortgage,
Speaker 1: and that way you're able to pounce when the time comes.
Speaker 1: You want to make sure that if you're like I'm
Speaker 1: ready to buy home, I've got the down payment, I
Speaker 1: know that I can afford this that you're pre approved
Speaker 1: in all likelihood with a local mortgage lender or with
Speaker 1: a credit union, so that you can make solid offers
Speaker 1: when the home of your dreams kind of comes available
Speaker 1: on it's right. And the reason too, that you can
Speaker 1: confidently pounce and purchase a home of your dreams is because, uh,
Speaker 1: this is kind of like an additional step too, is
Speaker 1: that you've been searching, You've been researching, you know the
Speaker 1: market that you you know that you're looking to buy in,
Speaker 1: not just on Zillo, not just because you have been
Speaker 1: like zooming in and tapping homes and looking at the
Speaker 1: price history and all the things that we've all done,
Speaker 1: but because you are taking it to the streets, like
Speaker 1: literally you drive through the neighborhood. We've talked about the
Speaker 1: wave test before, where you wave at people and you
Speaker 1: see how they were they're like, oh, okay. We've had
Speaker 1: some pushback, some people didn't like the wave tests the way. Hey,
Speaker 1: I'm still all for the wave test. And but not
Speaker 1: just driving through neighborhood, but even walking through a neighborhood
Speaker 1: and talking to other folks who are out and about
Speaker 1: walking their dogs. These are always garner a lot of
Speaker 1: information just by talking to the folks you want to
Speaker 1: You want to know is like specific streets like the
Speaker 1: back of your hand, so that when something comes up,
Speaker 1: you know that, oh you know that that doesn't seem
Speaker 1: like a great deal, but I know that street and
Speaker 1: that street is an amazing street. It is that you
Speaker 1: know that is worth every penny. That's the kind of
Speaker 1: confidence that you gain from research and knowing a market. Uh,
Speaker 1: And so that's something you gotta do as well. Like
Speaker 1: something really small about the house that we moved into
Speaker 1: recently is that the specific location on the street just
Speaker 1: means there's a lot less car traffic, Like just a
Speaker 1: few houses up, there's this intersection where most of the
Speaker 1: cars turn, and so they turn away from your house exactly.
Speaker 1: And so it's kind of nice that we could send
Speaker 1: our kids into the front yard and there's just not
Speaker 1: really much thought to car traffic going by because there's
Speaker 1: so very little of it. It's all those like little
Speaker 1: things that add value to the house that you can't
Speaker 1: necessarily see you on a Zilla listing. Yeah, So we
Speaker 1: share all this because it is important to not only
Speaker 1: to have all your finances in order and not just
Speaker 1: to sit back on the couch with your phone, dreaming
Speaker 1: of Oh, I could live in this house, or I
Speaker 1: could live in this house like everybody does that. That's easy.
Speaker 1: But do the harder things that are a little more difficult.
Speaker 1: Do the things that nobody else is doing, because that's
Speaker 1: what's going to set you apart. You start doing the
Speaker 1: effort and you're gonna you're gonna have more success when
Speaker 1: it comes to actually finding the property that you want.
Speaker 1: You're gonna reap those rewards. And one other thing too.
Speaker 1: We we we don't want to folks to overdo it on
Speaker 1: housing costs. You know, as we kind of kind of
Speaker 1: zoom out, step back here for a minute. If you're
Speaker 1: spending too much on a house like that is going
Speaker 1: to prevent you from reaching other important goals in your life.
Speaker 1: There's a reason that the term house poor exists because
Speaker 1: that's that's what you are basically, when you are spending
Speaker 1: too much of your disposable income on housing. It sounds
Speaker 1: like we're prudish by limiting the amount of money that
Speaker 1: you're bringing in on a house, but no, we're just
Speaker 1: trying to help you be be wise and not experience
Speaker 1: that financial stress and difficulty. We're trying to help you
Speaker 1: to be thoughtful. And we know that this is easier
Speaker 1: so than done given the recent surge in housing costs
Speaker 1: for basically everyone who didn't buy a home three years
Speaker 1: ago with three plus years ago, I guess. But if
Speaker 1: you opt to spend a bigger chunk of your take
Speaker 1: on pay on housing, you're gonna have less for saving,
Speaker 1: You're gonna have less for investing in other awesome life goals.
Speaker 1: We've referenced the staff before, but ninety percent of Americans
Speaker 1: have the vast majority of their wealth tied up within
Speaker 1: their their home, within their primary residence, which isn't good.
Speaker 1: You should think about the home equity that you're able
Speaker 1: to build as icing on top, you know, icing on
Speaker 1: the cake is it's like a nice little bonus, But
Speaker 1: the majority of your net worth should come through basically
Speaker 1: passively investing within the stock market, or at least if
Speaker 1: you are going to purchase a home, investing within real estate,
Speaker 1: because you're looking through things through a different filter than
Speaker 1: you do when you're buying a primary home. Yeah, for sure.
Speaker 1: And the reality is, Matt that for some people, never
Speaker 1: buying can also be a good option. For a lot
Speaker 1: of folks, Yeah, I think that's almost seem as like
Speaker 1: a slur in our society, where it's like, oh, oh,
Speaker 1: you're a renter. You're you're looked down upon a little
Speaker 1: bit in society ridiculous because it's often it's the best
Speaker 1: lifestyle and financial option for a lot of folks. It's
Speaker 1: not a bad life like piece. I'm gonna take advantage
Speaker 1: of the sweet flight deal that I saw down to
Speaker 1: the Caymans and uh, oh, sorry, you've got to let
Speaker 1: the HV guy in to fix your furniss right, yeah,
Speaker 1: you don't have to worry about that. Uh. And ultimately
Speaker 1: the answer where you land is gonna vary based on
Speaker 1: a lot of different personal variables. Buying a home is
Speaker 1: beginning to look a little bit easier at least for
Speaker 1: a lot of folks then it has looked over the
Speaker 1: past couple of years. There's less competition out there. Homes
Speaker 1: are sitting on on zillo longer. Right, you can you
Speaker 1: can actually get more of an idea of what the
Speaker 1: pricing should look like because things aren't going overnight. But
Speaker 1: things have also gotten more expensive, and here's the reality,
Speaker 1: prices could moderate in the coming months. That's also not
Speaker 1: a sure thing either, and Ultimately, if if you really
Speaker 1: want to own that home, and you're doing great with
Speaker 1: your finances as a whole, you're wanting to own that
Speaker 1: home for a minimum of five years, in all likelihood,
Speaker 1: better advice to be able to commit to owning it
Speaker 1: for at least seven to ten years longer. Yeah, then
Speaker 1: you know it might make sense. Even if you're unsure
Speaker 1: of what housing prices are going to do in the
Speaker 1: next six to twelve months, Well, that matters a whole
Speaker 1: lot less if your ownership timeline is a little bit longer, exactly. Yeah. Like,
Speaker 1: in the end, what we want to leave you with
Speaker 1: is that all of the different headlines that you see,
Speaker 1: all all of the market conditions, what the FED does,
Speaker 1: where you know, where mortgage rates are, these are all
Speaker 1: a little less important than where you are personally, whether
Speaker 1: it be your own finances or you know, like where
Speaker 1: your head's at, Like maybe you're just not ready from
Speaker 1: a mental state to be able to own a home
Speaker 1: because maybe you're focusing on your career or maybe you're thinking,
Speaker 1: you know what, I'm pretty sure i'm gonna get married
Speaker 1: in a couple of years. I'm going to find the one,
Speaker 1: and I don't think I want to buy a home
Speaker 1: when there's a chance that my partner might want to
Speaker 1: move somewhere else. These are other things that you want
Speaker 1: to keep in mind before you spend a lot of
Speaker 1: money on the most expensive purchase that most people ever
Speaker 1: make in their lives. About Joe, Let's shift gears. Let's
Speaker 1: get back to the beer that you and I enjoyed
Speaker 1: during this episode. This was an Odelette, which is a
Speaker 1: food er laggard beer de guard and this is a
Speaker 1: beer by fair Isle Brewing out of Seattle. What were
Speaker 1: your thoughts on this, dude? So I wrote down three
Speaker 1: words to describe it, oky beer, champagne. It's kind of
Speaker 1: how I think about it. I like some of the
Speaker 1: okay beer champagne. Please, thank you very much, sir. So good.
Speaker 1: Like you're at a tail party and they're walking around
Speaker 1: with bottles of just nice craft beer, right, and this
Speaker 1: was what That's the kind of party I'm want to
Speaker 1: go to. That's exactly right. This is what by fair
Speaker 1: Aisle Brewing is what you said. And to me that
Speaker 1: I think it's like some sort of Norwegian sweater style.
Speaker 1: So it's it's like a cozy Norwegian sweater for myself.
Speaker 1: It's those hand knit sweaters that have like the I
Speaker 1: don't know, the lions going across. I've got a fair
Speaker 1: aisle um style like card again or something that I
Speaker 1: like to wear specifically in the winter when I'm kind
Speaker 1: of sitting there in my chair reading the book, specifically
Speaker 1: on Sunday afternoons. That old man by the sea life.
Speaker 1: That's that's what's for me feeling the higi or whatever
Speaker 1: they call it. Absolutely, man, I'll say that the like
Speaker 1: that oakiness, like that's the first thing that you taste.
Speaker 1: I mean, it's the first thing you smell as well,
Speaker 1: But I can't like, almost every beer out there that's
Speaker 1: been aged in wood, aged on oak is going to
Speaker 1: taste a little bit better. But then you've got those
Speaker 1: tasty malts that you kind of expect with just a
Speaker 1: high quality logger. But then sure enough it just dries out,
Speaker 1: which is you know, that's kind of I guess more
Speaker 1: of the champagne side of what you're saying. Yeah, man,
Speaker 1: it's it was really impressive that I think a lot
Speaker 1: of times with a beer that's got this type of complexity,
Speaker 1: you expect there to be maybe some more sugars, some
Speaker 1: more sweetness within the beer. But it just really dried
Speaker 1: up and it made this a very surprisingly delicious beer
Speaker 1: to drink here at the tail end of summer. I
Speaker 1: would highly recommend for anybody who might be interested in
Speaker 1: what we just talked about to pick up a bottle
Speaker 1: of Odallett's. And again, this was by Fair Aisle. By
Speaker 1: the way, this is the first time we've ever had
Speaker 1: a beer by these guys, so that we are now
Speaker 1: getting down here in Georgia. But I will look forward
Speaker 1: to more beers by them in the future, no doubt.
Speaker 1: All Right, that's gonna do it for this episode, Matt.
Speaker 1: Folks can find the show notes for this episode up
Speaker 1: on our website at how to money dot com. So
Speaker 1: until next time, best Friends Out, Best Friends Out.