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National shortage on affordable housing

The National Low Income Housing Coalition found in a recent study that there’s a national shortage of 7.3 million affordable and available rental homes for extremely low-income renters. That’s Americans at or below the federal poverty line, 30% lower than the median income.

It’s important to note that’s only for those in extreme poverty.

More broadly speaking, Realtor.com found slightly better results, with a 6.5 million shortage of single family homes overall. That’s even as prices dropped slightly during the latter half of 2022.

Meanwhile, the number of prime buyers in 2008 (Gen Xers) totalled 55 million versus 66 million prime buyers today (millennials), as Ramsey pointed out during the livestream.

The overall housing shortage continues to keep real estate demand up across the country. And so long as demand outpaces supply, higher home prices will result. (Clever homeowners can leverage this by selling their property in a hot market and moving to an area with more plentiful inventory and lower prices.)

As those two factors converged in the pandemic, Ramsey says panic set in.

“Everyone’s going, ‘Oh, it’s all going to go away! It’s all going to be another 2008!’ We kept saying, ‘No it’s not, it’s not going to bust,’” Ramsey recently recalled on his show.

“I think we can just stop and say I told you so.”

That being said, Ramsey does think the market has slowed down. Indeed, after median home prices peaked at $449,000 in June 2022, they dropped to $400,000 by January 2023, according to data from Realtor.com. That was a dip of about 10% — yet nowhere near the 33% tumble seen in the 2008 housing crash.

But go figure: As of July the median home price is $440,000, down slightly from $445,000 in June. That’s a decline of 2% from June 2022 — definitely not a crash, let alone a sign one is on the way.

Read more: 'It's going to be ugly': This CEO issued a dire warning about U.S. real estate, saying areas will be 'destroyed' — but he still likes 1 niche

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Temper your expectations

So, homeowners looking to sell can take heart. On the one hand, the days of receiving dozens of offers in one weekend, sight unseen, are gone. Ramsey contends that sellers will have to stage, clean up and work on the curb appeal of their homes to sell for a good price.

Assessing the market heat up during the pandemic, Ramsey says “that was an anomaly.”

“That was a short period of time … when everyone sat around in their house and got fat and decided they wanted to move out of their house. There was a shortage of lumber, lumber when up 3x, it’s back down, and builders are not building specs right now. They’ve slowed down and they’re adding to this shortage.”

Ramsey and his team had predicted that after the recent drop there would be a 2% to 3% increase in the value of homes this year. But as they note on the show, this is in home value — not asking price.

“It’s not people buying like they’ve lost their dadgum minds. This is reasonable people buying properties at reasonable prices,” Ramsey said.

Prepare for higher mortgage rates

As for mortgages, Ramsey notes that we may never again see those 2% or 3% mortgage rates of the recent past. Instead, Americans will need to level-set their expectations to a norm of 6%.

“The only reason it was driven down below 6% was the government artificially [did it] to restimulate the real estate market after 2008,” Ramsey said.

All said and done, Ramsey and his team stated may check in on their predictions more often — if only to say “I told you so.”

“We completely nailed that,” he said. “[We] looked at the data and we hammered it. We nailed it.”

And when it comes to housing, a hammer and a nail beats getting hammered and nail biting every time.

Correction — Aug. 2, 2023: This article has been updated from a previous version that incorrectly stated in the headline Dave Ramsey made his prediction about real estate 18 months ago. It was in fact made on July 14, 2022.

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Amy Legate-Wolfe Freelance contributor

Amy Legate-Wolfe is an experienced personal finance writer and journalist. She has a Bachelor of Arts in History from the University of Toronto, a Freelance Writing Certificate in Journalism from the University of Toronto Schools, and a Master of Arts in Journalism from Western University. Amy has worked for Huffington Post, CTVNews.ca, CBC, Motley Fool Canada, and Financial Post. She is skilled at analyzing trends and creating content for digital and print platforms. In her free time, Amy enjoys reading and watching British dramas on BritBox. She is a mother and dog-mom to a Wheaten Terrier.

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