Many people who are looking at potentially buying a home try to get the latest, most reliable expert advice on the state of the housing market they can before signing on the dotted line.
But personal finance author and radio host Dave Ramsey explains that real estate market professionals do the best they can to use available data to make guesses about future trends, but no prediction is 100% guaranteed.
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Ramsey also emphasizes one major factor that must be in place regardless of the state of the housing market: The potential buyers of a home must have their own personal finances in good enough shape to make the move. Buying a home, after all, is generally considered to be the largest investment the average American makes.
So naturally, the largest determinant of one's ability to purchase a home is one's financial readiness. Ramsey advises against, in most situations, placing too much emphasis on housing market conditions.
That said, Ramsey offers three predictions for the housing market for at least the rest of the calendar year.
- Interest rates will decrease.
- A crash in the housing market is not imminent.
- Housing inventory is likely to stay low through December.
And he explains further what these predictions, assuming they hold, mean for potential home buyers.
Dave Ramsey explains mortgages and the interest rate outlook
Mortgage interest rates increased at a very quick pace between 2021 and 2023, primarily because the Federal Reserve was repeatedly raising the federal funds rate during that time in its effort to combat inflation.
The rate on a 30-year mortgage has fallen from 8% to 6.3% since October already.
And the mortgage rate will likely fall even further in the next few months, as the Fed meets on Sept. 17 and 18 with a high expectation it will be lowering the federal funds rate.
"For the housing market overall, this means buyer demand should pick up throughout the rest of 2024 because more people will be able to afford a mortgage," wrote Ramsey Solutions.
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Ramsey then offers some specifics on what it means to be financially prepared enough to make the purchase.
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Ramsey clarifies what it means to be financially ready to buy a home
Because Ramsey said prospective home purchasers should not pay close attention to the housing market as a major factor in the their decisions about when to buy, the personal finance personality took some time to explain the factors to which people should be paying attention.
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So Ramsey provided a list of requirements potential home buyers should check off before making the big purchase.
- Being debt-free.
- Having an emergency fund in place of three- to six-months worth of costs.
- Having a mortgage payment that is not more than 25% of your monthly income.
- Having a down payment of 20% or more of the cost of the house.
- You are able to pay closing costs without taking them out of your down payment.
"If you don’t meet these qualifications, it doesn’t matter if the market is in your favor," wrote Ramsey Solutions. "Buying a home would be a curse instead of a blessing."
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