let's talk about the housing market according to Redfin Americans stopped buying homes leading up to the election due to the uncertainty and then after the election was decided Americans finally started buying homes again but the question is with mortgage rates back at 7% and housing prices near record highs is this a good time to buy a house and the reason I wanted to make this video specifically is because out of the last 10 podcasts that I did every single host asked me the same question should you buy a house right now so I want to
break this video up into three different parts number one should you buy a house right now number two where is the housing market going next because this is what everyone's trying to figure out and number three tips if you are thinking about buying a home on how you can save some money when you're actually buying a house now let's start with number one should you buy a house right now but first here are a few words from my sponsor duck ducko look not overpaying on your housing cost is important but so is not getting my
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now to answer the question of should you buy a house the first thing you want to understand is what is your home is it an asset or a liability and the reason why I bring this up is because I have seen the house Market from multiple lenses I a licensed realtor I a licensed attorney I'm a real estate investor and the problem that so many people make when they go out to buy a home is when you talk to your realtor you talk to your Banker they tell you that this home that you're going to
buy this house that you're living in is your biggest investment it is your biggest asset and so you definitely want to buy a little bit bigger a little bit nicer because this is how you're going to build your generational wealth that's what every realtor every mortgage Banker will tell you the problem with that is if you look at any wealthy person in the world they never talk about how they became wealthy because they paid off their house they talk about how they became wealthy because they invested in businesses because they built a business because they
invested in rental real estate because they invested in stocks that's how people become wealthy they don't become wealthy because of the house now listen to what I'm saying I'm not saying you shouldn't buy a house but you have to understand if your house is an asset or a liability because the reality is your house is a money pit it is a liability until you sell it and then then maybe you make some money but it is a money pit until then and there's no guarantee you're going to make any money which is why I want
you to treat your house like a liability not like an asset when I think about buying a house for made to live in I want to make sure I can afford it that's the key thing ignore all the other stuff that's going on because everybody is looking at their house as a way to make money that's why people get so caught up with what's happening in the housing market and the economy because they're looking at this house as how I'm going to build wealth how much money am I going to make instead of is this
the house that I can afford to live in to make memories in and that's for so many people get things wrong and I'm going to take this one step further because you probably heard people say oh if you buy a house for $300,000 it's going to be worth a million dollars when you retired then you can pass it on to your kids but the problem with that is you buy this $300,000 house and it goes up a value to a million you might feel like you built wealth out of this house but there's a few
problems because number one even if you pay off the mortgage it still cost you money to live there in fact it costs you more money to live there now because your property taxes go up as well your property taxes are based off of the value of the property so if your house price goes up your house value goes up so do your property taxes and if your income doesn't go up to match that well now you can't afford the house you also have insurance to pay for and as your house goes up in value your
insurance also becomes more expensive so if we don't have the income to pay for the higher insance Insurance well now you might not be able to afford that house not to mention you still have to pay for the upkeep the maintenance and the upgrades so now even if you pay off that house as it goes up in value you have to make sure your income keeps rising to make up for the higher cost of living and then if you pass this house down to your kids they get this house free and clear but now they
have to have the income to support living in this house and if they don't either they have to do a Cash out refinance and then have to figure out how to pay the mortgage or they're going to have to sell the house and now start this process all over again versus if you own a rental property now the cash flow from the property the rental income should be enough to pay for your property taxes your insurance to maintenance your upgrades and put some money in your pocket that's the difference between real wealthy thinking and the
average person's wealthy thinking that's why I want you to think of your house like a liability instead of an asset and when you do that you'll change the way you think about buying a house because you're not looking at this house as a way to make money you're buying this house like a liability when I go on buy a shirt I don't care what's happening in the economy I look at can I afford the shirt and is this something that I want and need so now if you want to buy a house great go ahead
just make sure you think of it like a liability and when you think of it like a liability now you definitely have to make sure that you're can afford the house what does it mean to afford the house that you're going to buy three things you have to afford the down payment the monthly payment and the moving cost let me start with the moving cost because this is probably the one that most people completely Overlook when when you buy a house and you have to move into the house it is expensive and I'm not talking
about the closing fees which are also expensive I'm talking about actually moving into the house if you have to hire movers that's an expense back to that in if you're going to buy new furniture back to that in Furniture is expensive trust me I know my wife and I went to go out and buy new sofa recently if you want to buy or upgrade your kitchen or your bathroom that is expensive if you're going to finish the basement if you're going to build a deck all these things are part of the moving cost and you
better factor that in before you move in because you better have the money for it because if you don't you are going to be digging deep into your pockets to pay for that the second thing is you have to afford the down payment now I don't make these videos to get you to like me I get these videos to help you be better with their money and the reality is everybody wants to sell you a mortgage and so even if you don't have the money they will try to find creative ways to get you in
for 10% down 5% down 3% down maybe even 0% down but if you actually want to be able to afford the home you want to have at least a 20% down payment I know that's expensive during a time when housing prices are very high but if you want to actually afford the home now look at the down payment and have at 20% down payment that we have some real Equity you have some real skill in the game to protect you against worst case type of situations and then the third part is your monthly payment making
sure that you can afford your monthly payment now every bank is going to have a different calculator some banks like to follow was called the 28% rule but I'm going to do this a little bit differently and the way I like to do this is by talking about the 75151 plan you may have heard me talk about in the past and what the 75151 plan says is for every dollar that you earn from here on out 75 cents is the maximum that you can spend 15 cents is the minimum that you invest and 10 cents
is the minimum that you save that means that you have to be able to live off of 75 cents of every dollar that you earn and this has to include your mortgage costs your property taxes your insurance your growth gry costs your car costs your travel costs your fund costs your clothes costs so if we can fit all of your expenses within here you can afford the mortgage but this is where you have to make sure that you can continue to pay your mortgage pay your bills and still have money to invest and still have
money to save that's the real way to afford your mortgage it's because you're still having money to invest the mistake that so many people make is they buy a house so big because their realtor say so their mortgage Banker says they can afford it and then because you buy a house so big you don't realize this is a money pit and now you have so much money going to pay your mortgage and your property taxes and your insurance that you no longer have money left over to save or invest and now you're stuck but you
think you're Building Wealth because you're building this equity in your house when in reality all you're doing is paying the bank's interest because don't forget the banks are smart and the way that they play their game is they frontload their mortgages so if you get a 30-year fix rate mortgage the first first almost half 14 years and 8 months or so are going to be the majority of your monthly payment going directly into the bank's pocket of Interest so if you're paying $3,000 a month for your mortgage for the first few months almost all of
that $3,000 as going directly into your Banker's pocket and interest maybe $10 or $12 is going to your principal it isn't until year 15 that half of your monthly mortgage payment is going to build equity in your property 15 years later but if you refinance along the way that clock restarts and the process starts all over again because the bank wants to get paid first they frontload your mortgages so your bank gets paid their interest first now before I move on to the second section of this video I want to reiterate I'm not against you
buying a home in fact I would prefer you to buy a home I just want to make sure you can afford the home and on to understand where the housing market is going let's take a look at where housing prices are and what's going on with supply and demand in the housing market because this will teach you what's going on in the housing market economy housing prices nationally are still at or near record highs although we do have some Pockets around the country like in Florida where housing prices are falling but even if housing prices
fall a little bit the problem is that we've seen housing prices grow way faster than incomes Over The Last 5 Years between 2019 and 2024 we have seen household income in America grow by an average of 18% well the average housing cost has gone up by around 50% we've seen it go up by more than that in some areas in fact many areas it's gone up by more than 50% some areas a little bit less but on average about 50% growth in housing cost and that's just the cost to buy a home not to mention
higher mortgage rates than where we were 5 years ago but you can start to see the problem the cost to buy a house has gone up so much faster than incomes which is why house pricing is so important and this is where so many people are paying attention to what's going on with home prices because people are hoping for a break and this is where you want to pay attention to supply and demand because the reality is housing costs housing prices like every other asset follow supply and demand when you have more buyers than sellers
when you have more demand than Supply that pushes home prices up when you have more sellers than buyers when you have more Supply than demand that can pull home prices lower so let's take a look at Supply and then let's take a look at demand number one we're not seeing forced sales meaning foreclosures and the reason why is because home prices have gone up so much so if you buy a home the first thing is many people have a 30-year fix rate mortgage or some sort of fix rate mortgage which is different than what we
saw back in 2008 back when the Great real estate crash happened because back in the 2008 crash many people had a variable interest rate mortgage which meant that their payments would fluctuate we don't have that today cuz most people have a 30-year or 15year fixed rate mortgage the second difference between now and then is let's say you own a home and you run into a financial hardship you know what your monthly payments are but you just don't have an income to pay off this mortgage now what well back in 2008 when house prices were falling
people had no equity so now you'd have no option you couldn't sell today if you run into a financial hardship and you bought your home a few years ago chances are you could sell your home and walk away with a pocket full of cash so there's no reason for a foreclosure to happen this is why we haven't seen a big uptake on foreclosure and you might have seen some articles talking about how foreclosure rates are rising at an alarming rate the reason why is because we had no foreclosures in 2020 and 2021 so when you
go from zero to some it looks like a lot versus we're still way below where we were back before the pandemic number two it's not favorable for a lot of people to sell yes if you sold your home you could probably get a profit but the problem for a lot of people is they'd have to then upgrade to a much higher mortgage rate people don't want to do that 76% of Americans today have a mortgage rate locked in at under 5% many people have a mortgage rate locked in under 4% so if you have a
4% mortgage a 3% mortgage or a 5% mortgage you probably don't want to sell that home unless there's a real reason to because then you have to go to a 7% mortgage maybe want a s a half% mortgage and that's been disincentivizing a lot of people from wanting to sell their home and go to a new house because they're locked in at a low mortgage rate and you won't get those mortgage rates anytime soon it seems and then we have the third part to supply which is building new homes and this one is interesting because
New Economic policies and government policies could change this but we haven't seen a huge influx of building until just recently because a lot of Builders were not sure about what's going to happen with mortgage rates or the economy and now that Trump is entering the White House we have a whole new economic plan on how to stimulate the housing market and we've seen mixed reviews from economists but of course we're not going to know what happens until it actually happens so just take everything that I saved with a grain of salt number one economists are
saying that Trump's economic plan to remove millions of illegal immigrants will hurt the building process why because you have a lot of undocumented or illegal immigrants that working to build houses so if construction companies lose those workers it could take longer to potentially build homes then number two Trump has also promised to remove some red tape and regulations to make it easier for Builders to go out and build new homes build new properties and have more land to potentially build these properties to hopefully increase the supply of homes and then the third part to Trump's
plan here is he also has been promising lower mortgage rates now Trump can't set mortgage rates directly the Federal Reserve Bank sets the federal funds rate the bank sets the actual mortgage rate so we'll see what ends up happening with mortgage rate where Trump has been promising lower mortgage rate which could make it easier or more favorable for somebody who owes a home to sell because then you don't have to go up to a 7% mortgage if you're going from a 5% mortgage to a 5 half% mortgage is not as bad of a sell not
to mention that General Powell also said that he won't leave even if Trump asks him to um if he asked you to leave would you go no do you think that legally he you're not required to leave no moving on to the demand side there are two main factors that influence the demand for housing and that is the economy and mortgage rates starting with the economy when people feel confident about the economy then they feel more confident to make a big purchase like buying a house because they're confident that they're going to continue having a
salary they're going to keep their job the business is going to keep growing and so we're going to see what ends up happening with the economy but you want to pay attention to this because if people feel strong in the economy people feel more confident to buy a house same with mortgage rates we already kind of talked about this in the supply side but when people have lower mortgage rates your mortgage is more affordable generally assuming you don't have to go out and borrow a whole lot more dollars but lower mortgage rates make your mortgage
payment more affordable so it makes the cost of buying a house a little bit cheaper and we're not going to know for sure what happens with mortgage rates until after Trump comes into office and we see what happens with the Federal Reserve Bank so I'm not going to go too deep into that but just understand the lower mortgage rates can increase demand higher mortgage rates generally decrease demand although the higher mortgage rates that we have seen in the last couple of years didn't decrease demand fast enough to cause a decrease in the price of homes
because while the demand did fall the supply wasn't there either and the third part of this video that I want to talk about is how you can save some money when buying a house and the reason why I want to talk about this is because I was on a podcast recently where the host asked me if somebody wanted to buy a home and they feel like they're priced out will they ever be able to buy a home what can they do to ever be able to buy a home because young people don't have the money
for the down payment and prices keep getting more expensive and is there ever going to be an opportunity and I said yes but you have to look outside of the box for example and this is going to offend a lot of people but that's okay come to Michigan our office is in downtown Detroit Michigan is beautiful there's a lot of amazing things happening but do you know what else if you can afford a $250,000 house you can buy a nice house three bedroom maybe four-bedroom two bath in a growing neighborhood where businesses are moving into
with a nice downtown and not just that when you compare the salaries of a job in Michigan versus New York or Michigan versus California you'll see that the incomes are not that different but the cost of living is drastically different meaning if you move out of a High Cost of Living State and you move into a lower cost of living State you might take a little bit of a pay cut but your cost of living might have a huge pay cut which means you could build more wealth faster own your house faster and have more
money to invest and this is where you got to understand why are you living where you are because there are some people that are living in California and New York because they want to make it because they want to grind because they have the opportunity in this place fine that makes sense but if you're there just because well that's where you want to be and you want to party and you want to spend money and you also want to build wealth well you're kind of not making any sense here and you got to think about
what are the other opportunities so number one is consider moving from a High Cost of Living state to a lower cost of living state number two that I always want to highlight because I've noticed a lot of people talk about this recently is when you're getting a mortgage shop around don't just go to your Banker shop around go online see what different mortgage lenders are charging because guess what some mortgage lenders are going to charge you less money less interest on the exact same loan which means you could save1 or $200 or $300 a month
just by going to a different lender so yes it can pay to shop around because some lenders are going to charge you more than others just because of who you're going to and tip number three is consider buying what other people are scared to buy meaning a fixer upper a house that doesn't look very beautiful because sometimes these homes that don't look very nice you can get at a big discount and sometimes that discount is going to be big enough for you to do a whole renovation to make this home look beautiful and still have
a discount on the fair market value of the home this is what flippers do flippers are looking for homes that look ugly coming in putting in the money to make it look beautiful that way then they can sell it for a profit but you can do what flippers do without flipping the home you can just live in that home find an ugly home put in the money to make it look beautiful and then keep that money as a discount that you saved by not having to pay top dollar for a already beautiful home it takes
more work but there's a lot of opportunity there Buy Low sell high but what do you do in an economy like today where markets are setting record highs even though many people are still concerned about the economy and now investors are hopeful that Trump is going to save the economy and boost the stock market so is this the time to double down and buy even more or is this the time to sell high and cash out of your profits
