Over the past several decades, the cost of buying a home has soared relative to household income. Homeownership was once considered a given, feasible even on a single income.
Now, many dual-income households live paycheck to paycheck, struggling to make rent while attempting to save tens of thousands of dollars for a down payment.
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Younger homebuyers have opted to stay out of the housing market, continuing to rent in the hopes that buying conditions and mortgage rates improve.
However, the housing market has taken longer to bounce back than many buyers would like, which has delayed the younger generation from achieving the American Dream.
In an exclusive interview with TheStreet, financial guru Dave Ramsey reveals when he believes younger generations can expect the pendulum to swing back in their favor, and how the housing market will change in the year ahead.
Rising home prices and mortgage rates have priced many buyers out of the housing market, putting homeownership out of reach. However, Dave Ramsey expects housing conditions to rebound.
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Dave Ramsey says homeownership is delayed, but younger buyers will get an opportunity eventually
Only half of millennials and a quarter of Gen Z own a home, and mortgage rates and home prices are to blame. Housing costs have far outpaced wage growth, making it increasingly difficult for younger generations to make ends meet.
Only 33% of current 27-year-olds are homeowners, as opposed to 40% of baby boomers who owned a home at 27.Â
Still, Ramsey explains why younger homebuyers shouldn’t lose hope in the housing market.
“Oh, homeownership is just delayed,” he said. “You know, what you’ve got to remember is in a given moment, your life is a snapshot, but your snapshot is not a predictor for your whole life. Life is a filmstrip. It moves on to the next frame, and the next frame.”
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Most millennials and Gen Z buyers indicate that a mortgage rate below 6% would be enough to encourage them to buy a home, but that seems unlikely anytime soon, as current mortgage rates have begun inching toward 7% again. Ramsey highlights that buyers are always able to recover and purchase a home, even after times of great uncertainty or recessions.
“A year from now is going to be different; it could be better, it could be worse, but it’s definitely going to be different. That’s been true of every generation for the past 35 years since I’ve taught people about money.”Â
Dave Ramsey remains bullish on a housing market resurgence
Although mortgage rates seem stubborn and elevated from the 3% rates during Covid, a mortgage rate between 6% and 7% is very in line with historical averages. The 1980s saw mortgage rates in the double digits for several years.
Although the costs of living and housing prices are on the rise, Ramsey expects the market to correct itself soon, as it typically does.
Related: Dave Ramsey warns home buyers to avoid major mortgage mistake
“I’ve watched these markets come and go,” he said. “I’ve watched people panic about real estate, saying, ‘I’ll never own a home in 2008.’ Well, guess what, they’ve all got homes now.”
Although an unpredictable housing market can be unnerving, time heals all wounds — even a lack of affordability and diminishing inventory.Â
“Right now, at this moment, someone’s income may not keep up in this particular snapshot with the price increases, but I’m really bullish,” Ramsey said. “I think that Gen Z is going to have plenty of housing. They’re going to be just fine.”Â
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
