'I Told You So!' — Dave Ramsey's Accurate Call on Real Estate 18 Months Ago. What Does The Money Expert Say Is Next?

Who can forget the Great Recession? For those heavily involved in real estate or grappling with the aftermath of underwater mortgages, the memories may still sting. 

The subprime mortgage crash of 2008 inflicted a harsh reality as housing prices plummeted by one-third, leaving lasting scars in its wake. Today, with mortgage rates skyrocketing and high-profile bank failures still fresh in the collective consciousness, Americans find themselves approaching the housing market with a healthy dose of caution.

Financial expert Dave Ramsey has a different perspective. When it comes to predictions in consumer finance, he often hits the mark, and during a recent episode of “The Dave Ramsey Show,” he had some insightful words for those fearing a repeat of the past.

“We predicted exactly what would happen,” Ramsey said. “We were using data, not emotions, to actually figure out what was going on.”

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The significant difference between then and now, according to Ramsey, is the “dramatic” shortage in housing inventory despite rising interest rates. This scarcity affects affordable housing on a national level. A National Low Income Housing Coalition study revealed a shortage of 7.3 million available and affordable rental homes for extremely low-income renters, those at or below the federal poverty line, which is 30% lower than median income.

Looking at the broader picture, Realtor.com found a shortage of 6.5 million single-family homes overall. Despite a slight drop in prices during the latter half of 2022, the overall housing shortage continues to drive real estate demand across the country. Ramsey points out that there are 66 million prime buyers today, compared to 55 million prime buyers in 2008.

During the pandemic, with the convergence of these factors, panic set in. Ramsey recalls the prevailing sentiment of: It's all going to go away — it's another 2008. But Ramsey says it’s not another 2008, and the bubble is not going to burst. And now, with the benefit of hindsight, he can confidently say, “I told you so.”

While Ramsey acknowledges that the market has slowed down, the median home prices have not experienced a crash akin to the 2008 housing crisis. After peaking at $449,000 in June 2022, prices dropped to $403,333 by January, marking about a 10% dip. But between January and May, home prices rebounded to $441,445, up 1% year over year, clearly indicating that a crash is not on the horizon.

While the market has shown some fluctuations, it remains far from the catastrophic scenario of 2008. And as the market continues to evolve, alternative investment platforms like Arrived Homes offer opportunities for individuals to invest in real estate by purchasing shares of rental properties. Investors can earn passive income through rental revenue while properties they invest in appreciate in value over time.

Rental properties, according to Ramsey, offer a great opportunity to generate extra income. They can add thousands of dollars to your yearly earnings and potentially yield significant profits when sold. But being a landlord comes with challenges such as dealing with rent payment issues, finding new tenants and managing maintenance and repairs.

To address these challenges, Arrived Homes provides an alternative approach to homeownership. This unique platform shares the responsibilities and risks of property ownership among multiple investors, making it more manageable and reducing the burden on individual landlords. 

Bidding farewell to those rock-bottom interest rates of the past, Ramsey offers a reality check for Americans. Brace yourselves for a return to a more typical mortgage landscape, with rates hovering around 6%. Ramsey explains that the artificial measures taken by the government post-2008 were responsible for driving rates below that threshold.

With a touch of confident humor, Ramsey and his team emphasize their accurate predictions. “We completely nailed that,” Ramsey said. “We looked at the data, and we hammered it. We nailed it.”

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Image source: Screenshot from Is the Housing Market Going to Crash? | Ramsey Real Estate Reality Check on Youtube.