The Expert Podcast

For many years, there's been significant backlash against the housing market, with people saying, "Look, I can't afford the American dream." The American dream includes owning a home, a white picket fence, and all that. While there's a lot more to it than that, there may be real obstacles to owning a dream home. An American dream and a dream home are related, but they're not exactly the same. You can still have the American dream and own a home if you change the definition of what a dream home is.

If you're watching all of the online home-buying shows or celebrity-type reality shows, seeing large, lavish homes, and concluding that's the only kind of house that could make you happy, you probably aren't going to own a dream home. According to this article, 50% of Americans say they're giving up on their dream home. That could be a good thing or a bad thing. If it means giving up on the idea of buying a home, that's a bad thing because homeownership is a pathway to the American dream and financial security. However, if you're giving up on buying a particular type of home and realizing that any home could be a dream, that's a different story.

It's unclear exactly what percentage of people are deciding not to buy any house versus those who are downscaling. We've talked on this channel for many years about how buying a home—within what you can reasonably afford—is better than staying in a rental situation. So, what's changing now? Well, obviously, there are higher prices. But when prices first increased from around 2018 to 2020-2021, there was a 24- to 30-month period where home prices roughly doubled. Even with that jump, there was still a huge demand for homes because interest rates were low.

At a 2% or 3% mortgage, even if a house price went up from $250K to $500K, the monthly payment remained affordable. Now, home prices have gone up and locked in, while mortgage rates have risen from 3% to almost 8%. This is the nail in the coffin stopping many from buying a house. The bad part is that house prices are relatively sticky. Once they rise, they rarely come down quickly. Unlike the stock market, which can fluctuate daily, housing prices don't vary as much.

You might think of the 2008 housing crash, but that's a different story. Back then, many homes weren't backed by solid ownership. People had interest-only loans, multiple speculative houses, or no down payments. Today, most homes have significant down payments, low interest rates, and thorough underwriting. Buyers are vetted for income, credit, and down payments. These aren't people who can easily walk away from a house.

In 2008, 20%–30% of homeowners had bad credit, zero down payments, or multiple houses in their names, making it easy to walk away. That's not the case today. Despite high prices creating pressure, there's still demand for homes, preventing significant price drops. Unlike 2008, when there was a surplus of homes, there's currently a shortage.

Even with affordability challenges from high prices and interest rates, there will still be buyers. Will prices shoot up more? Probably not anytime soon. Will there be some discounting? Perhaps, especially for speculative homes. But prices likely won't return to 2019 or 2020 levels. Homeownership is crucial, and waiting for rates or prices to drop could mean missing out on the benefits of owning a home.

If you're renting, your rent will definitely go up during renewal. As more people unable to buy a home are forced to rent, the rental market will skyrocket. Many houses are being bought by investors—hedge funds betting on housing as a solid investment. For example, in the Dallas-Fort Worth area, nearly one-third of homes sold were purchased by investors. Nationwide, in some areas, investors bought over 50% of homes.

These investors make decisions based on financial calculations, not aesthetics. If you want to piggyback on their strategies, buying a home—even just one to live in—provides multiple benefits. It gives you a roof over your head, stable payments, and aligns you with expert financial strategies.

Let us know in the comments what you think about the future of real estate. When considering whether housing prices will crash, ask yourself: Is that wishful thinking so you can buy a house, or is it a logical and rational analysis of the market?