Dave Ramsey: It’s not the market’s fault you can’t buy a house

With home affordability at a new low, the dream of homeownership seems increasingly out of reach. Dave Ramsey, CEO, Ramsey Solutions and host of The Ramsey Show joined TheStreet to discuss the crucial mistake people tend to make when it comes to saving for a house.
Transcript:
CONWAY GITTENS: What is your rule of thumb in terms of a down payment amount. What's the realistic savings goal that people should be targeting?
DAVE RAMSEY: Well, if you're a first time home buyer, you know, you need to put down 5% or 10% maybe 20 would be great. But it's a lot tougher when you're a first time home buyer to do that. 20 would be great because you avoid PMI, private mortgage insurance, which is about $75 per month per 100,000 borrowed. So you buy a $400,000 house. We're talking about 200. We're talking about 300 bucks a month just for PMI. And so you avoid that with a 20% down payment. So that's best. 100% down is best. But again, first timers, we 5%, 10%, whatever, and make sure you're out of debt on everything else. So that you can afford the house then.
CONWAY GITTENS: So I know you are a tough love kind of guy. So when we're thinking about coming up with this deposit, many people are trying to figure out how am I going to do it. So what is your advice to people of all generations and how to save in order to come up with the money that they need to make that deposit?
DAVE RAMSEY: The average car payment in America today is almost $700 a month. There's $1.7 trillion in student loan debt. There's over $1 trillion in credit card debt. No wonder they can't save. If you have a $700 car payment and a $400 student loan payment and and you're living from credit card to credit card to credit card and you're running another 300 or 400 bucks out on that in an average household income, you can't breathe. Let's have two cars. Let's go ahead and kick that to almost 2000 bucks a month just for car payments. You know, so what we teach folks is if you get out of debt and you buy a car that you can actually pay cash for and you cut up your credit cards and you live on actual debit cards, actual cash, and you don't spend more than you make.
Quit acting like you're a freaking congressman, you know. I mean, my gosh, live on less than you make when you get the debt cleaned up in the average household. Now, there's disposable income mathematically, but they're giving it all to car companies, credit card companies and Sallie Mae. And so, of course, you can't save in that situation. You're giving away your most powerful wealth building tool, which is your income. So that's why we've ended up in the name of wealth creation, in the name of prosperity have ended up becoming the no debt guys over at Ramsey.
CONWAY GITTENS: So are you saying that Americans are driving too much car and that's why they can't save for their house?
DAVE RAMSEY: 100% definitely. They're driving cars they can't afford for sure. And they're and they're going to schools. They can't afford in the name of if I go to that school, I'll be successful versus the school I could actually pay cash for. And mom and dad could have helped me work my way through. But instead I got $140,000 in student loans because I went to a famous college and got basically the same education. And so, yeah, yeah, definitely. We're buying things we can't afford with money. We don't have to impress people we don't really like. And then the payments are stealing our ability to save and invest.
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[@bennyboy0773]

Yeah the average car payment may be $700, but that's not because we're more extravagant than previous generations, it's for the same type/age/class of car as before, the prices are just exponentially more.

[@lauracollins3451]

NO, prices of homes are rediculous. I purchased my home for $145,000 in 2016 i have had realtors send me advertisement offers for between $380,000 to $410,000 on my property for the past year because there is no sales inventory for people to purchase homes in my area. No way my house should have a increased price over $250,000 in 8 years. Its rediculous!

[@TedHawk]

Gotta love the tough Boomer love for Gen Z. People who built fortunes while the Fed inflated markets lecturing the next generation who gets to live with the promissory notes.

[@Trackpad12]

CRY MORE ONLINE IM SURE THAT WILL HELP YOU!

[@TedHawk]

@@Trackpad12 More tough love- thanks Boomer.

[@Evan_Adams]

This is stupid. We live in California where starter homes are now past $1M. How you gonna save $200-$300K after tax. Just about impossible. Delays household formation. You are not going to save that because of a few bucks here and there. Of course never buy a new car. But still this isn't a path. The issue is the taxes. We pay too damn much taxes

[@hodgymowagy7521]

Guess you shouldn't be living in California

[@Evan_Adams]

@@hodgymowagy7521 effective tax rate.

[@elijah__]

step 1: move

[@elijah__]

stop deflecting. the issue is your spending and your income. not taxes. i am 24, and i have a roommate in a 70k population city you've never heard of. 6k hits my bank each month, and my obligatory expenses are 900. i invest all the rest. i have no education, and i got these jobs (one full time, one part time) with no experience. complain more, or change your life. those are your options

[@Evan_Adams]

@@elijah__ I live in a town of 35K in the SF Bay Area. My wife and I make around 750,000 a year. We are educated. Well employed. Bought a starter home for 2.5M. put down 20% and had the required extra cap requirements covered. The amount we had to pay in taxes was absurd to get here for almost no benefit. Simple fact is people in California subsidize the welfare states all across fly-over USA.

[@FrankMakrides]

The most valuable money making tool is not income, it's time.

[@Trackpad12]

Oh really?

[@FrankMakrides]

@@Trackpad12 Really

[@Trackpad12]

@@FrankMakrides well you are wrong. You need income, without it you just have free time and still broke.

[@FrankMakrides]

@@Trackpad12 There are no right or wrong answers, only results. I can honestly say from personal experience that time is our most valuable asset for almost everything. That includes experience, wealth, compound growth and financial freedom for starters. Some famous quotes to put things in perspective: "time is money" - "compound interest is the 8th wonderu of the world" - "The key is in not spending time, but in investing it." - "time is the most valuable thing a man can spend" - I wish you all the best, good luck!

[@GillerHeston]

I’m closing in on my retirement and I’d like to move from Minnesota to a warmer climate, but the prices on homes are stupidly ridiculous and Mortgage prices has been skyrocketing on a roll(currently over 7%) do I just invest my spare cash into stock and wait for a housing crash or should I go ahead to buy a home anyways?

[@jcurdrayeric243]

If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.

[@rogerwheelers4322]

Considering the present situation, diversifying by shifting investments from real estate to financial markets or gold is recommended, despite potential future home price drops. Given prevailing mortgage rates and economic uncertainty, this move is prudent, particularly due to stricter mortgage regulations. Seeking advice from a knowledgeable independent financial advisor is advisable for those seeking guidance.

[@joshbarney114]

I've remained in touch with a financial analyst since the start of my business. Amidst today's dynamic market, the key difficulty is pinpointing the right time to buy or sell when dealing with trending stocks - a seemingly simple task but challenging in reality. My portfolio has grown by more than $700k within just a year, and I've entrusted my advisor with the task of determining entry and exit points.

[@FabioOdelega876]

@@joshbarney114 I appreciate the implementation of ideas and strategies that result to unmeasurable progress. Being heavily liquid, I'd rather not reinvent the wheel, thus the search for a reputable advisor, mind sharing info of this person guiding you please?

[@joshbarney114]

Finding financial advisors like Marisa Breton Dollard who can assist you on things like investing, insurance, making sure retirement is well funded, going over tax benefits, ways to have a volatility buffer for investment risk would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.

[@ianburke7960]

This guy is supposed to be an expert? I own my car. I went to a cheap state school for college. I make more than the median income and I would need to double it to even qualify for a mediocre fixer upper home. How about we stop the investors from eating up the supply? What does a single person need to own 5+ properties for? They don't. It's greed. And it's infringing on the average Americans right to own property.

[@KiingM]

Pay cash for university, where is a 18 year old getting $20000 from? Pay cash for your car, if you want a decent car that won’t brake down in 3 months you have to pay bare minimum $1500, and meanwhile where am I working to make that and how am I getting to work? Most of y’all didn’t grow up taking public transport, y’all don’t know that life unless you are in a big city. Like I get it, don’t go into debt, save etc but be more realistic Dave. Try understand what the younger generation is going through instead of blind lectures.

[@wesjimez2941]

Dave has no concept of reality. He thinks you can pay for college delivering pizza.

[@charleswarren9944]

Good info.

[@pleaseadoptus]

This guy's only rich because he has a TV/radio show

[@jimnpen8451]

Avg median income is 77k... Avg home price 250k Things are not what they were before you got rich there fat cat..

[@Eric79-f7i]

Come to Ontario, Canada. You cant get an apartment condo or trailer in a trailer park for 250k.

[@kickstartfoxy4943]

Where did you get 250k, all in seeing is 400k

[@Trackpad12]

@@jimnpen8451 why try to be average??

[@wesjimez2941]

Dave is worth almost a billion dollars. He has no clue what the average person has to deal with. He said his kids have no concept of reality. He is right about paying $700 a month for a car

[@xquakexx]

Wrong as always. Wages