In a recent episode of the PBD Podcast, hosted by Patrick Bet-David on Valuetainment, financial experts discuss the challenging landscape for first-time homebuyers amid skyrocketing mortgage rates and home prices. Joined by Vincent Oshana, Tom Ellsworth, and Adam Sosnick, Bet-David explores practical strategies for navigating the housing market, particularly the unconventional yet increasingly relevant advice: “Rent and Save.”
Mortgage Rates at a Record High
Mortgage rates have hit a 14-year high, with the 30-year mortgage rate standing at 7.03%, and Jumbo loans reaching 7.11%. This surge marks the biggest increase in two months and breaks a three-week downward trend. The higher rates are causing a significant drop in mortgage applications, indicating a cooling market.
The Dilemma: High Prices and High Rates
Bet-David highlights the paradox facing potential homebuyers: record-high home prices coupled with record-high mortgage rates. With a shortage of 4.5 million homes in the U.S., according to Zillow’s Orie the Vog, homeownership is becoming increasingly out of reach for many families. The advice from the experts? Consider renting and saving instead of buying in this market.
Rent and Save: The Strategic Move
Tom Ellsworth strongly recommends renting as a strategic move in the current market. He advises potential buyers to live below their means, find a good rental, and save the difference. This approach allows individuals to avoid the high costs associated with homeownership, such as property taxes and homeowners insurance, which are also at an all-time high.
The Tax and Insurance Trap
Ellsworth points out that buying a home at current prices means facing exorbitant property taxes and insurance premiums. These additional costs can make homeownership financially burdensome, especially with the added strain of high mortgage payments. By renting, individuals can avoid these expenses and save money for a future purchase when market conditions improve.
Future Market Predictions
Bet-David discusses potential future market scenarios, including the possibility of mortgage rates dropping if economic conditions change. He suggests that if rates were to decrease, it could lead to a surge in home prices due to increased demand and limited inventory. This potential for price hikes makes the decision to rent and save even more prudent in the short term.
The Unpredictable Market
Reflecting on the unpredictability of the market, Bet-David emphasizes that whether to buy or rent depends heavily on individual circumstances. For those planning to stay in a home for five to seven years, buying might still make sense. However, for those looking at a shorter-term investment, renting remains the safer bet.
Consumer Debt and Housing Demand
Ellsworth highlights that American consumers are currently saddled with more debt than at any point in the last 32 years. This high debt level could impact housing demand, even if mortgage rates drop. The overall economic environment remains uncertain, adding another layer of complexity to the decision-making process.
The Investment Perspective
From an investment standpoint, Bet-David notes that wealthy individuals often prefer to park their money in real estate as a hedge against inflation. This trend can drive up property prices even in markets experiencing population declines. The advice for everyday consumers is to stay flexible and prepared for various market outcomes.
“You Will Own Nothing and Like It”
People in the comments shared their thoughts: “Remember they said you will own nothing and like it….seems like their making that actually happen.”
Another commenter added: “Rent and save? It used to be you buy a home to build wealth. Now it is only for the already wealthy.”
One person concluded: “The ONLY reason I would sell now is to get the equity out of my home. Rent is more than my mortgage.”
A Cautious Approach
The consensus among the PBD Podcast hosts is clear: in today’s high-cost, high-risk housing market, renting and saving is a smart strategy. By avoiding the immediate financial burdens of homeownership and building savings, individuals can position themselves for better opportunities in the future. The key is to stay informed, cautious, and ready to adapt to changing market conditions.
Effectively Saving Money
What are your thoughts? How can renters effectively save money to prepare for future homeownership? What factors should be considered when deciding whether to buy or rent in your local market? How do current mortgage rates and home prices compare historically, and what lessons can we learn from past market trends?
Explore the full insights by viewing the video on Valuetainment’s YouTube channel here.