Joel Larsguard How to Money his show Sunday twelve pm to two pm. His social address is at how to Money Joel Joel.
Good morning, morning Bill.
I have not seen this happen for a while, homeowners finding themselves underwater. Now, I have not heard that phrase for a while. Let's explain what's going on, only you explain what's going on and how the market has changed.
Yeah, so this is you're right.
I mean, this is one of those things where in the Great Recession, the aftermath of the Great Recession, the amount of homeowners that were underwater was kind of astronomical, right, And so we saw a lot of foreclosures, a lot of short sales, and it was I mean, it led to just a tanking of the housing market across the United States, and right now, like we've had this essentially since two thousand and nine, and just you know, prices being so stink and low, it wasn't even funny people
slowly buying into the housing market. And then you know, just gradually prices increased over time. And then with the during the pandemic, with what people wanted and desired out of housing, the housing market just continued to take off rates were still low, but then rates crept up and prices were at an all time high. And so now what we've started to see is the market become a
lot more stagnant. And then now the market has softened, in particular in some of those cities and locations where the price run ups were the highest, and that's leading to not just the softening, but really to reduced asking
prices and fewer homeowners being able to sell. And if you bought a home, it's in particular in the last couple of years, you might find if you list it you're getting less than what you paid for it, which is a problem for a lot of people having to bring money to the table when you sell it.
Yeah, and perfect example is me, and that is because I bought my home. I closed in December, literally last week of December twenty twenty three. There were no properties out there. I paid effectively top dollar, top of market, didn't ask goodness, it wasn't a bidding war, and now I could get my house.
For a whole lot less.
But it checked all the boxes that I wanted and it was and I've never paid market, never paid.
Asking price in my life, and there it was.
And that's where a lot of people found themselves and you mentioned even you know, the fact that a bunch of people trying to buy the same property led to bidding wars. Some people were paying fifty sixty, one hundred plus thousand dollars more than the asking price because there were dozens of people lined up to be the exact
same thing. That was kind of an anomaly, a rarity, and it's I think it's good that we're starting to see kind of the housing market peter out a little bit because it was insane, right, anybody knows who wanted to buy a house that it was truly ridiculous. And I was just talking to some of the other day, like about when I bought my first house, and I feel for youngsters who want to buy their first house now, who they're in their early twenties and they're saying it's time,
but wow, it's completely unaffordable. We're starting to see that change, like what's going to happen with interest rates? As anybody's guess, but I will say too, man, I.
Was proved right.
There was so much talk, especially from the real estate community, well go ahead and buy the house, because real estate only goes up in value and you know what rates. Interest rates are going to go down, you'll be able to refinance. You'll be in the best of both worlds by having a lower interest rate and having that locked
in low price that you paid for the home. But in some of these markets we're seeing, you know, three four seven percent drops in home prices, especially in places like Texas and Florida where prices just went insane and if you had to have to get out and quick in short order. This is just another another reason when I talk about buying a home, you want to buy that home for a minimum of seven years, likely ten, because even if you over paid, time can heal that
wound a little bit. But yeah, if you if you bought just a couple of years ago and you find yourself having to sell, especially with real estate transaction.
Costs, it really could cost you a pretty penny.
And if you're going to stay in the house, which I'm going to, it becomes academic.
It really doesn't matter.
But still, you know, the house across the street is going for less money and it's effectively the same house.
I want to blow my brains out.
The other thing it really is, and the other thing I want to point or ask about is when do you think we forget about two and a half three percent money? Because of course that made home buying the easiest thing in the world. And right now at five five and a half percent, that's normal, that's sort of the.
Way it should be.
And at some point we you know, the two percent, the three percent money disappears in the far reaches of history and now we're in a normal market. Is that affecting sales and buying home homes that people are still thinking about three percent money?
Yeah, I mean, I think the further we get away from that reality that used to exist, the less people are going to bank on.
That coming back.
And we've kind of have to pull out the binoculars now to remember right that existing. And yeah, I do think that that with every single month, every year that passes, people are less just less thinking along those lines, and these you know, six plus percent interest rates have become normal.
The only caveat to that is if you are one of those people who has who did buy in the twenty seventeens, twenty nineteens, twenty twenty ones even and you've got that locked in low interest rate, I mean, I think it just behooves those people to stay in that property longer. So it will if rates tick down a little bit, I think it will grease the wheels.
Of the housing market some.
But because I just think people are reticent, but they're becoming more reticent or less reticent, I think, to sell their homes the further along we get into this era of higher rates, Joel.
Student loans, I mean, that is a whole world on to itself.
If I'm not mistaken.
Student loans now are at one point two to one point three trillion dollars. I mean, just astronomical amounts of money, and paying them back has been a huge problem, to the point where they're almost impossible to get out of with bankruptcy.
The federal laws have changed. But what's going on with that? What's the latest?
Oh man, it's I mean, it's a complete, complete mess. And I think partly we set ourselves up for this with just administrations having completely different takes on student loans. The Biden administration was basically like, hey, let's make sure that you guys don't have a payment. Understandably so in those first days of COVID, but then for many, many years there were just no student loan payments it's kind of like an out of sight, out of mind thing.
And those promises of forgiveness or substantial forgiveness for a bulk of student loan borrowers.
That didn't come to pass.
And so now we're in this era where payments are restarting, and it's a much harsher the administration current administration is taking much harsher action towards student loan borrowers, and they're saying, hey, actually, you actually owe this money, and we're gonna restart payments.
And even the safe plan that the Biden.
Administration attempted to create to put into practice was declared unconstitutional by the courts, and so this was going to at least make repayments gentler. The payments, the monthly payments for borrowers are going to be smaller, and so borrowers are getting bills and what's happening is they're saying, wait a second, I can't pay this. I'm not used to
paying this. I didn't know I was going to have to pay this, And their credit scores are being docked, and pretty soon we're going to start to see I think a lot of student loan borrows not just have their credit scores go down, but their wages garnished. I think, in particular, come the beginning of next year, when it comes tax refund time, we're going to see those artist from a lot of student loan borrowers. So it's I think things could get dire for a decent chunk of student loan borrowers.
And here's the question. The Trump administration is effectively saying, Hey, guys, you borrow the money, and the deal was you were going to repay the money like everybody else does who borrows money. Where did we get to the point where somehow in people's mind student loans became grants.
Yeah, I mean that's a good question too.
I think part of what happened, if you want to get like even just a little more macro with this, is we have incentivized. We have told people that college is the only way forward, and then we have said, and we're going to give seventeen year olds giant loans to go get whatever degree they want, whether or not that degree.
Is going to pay off or not.
And so what we've done is seen just this ballooning student loan debt for higher and these colleges are saying, you know what, Hey, if they can take out loans for it. We're going to build fancy new buildings, We're going to hire more administrators. The cost of college is going to go up too, which means that the amount of debt people have to take on to get that
degree has gone up. Think about what it costs to go get a degree back in the seventies, eighties, and nineties and what it costs to go get a degree now, and it's we're talking a completely different world that we're living in as people who want to go get a
college degree. So I mean, my advice as always to young people who are planning on going to college is to think long and hard about what you're going to major, and think long and hard about where you're going in the financial aid you're going to get, Because if you're taking on more debt than what you're likely to earn in your first year out of school, you could be in for a long, hard slog trying to repay that debt. And it might be Yeah, it might set you up for misery for many decades.
Yeah.
When people ask me, when kids ask me about college, I go, don't go. Don't go find someplace else to make a living. I mean when you look at the benefits versus the cost. Matter of fact, I'm moving in that direction with high school.
Don't know, yeah, don't go well, I mean, I will say this, the facts still remained when you when you look at the average person with a college degree makes something like a million dollars more over the course of their life than just the typical high school graduate.
So there is still a college premium.
Which wait, just down the line.
Yeah yeah, I mean you have to be really really careful about how much debt you take on and what you get your degree in, because if you are, you are likely to be one of those people who benefits from going to college. But you're right, there's the other side of the equation, where there is we have a dearth of blue collar workers, and you can start your own business. You can make big bucks working kind of what a lot of people would consider an unsexy job.
You're not in the laptop class, but you're out there pounded the pavement creating your own business, and you can do incredibly well for yourself. Especially since we've said, hey, we've pointed everybody in the direction of college. A lot of people could benefit from wisely avoiding college. But starting
something on their own. And yeah, over the years, think about even just the four years you spend to college building your business instead, you know, ramping something up that creates income versus taking on all that debth that you're going to have to pay back in the future.
Now building your own business, you have to be fair. It takes a lot of motivation, It takes a lot of focus to be success. Not everybody and not everybody has that, but still, I mean, if you look at the amount of money you make immediately, it's yeah, yeah, you're absolutely right. I mean, you know, I tell my kids. One is going for her master's degree and I say, what are you doing? What in God's name ors are you doing? And her answer is perfect.
She looks at me and goes, dad, you're paying for it. Oh yeah, yeah, I forgot. Yeah, Okay, we're done.
It makes tons of sense, you know.
Yeah, no, it doesn't hurt case. Yeah, for sure.
I was one of those people that started a five twenty nine plan the day the kids were born, so that helped a whole bunch. All right, guys, we're done, Joel, thank you. We'll catch you this weekend twelve to two pm on Sunday and then again next Thursday.
All right, sounds good. Thanks Bill,