💵 Sign up for EveryDollar today - Create a free Budget!
Did you miss the latest Ramsey Show episode? Don’t worry—we’ve got you covered! Get all the highlights you missed plus some of the best moments from the show. Watch entertaining calls, Dave Rants, guest interviews, and more!
Next Steps
📞 Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET or click here!
🏠 Reach your home goals with the right resources
Listen to more from Ramsey Network
🎙️ The Ramsey Show
🧠 The Dr. John Delony Show
🍸 Smart Money Happy Hour
💡 The Rachel Cruze Show
💰 George Kamel
💼 The Ken Coleman Show
📈 EntreLeadership
Learn more about your ad choices. https://www.megaphone.fm/adchoices
Ramsey Solutions Privacy Policy
I appreciate you taking your time. I know you and your team talk a lot about the trends in the real estate market. My question is, when do you think the obnoxious overbidding on houses will stop? Wow. Is that happening in your area and Philly right now? I mean, I believe so, but yeah, I could tell you personal experiences, but I just feel that I personally put in offers and I mean, I'm just getting 50,000 more than asking price. Well, the simplified answer is that that is caused by more buyers than there is inventory. Anytime basic economics supply demand curve says that any time there are a large number of people chasing a few goods, it drives the price up scarcity drives the price up. Opposite of that would be if there was more houses on the market than there were buyers, then that would be called a buyer's market. This is a seller's market. A buyer's market means that the seller's feel just blessed to have anyone look at their little poor little house because nobody's out looking at houses and because there's hardly any buyers, in other words, there's 10 buyers for 100 houses, right now there's 100 buyers for 10 houses. You see the difference? And that's a simplified answer and that's being caused by several things, but one of the things that's driven it of late in the last five years as much as anything is all of the migration that has happened of people changing states because of taxation and archaic, crazy laws having to do with the Fauci pandemic and all kinds of stuff. People just left California, they left New York and they're in Tennessee, they're in Georgia, they're in Florida and they're in Texas and the numbers are there to support that. That's not a political statement. It's just a huge change in population shift. And so that's created in those states in particular shortage. Now you're not in one of those states, but just to say that's exasperated in those states. Then the other thing that's exasperated is if the economy, if builders of single family homes do not believe in the economy, then they don't build houses because they're afraid they can't sell them and that's happened hardcore in the last 18 to 24 months because real estate markets slowed down and so builders, the number of new housing starts is way off and we were already had an inventory shortage. And so now with not as much new housing coming online as it needs to, now we've got even more of an inventory shortage and that's what's driving this is you've got a hundred buyers or whatever the number is on 10 houses. That's not an exact number, but there's this tremendous oversupply of buyers and so they're doing stupid stuff like bidding 50,000 bucks over what the appraisal is, which then ends up ultimately changing the appraisal because people do it enough, it becomes a new market value. Yeah, and that was a follow-up question too, exactly. I mean, how are these houses, townhomes getting appraised to this value that or just it's kind of, I don't want they made up, but how are the, how is it equaling the overbidding? All of these plays are saying you're right, it is over 50. Well, if you have, if you have 10 houses in a row on the market and six of them sell with overbids, you now have a new market value. It's the overbid value because market value, the definition of it in appraisal class is what a willing buyer gives a willing seller where no duress is involved. Now we could argue that this is a duress market, but in other words, neither one of them are being cheated and neither one of them have a gun to their head. And so that buyers willing to pay that seller that knowing it, and if they do that enough times on that block, voila, you have a new market value and it's the overbid price. It's not the, it's not the original value. And so again, the shortage of housing versus the number of buyers is driving it up. And so we've got some markets like yours, I didn't, I was not aware of Philadelphia was that hot, but we've got some markets like yours where you put a house on the market and you're getting multiple bids over the weekend, even with interest rates almost double what they were two years ago. Yeah. And that's another piece of this grace is that there's some golden handcuffs out there because people either refinanced or bought at crazy low rates and now they're unwilling to sell that home because they don't want to take on a new mortgage that has double the interest rate, which means there's lower inventory. So I don't see this thing shifting drastically in the next, you know, a year. I think when you're ready to buy, you got to buy and if it means you had to get a competitive bid in with a good real estate pro, then that's what you had to do to get that home. There's not going to be deals out there where you're, you know, doing 20,000 under asking price right now. It's not the time to look for a bargain in real estate business. That's for sure. No, I don't know. I mean, I'm a bargain buyer. I don't buy except in bargains and... Dave hasn't bought a lot lately. And I haven't bought anything in a while. I mean, it's, and I'd kind of like to. I got some cash. I'm sitting on them, but I'm not, I'm not going to pay, I don't pay retail. So it's just like a Ramsey rule. So what's your price point, Grace? Well, I mean, and I've been guilty where I, I mean, I kind of get to be competitive. I've gotten 20,000 over, but I mean, I'm looking around at 300 to 320. That range goes real fast. Yeah, that's the biggest shortage. Oh, yeah. I was talking to my real estate buddy yesterday and he said homes under 500,000 in Nashville are going like that. If I was a home builder in an average city in America right now, I would build all the $500,000 houses I can build because you could sell everything you built. There's just a true, because that's an entry level in some markets. It's a number two move up in other markets and it's just, you know, I would build. There's a tremendous inventory shortage. Now, again. I think this is going to be behind the scenes, but do you think banks are going to after when a appraisal comes back and they're saying, okay, there's this town home that was, I mean, for example, I had a 309 townhouse I did for 330 and it finally sold for 363. So do you think the banks are going to counter off for that thing? I don't think this is going to be a praise for that. Hi. Well, they're going to run an appraisal and if there's no statistical evidence that that other townhouses were selling at the 369, then that deal is going to have a problem because that bank has got a bunch of regulations on them. They cannot loan more than appraisal. That's what got us in the 2008 debacle was them loading, loaning on bogus appraisals. And so the appraisal industry since 2008 is tightened way up on regulations and the banks are tightened way up. The mortgage companies are tightened way up. So they don't have a lot of wiggle room. So if somebody made that offer, they have to disclose to the bank they're paying 369. But if the appraisal comes back at 320, the bank's going to lend on 320. They've got to have the cash in their pocket for the difference. So Grace, you're going to have to compromise on some things whether that's location, you know, the home type, how old it is, see past some things that you can renovate. But I don't want you to sit on the sidelines hoping for the market to shift drastically. It's not going to. Yeah. And I don't really disagree with your word obnoxious. I kind of think it's accurate, but it is based on supply and demand. And especially if you're trying to buy, it's just it's distressing. It's harsh out there, weird. Yeah. You [BLANK_AUDIO]
