Speaker 1: Joel Larsguard How to Money his show Sunday twelve pm
Speaker 1: to two pm. His social address is at how to
Speaker 1: Money Joel Joel.
Speaker 2: Good morning, morning Bill.
Speaker 1: I have not seen this happen for a while, homeowners
Speaker 1: finding themselves underwater. Now, I have not heard that phrase
Speaker 1: for a while. Let's explain what's going on, only you
Speaker 1: explain what's going on and how the market has changed.
Speaker 2: Yeah, so this is you're right.
Speaker 3: I mean, this is one of those things where in
Speaker 3: the Great Recession, the aftermath of the Great Recession, the
Speaker 3: amount of homeowners that were underwater was kind of astronomical, right,
Speaker 3: And so we saw a lot of foreclosures, a lot
Speaker 3: of short sales, and it was I mean, it led
Speaker 3: to just a tanking of the housing market across the
Speaker 3: United States, and right now, like we've had this essentially
Speaker 3: since two thousand and nine, and just you know, prices
Speaker 3: being so stink and low, it wasn't even funny people
Speaker 3: slowly buying into the housing market. And then you know,
Speaker 3: just gradually prices increased over time. And then with the
Speaker 3: during the pandemic, with what people wanted and desired out
Speaker 3: of housing, the housing market just continued to take off
Speaker 3: rates were still low, but then rates crept up and
Speaker 3: prices were at an all time high. And so now
Speaker 3: what we've started to see is the market become a
Speaker 3: lot more stagnant. And then now the market has softened,
Speaker 3: in particular in some of those cities and locations where
Speaker 3: the price run ups were the highest, and that's leading
Speaker 3: to not just the softening, but really to reduced asking
Speaker 3: prices and fewer homeowners being able to sell. And if
Speaker 3: you bought a home, it's in particular in the last
Speaker 3: couple of years, you might find if you list it
Speaker 3: you're getting less than what you paid for it, which
Speaker 3: is a problem for a lot of people having to
Speaker 3: bring money to the table when you sell it.
Speaker 1: Yeah, and perfect example is me, and that is because
Speaker 1: I bought my home. I closed in December, literally last
Speaker 1: week of December twenty twenty three. There were no properties
Speaker 1: out there. I paid effectively top dollar, top of market,
Speaker 1: didn't ask goodness, it wasn't a bidding war, and now
Speaker 1: I could get my house.
Speaker 4: For a whole lot less.
Speaker 1: But it checked all the boxes that I wanted and
Speaker 1: it was and I've never paid market, never paid.
Speaker 4: Asking price in my life, and there it was.
Speaker 3: And that's where a lot of people found themselves and
Speaker 3: you mentioned even you know, the fact that a bunch
Speaker 3: of people trying to buy the same property led to
Speaker 3: bidding wars. Some people were paying fifty sixty, one hundred
Speaker 3: plus thousand dollars more than the asking price because there
Speaker 3: were dozens of people lined up to be the exact
Speaker 3: same thing. That was kind of an anomaly, a rarity,
Speaker 3: and it's I think it's good that we're starting to
Speaker 3: see kind of the housing market peter out a little
Speaker 3: bit because it was insane, right, anybody knows who wanted
Speaker 3: to buy a house that it was truly ridiculous. And
Speaker 3: I was just talking to some of the other day,
Speaker 3: like about when I bought my first house, and I
Speaker 3: feel for youngsters who want to buy their first house now,
Speaker 3: who they're in their early twenties and they're saying it's time,
Speaker 3: but wow, it's completely unaffordable. We're starting to see that change,
Speaker 3: like what's going to happen with interest rates? As anybody's guess,
Speaker 3: but I will say too, man, I.
Speaker 2: Was proved right.
Speaker 3: There was so much talk, especially from the real estate community,
Speaker 3: well go ahead and buy the house, because real estate
Speaker 3: only goes up in value and you know what rates.
Speaker 3: Interest rates are going to go down, you'll be able
Speaker 3: to refinance. You'll be in the best of both worlds
Speaker 3: by having a lower interest rate and having that locked
Speaker 3: in low price that you paid for the home. But
Speaker 3: in some of these markets we're seeing, you know, three
Speaker 3: four seven percent drops in home prices, especially in places
Speaker 3: like Texas and Florida where prices just went insane and
Speaker 3: if you had to have to get out and quick
Speaker 3: in short order. This is just another another reason when
Speaker 3: I talk about buying a home, you want to buy
Speaker 3: that home for a minimum of seven years, likely ten,
Speaker 3: because even if you over paid, time can heal that
Speaker 3: wound a little bit. But yeah, if you if you
Speaker 3: bought just a couple of years ago and you find
Speaker 3: yourself having to sell, especially with real estate transaction.
Speaker 2: Costs, it really could cost you a pretty penny.
Speaker 1: And if you're going to stay in the house, which
Speaker 1: I'm going to, it becomes academic.
Speaker 4: It really doesn't matter.
Speaker 1: But still, you know, the house across the street is
Speaker 1: going for less money and it's effectively the same house.
Speaker 4: I want to blow my brains out.
Speaker 1: The other thing it really is, and the other thing
Speaker 1: I want to point or ask about is when do
Speaker 1: you think we forget about two and a half three
Speaker 1: percent money? Because of course that made home buying the
Speaker 1: easiest thing in the world. And right now at five
Speaker 1: five and a half percent, that's normal, that's sort of the.
Speaker 4: Way it should be.
Speaker 1: And at some point we you know, the two percent,
Speaker 1: the three percent money disappears in the far reaches of
Speaker 1: history and now we're in a normal market. Is that
Speaker 1: affecting sales and buying home homes that people are still
Speaker 1: thinking about three percent money?
Speaker 3: Yeah, I mean, I think the further we get away
Speaker 3: from that reality that used to exist, the less people
Speaker 3: are going to bank on.
Speaker 2: That coming back.
Speaker 3: And we've kind of have to pull out the binoculars
Speaker 3: now to remember right that existing. And yeah, I do
Speaker 3: think that that with every single month, every year that passes,
Speaker 3: people are less just less thinking along those lines, and
Speaker 3: these you know, six plus percent interest rates have become normal.
Speaker 3: The only caveat to that is if you are one
Speaker 3: of those people who has who did buy in the
Speaker 3: twenty seventeens, twenty nineteens, twenty twenty ones even and you've
Speaker 3: got that locked in low interest rate, I mean, I
Speaker 3: think it just behooves those people to stay in that
Speaker 3: property longer. So it will if rates tick down a
Speaker 3: little bit, I think it will grease the wheels.
Speaker 2: Of the housing market some.
Speaker 3: But because I just think people are reticent, but they're
Speaker 3: becoming more reticent or less reticent, I think, to sell
Speaker 3: their homes the further along we get into this era
Speaker 3: of higher rates, Joel.
Speaker 1: Student loans, I mean, that is a whole world on
Speaker 1: to itself.
Speaker 4: If I'm not mistaken.
Speaker 1: Student loans now are at one point two to one
Speaker 1: point three trillion dollars. I mean, just astronomical amounts of money,
Speaker 1: and paying them back has been a huge problem, to
Speaker 1: the point where they're almost impossible to get out of
Speaker 1: with bankruptcy.
Speaker 4: The federal laws have changed. But what's going on with that?
Speaker 4: What's the latest?
Speaker 3: Oh man, it's I mean, it's a complete, complete mess.
Speaker 3: And I think partly we set ourselves up for this
Speaker 3: with just administrations having completely different takes on student loans.
Speaker 3: The Biden administration was basically like, hey, let's make sure
Speaker 3: that you guys don't have a payment. Understandably so in
Speaker 3: those first days of COVID, but then for many, many
Speaker 3: years there were just no student loan payments it's kind
Speaker 3: of like an out of sight, out of mind thing.
Speaker 3: And those promises of forgiveness or substantial forgiveness for a
Speaker 3: bulk of student loan borrowers.
Speaker 2: That didn't come to pass.
Speaker 3: And so now we're in this era where payments are restarting,
Speaker 3: and it's a much harsher the administration current administration is
Speaker 3: taking much harsher action towards student loan borrowers, and they're saying, hey, actually,
Speaker 3: you actually owe this money, and we're gonna restart payments.
Speaker 2: And even the safe plan that the Biden.
Speaker 3: Administration attempted to create to put into practice was declared
Speaker 3: unconstitutional by the courts, and so this was going to
Speaker 3: at least make repayments gentler. The payments, the monthly payments
Speaker 3: for borrowers are going to be smaller, and so borrowers
Speaker 3: are getting bills and what's happening is they're saying, wait
Speaker 3: a second, I can't pay this. I'm not used to
Speaker 3: paying this. I didn't know I was going to have
Speaker 3: to pay this, And their credit scores are being docked,
Speaker 3: and pretty soon we're going to start to see I
Speaker 3: think a lot of student loan borrows not just have
Speaker 3: their credit scores go down, but their wages garnished. I think,
Speaker 3: in particular, come the beginning of next year, when it
Speaker 3: comes tax refund time, we're going to see those artist
Speaker 3: from a lot of student loan borrowers. So it's I
Speaker 3: think things could get dire for a decent chunk of
Speaker 3: student loan borrowers.
Speaker 1: And here's the question. The Trump administration is effectively saying, Hey, guys,
Speaker 1: you borrow the money, and the deal was you were
Speaker 1: going to repay the money like everybody else does who
Speaker 1: borrows money. Where did we get to the point where
Speaker 1: somehow in people's mind student loans became grants.
Speaker 2: Yeah, I mean that's a good question too.
Speaker 3: I think part of what happened, if you want to
Speaker 3: get like even just a little more macro with this,
Speaker 3: is we have incentivized. We have told people that college
Speaker 3: is the only way forward, and then we have said,
Speaker 3: and we're going to give seventeen year olds giant loans
Speaker 3: to go get whatever degree they want, whether or not
Speaker 3: that degree.
Speaker 2: Is going to pay off or not.
Speaker 3: And so what we've done is seen just this ballooning
Speaker 3: student loan debt for higher and these colleges are saying,
Speaker 3: you know what, Hey, if they can take out loans
Speaker 3: for it. We're going to build fancy new buildings, We're
Speaker 3: going to hire more administrators. The cost of college is
Speaker 3: going to go up too, which means that the amount
Speaker 3: of debt people have to take on to get that
Speaker 3: degree has gone up. Think about what it costs to
Speaker 3: go get a degree back in the seventies, eighties, and
Speaker 3: nineties and what it costs to go get a degree now,
Speaker 3: and it's we're talking a completely different world that we're
Speaker 3: living in as people who want to go get a
Speaker 3: college degree. So I mean, my advice as always to
Speaker 3: young people who are planning on going to college is
Speaker 3: to think long and hard about what you're going to major,
Speaker 3: and think long and hard about where you're going in
Speaker 3: the financial aid you're going to get, Because if you're
Speaker 3: taking on more debt than what you're likely to earn
Speaker 3: in your first year out of school, you could be
Speaker 3: in for a long, hard slog trying to repay that debt.
Speaker 3: And it might be Yeah, it might set you up
Speaker 3: for misery for many decades.
Speaker 4: Yeah.
Speaker 1: When people ask me, when kids ask me about college,
Speaker 1: I go, don't go. Don't go find someplace else to
Speaker 1: make a living. I mean when you look at the
Speaker 1: benefits versus the cost. Matter of fact, I'm moving in
Speaker 1: that direction with high school.
Speaker 3: Don't know, yeah, don't go well, I mean, I will
Speaker 3: say this, the facts still remained when you when you
Speaker 3: look at the average person with a college degree makes
Speaker 3: something like a million dollars more over the course of
Speaker 3: their life than just the typical high school graduate.
Speaker 2: So there is still a college premium.
Speaker 4: Which wait, just down the line.
Speaker 3: Yeah yeah, I mean you have to be really really
Speaker 3: careful about how much debt you take on and what
Speaker 3: you get your degree in, because if you are, you
Speaker 3: are likely to be one of those people who benefits
Speaker 3: from going to college. But you're right, there's the other
Speaker 3: side of the equation, where there is we have a
Speaker 3: dearth of blue collar workers, and you can start your
Speaker 3: own business. You can make big bucks working kind of
Speaker 3: what a lot of people would consider an unsexy job.
Speaker 3: You're not in the laptop class, but you're out there
Speaker 3: pounded the pavement creating your own business, and you can
Speaker 3: do incredibly well for yourself. Especially since we've said, hey,
Speaker 3: we've pointed everybody in the direction of college. A lot
Speaker 3: of people could benefit from wisely avoiding college. But starting
Speaker 3: something on their own. And yeah, over the years, think
Speaker 3: about even just the four years you spend to college
Speaker 3: building your business instead, you know, ramping something up that
Speaker 3: creates income versus taking on all that debth that you're
Speaker 3: going to have to pay back in the future.
Speaker 1: Now building your own business, you have to be fair.
Speaker 1: It takes a lot of motivation, It takes a lot
Speaker 1: of focus to be success. Not everybody and not everybody
Speaker 1: has that, but still, I mean, if you look at
Speaker 1: the amount of money you make immediately, it's yeah, yeah,
Speaker 1: you're absolutely right. I mean, you know, I tell my kids.
Speaker 1: One is going for her master's degree and I say,
Speaker 1: what are you doing? What in God's name ors are
Speaker 1: you doing? And her answer is perfect.
Speaker 4: She looks at me and goes, dad, you're paying for it.
Speaker 4: Oh yeah, yeah, I forgot. Yeah, Okay, we're done.
Speaker 2: It makes tons of sense, you know.
Speaker 4: Yeah, no, it doesn't hurt case. Yeah, for sure.
Speaker 1: I was one of those people that started a five
Speaker 1: twenty nine plan the day the kids were born, so
Speaker 1: that helped a whole bunch. All right, guys, we're done, Joel,
Speaker 1: thank you. We'll catch you this weekend twelve to two
Speaker 1: pm on Sunday and then again next Thursday.
Speaker 2: All right, sounds good. Thanks Bill,