Yahoo Finance ‘Still not in a position to afford a house’: Homeownership is a dream that keeps slipping further away for a young Los Angeles couple with $90k in savings. Dave Ramsey responds
For young Americans, the dream of homeownership is drifting away at such a rapid pace that even disciplined savers are struggling to meet this moving target.
Natalie and her husband have been socking away money for six years, but still can’t afford anything in the Los Angeles housing market. She called into a recent episode of The Ramsey Show to express her frustration and seek financial advice.
Don't miss
Commercial real estate has beaten the stock market for 25 years — but only the super rich could buy in. Here's how even ordinary investors can become the landlord of Walmart, Whole Foods or Kroger
Cost-of-living in America is still out of control — use these 3 'real assets' to protect your wealth today, no matter what the US Fed does or says
Anything can happen in 2024. Try these 5 easy money hacks to help you make and save thousands of dollars in the new year (they will only take seconds)
“Our plan, we thought, would be three to five years [to buy a home],” she told Dave Ramsey. “But then Covid happened and inflation and we still aren’t in a position where we can afford a house.”
Their disappointing experience highlights a key fact about the housing crisis: saving just isn’t enough.
When saving isn’t enough
Property developer Tim Gurner originated the stereotype that millennials can't afford homes because they eat avocado toast. The inability to save money and avoid superficial temptations, some older homeowners believe, is what’s keeping younger couples from accessing the housing market.
However, Natalie serves as a case study for why this stereotype of millennials isn’t justified. Despite living in one of the most expensive cities in the world, she and her husband have managed to keep their expenses low. She’s a property manager, so they get to live for free.
Avoiding rent or mortgage payments for several years has allowed the couple to accumulate $90,000 for a down payment, despite only relying on her husband’s school teacher salary of $80,000.
In other words, this young couple followed the boomer advice and avoided the avocado toast. Unfortunately, their reward is non-existent.
The median home in Los Angeles sold for $930,000, according to Realtor data.
Assuming Natalie and her husband put all their savings toward the down payment on a median home, they would need a mortgage of $840,000 to cover the rest. Their household income of $80,000 is nowhere close to qualifying for a mortgage of this size.
However, this doesn’t necessarily mean Natalie and her husband can never own a home. Dave Ramsey sees a clear solution.
Read more: Generating 'passive income' through real estate is the biggest myth in investing — but here's 1 surefire way to do it with as little as $10
The only solution
“You live in one of the most expensive real estate counties in the world,” Ramsey told Natalie. “I’m not telling you to move, but you may reach a point where... you [will find] you can’t afford to live there.”
Ramsey said there have been plenty of “California refugees” who have been compelled to abandon the state due to its high cost of living.
California lost 817,000 residents in 2022, according to U.S. Census data. Meanwhile, 45% of Californians have said they are seriously considering moving out due to the cost of housing, according to a poll conducted by the Public Policy Institute of California.
With $90,000 in cash, Natalie and her husband can afford to buy a home in several other states and counties across the country.
Home prices are under $417,700 in at least half the country, according to the Federal Reserve Bank of St Louis.
“Do some research, look at different areas, look at different cities and states and really create a clear picture for what you want,” suggested co-host Jade Warshaw.
What to read next
You don't need to invest like Warren Buffett to get rich — this simple technique tops his returns without taking on more risk
Rich young Americans have lost confidence in the stock market — and are betting on these 3 assets instead. Get in now for strong long-term tailwinds
Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
