October 18, 2023 • 25 mins
Tune in and find out what the current interest rates are and how they are affecting the market.
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Episode Transcript
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(00:30):
Hey, what's up, Rob?
(00:52):
It's been a while since we've done one of these, man.
What's going on?
Yeah, it's been a while.
We're going to try to do it as often as possible, and we all get busy.
I know how it works.
Yeah, well, I'd rather be busy than not busy.
You know, at the end of the day, that says our job is to stay as humanly busy as possible.
(01:12):
Right.
Exactly.
And to help as many people as we can.
That's it.
Change people's lives.
It's simple.
That's what we do.
So, I usually don't like to talk about politics, Rob.
I mean, we didn't just meet, you know, that about me.
But these interest rates went up to pretty high just recently.
(01:32):
Do you have insight on that as our economists?
Yeah.
Well, hey, listen, none of us have a crystal ball.
And I always say that.
I always like to start with that.
Just start with the bad news.
Just out of the gate here, just to kind of get that out of the way and talk a little
bit about what's going on in the world and in the industry and why the interest rates
(01:55):
are where they are.
So, today, for the first time in 25 years, the rates have hit 8%.
Man, bad, bad news.
It's been going up and down.
It's been kind of playing with the 8% kind of max.
And it's been below that.
(02:16):
It's been between 6 and 1 half and 7 and 1 half.
And he goes back and forth for the last, I would say probably the last six months has
been going up and down.
But for the first time, it actually hit 8%.
You can look it up.
That's crazy.
It's pretty crazy news.
Everybody is worried about it.
We're all trying to figure out what's going on.
(02:37):
How do we, where do we go from here?
We thought we had hit the highest point possible.
But nope, here we are.
That is the bad news.
Let's talk a little bit about why that's the case.
And maybe we can jump into some good news because I do have three good news I want to
go over just to counter a little bit of the bad news on the rise.
(02:57):
We all know what's going on.
We have a new war happening with Israel and Palestine.
We have that nobody expected.
Out of the blue was not even in the cards for none of the politicians slash world leaders.
That just came completely out of the blue.
(03:18):
We still have a war in the Ukraine.
All those things are funneling money out of our economy.
We do have a cash rich economy.
The jobs report of a week ago came back very strong.
And the inflation man, that just doesn't die.
(03:38):
It just doesn't die.
It doesn't go, it has to celebrate it, which is good news, but it's not where the government
wants it to be.
And I think that those are all those factors are impacting the interest rates, the Federal
Reserve, we call them affectionately as the Fed, but the Federal Reserve Bank is trying
(04:04):
to figure out what to do now.
They've been increasing the rates for the last few months, for several months now.
And the fastest increases in interest rates since we've seen actually in history of the
Federal Reserve, like the fastest, like boom, boom, boom, boom, boom, boom, back to back,
back to back, back to back.
So they're very serious about managing the economy and putting a stop at on the inflation,
(04:34):
but it's not working as fast as they think it would.
So they're toying the line between should we continue to increase or should we kind of
wait a couple more months and see what happens.
There's a split.
Some economists think that they're not going to increase the rates in the next meeting,
which is November, sorry, October 31st, just at the end of this month, a couple weeks from
(04:58):
now.
And half of the other people think they might put some additional pressure and see what
happens.
So that's what's going on.
What's the stage?
Well, yeah, that's bad news.
I mean, 8% yesterday, I thought 7.9 was bad.
And now it's even worse today.
(05:19):
So that's never fun.
But bottom line is, man, people still need to buy homes.
You know, a lot of people are going to be pulling back because they're going to listen
to their uncle who went through a wait.
I mean, we've talked about the scenario before and they're going to get a bunch of not bad
information, but, you know, misinformation from an experience that somebody went through,
(05:41):
which is fine.
But there's going to be a ton of buyers out there that still want to buy.
I mean, it still sucks to rent from somebody else.
I know you're a landlord and it might be a touchy subject for you, but, you know, it's
not fun to pay somebody else's mortgage.
I mean, the end of the day, 8% is 8%.
(06:02):
At least it's not 14.
Yeah.
I mean, there's a place for renting, right?
There is definitely a place in time in a person's life to rent.
I always advocate for it to be as short time as possible.
So it is, you know, people are changing jobs.
(06:22):
They don't know if they're going to live in the area.
They need some flexibility with school districts and stuff like that.
There's always a reason to rent and it's justifiable in some cases.
But as soon as you can stop renting, you should.
As soon as you're able to stop renting, you should because when you rent, you don't build
(06:42):
equity.
You're not building an asset.
You're not building a retirement account, right?
Because some people use that for a retirement account.
The amount of people who use the equity in their houses for retirement is absolutely
incredible.
It's extremely high.
So I always advocate for get rid of a rent as soon as you can.
(07:04):
Now, the other thing that's happening right now is affordability is impacted by not only
by the interest rate, by the fact that the inventory is quite low on houses and most
in many markets.
So affordability, meaning being able to buy a house, it's pretty challenging for most,
especially for first time home buyers.
Now that forces people to rent, right?
(07:27):
Some people just don't have the choice at this particular moment.
Now rates are not easing off either.
In fact, they're going up.
Why?
Because it's harder to buy a house.
Because it's harder to buy a house.
Remember, we just came out of two years of government intervention for rentals, right?
(07:49):
So they froze in many states, increasing rates were frozen or capped.
We're out of that, right?
So landlords are trying to make the money they lost during that time or they failed to obtain.
So interest rates are high, but you know what's worse?
(08:10):
How fast rents are going up?
They're in some areas is 10% to 50%, 15% more than the last year.
So if you're paying rents and you're paying, let's say $1,500 a month, why not buy a house
that might be $2,500 a month?
Yes, it's higher, but you're paying yourself.
(08:32):
You're buying an asset.
You're building equity.
And in some cases, in some markets, it's even more straightforward.
There's some markets where rents are in the $2,000 to $3,000 range.
I can think of Modesto, Sacramento area, right?
And those rents are pretty high for that area and you can buy a house for that same monthly
(08:56):
payment.
Right.
You know, I know here in our area, Yuba City, I look at rents and I mean, we have some clients
that are paying like $2,500 a month.
And you know, I mean, average mortgage here is probably between $2,500 a month.
So why not try to make that sacrifice for a short amount of time to be able to have the
(09:21):
affordability of $3,000 a month or relocate?
I mean, I know that there are areas around us that are significantly cheaper than Yuba
City itself.
Absolutely.
And if you're flexible and you can look at different neighborhoods and you don't have
to live in a specific area and you can still have a wonderful home for a price that makes
(09:45):
sense.
And remember, I always tell this the first time home buyers, this is not your forever
home, this is your first home.
Okay.
It is baked into the equation that you're going to buy two or three more times in the
future.
This is so that you can build equity so that it's easier to buy that bigger home.
Right.
(10:06):
And nobody starts buying the multimillion dollar home up in the hill that we all dream of,
that doesn't happen from Monday to the next.
But the way it happens is the fastest and the soonest you can buy your first home, then
you move up, then you move up, then you move up until you get to that house that you want.
It is possible.
So can we talk about good news since we've been talking about bad?
(10:29):
So there's a few things that I want to highlight that are good news.
First of all, the inventories in many markets is going up.
I think as a result of two things, and when I say inventory for people who are listening
or following, what it means is the number of houses that are up for sale in different
markets.
Right.
And it's going up and it hasn't been going up as fast in the last year because of two
(10:54):
reasons.
One is the sellers or the owners of homes are locked into very good interest rates between
two and three and a half percent.
Right.
And that's going to happen by a 7.5%.
But some people have to sell anyway.
Right.
And a combination of buyers holding off and more sellers coming into the market because
(11:18):
they have to sell.
They can't hold on anymore.
That is helping us see an increase in inventory.
I have a couple of realtors in different areas and Stockton just comes to mind.
An incredible number of new homes in the price point of three to three and fifty are coming
to the inventory.
(11:39):
And if you are a pre-approved buyer, you have the ability to negotiate the terms because
those people have to sell.
Right.
So you can get a discounted value on the home, meaning a lower price than what they're asking
for or credits and in some cases even both.
So that is great news.
(11:59):
This is great news for first time home buyers.
It's great news for those that are feeling on the fence because of the interest rates.
I urge you to please look at the whole picture, not just the interest rate.
That's just one component of the whole picture.
Look at what's available.
Look at what your monthly payment is going to be.
Look at what is the potential market a year or two from now.
(12:24):
So being able to buy that house right now, it's an incredible opportunity.
You might not be able to buy any year from now because if the interest rates go down
as everybody expects, then you're going to have double the number of buyers in the market.
In the moment you have the double number of buyers in the market, you're not going to
be able to get that discount or those closing cost credits.
(12:45):
Right.
Yeah, and I've noticed in the deals that we've been doing lately and we've been selling
a lot of what we call wheel of state, right?
Mobile home and parks.
But negotiations have been wide open again.
I mean, we're able to ask for $5,000, $10,000 seller's credit to go towards somebody's closing
(13:08):
costs or go towards buying down a rate.
It's been kind of wonderful on the buyer side.
On the seller side, it can be kind of a hard pill to swallow, right?
Like you have buyers that basically they're saying, I'm going to only pay this amount
(13:29):
and give for them.
They should.
If that's what they can afford and that's what the house is worth because there's the
whole thing with inflation, right?
It goes into the housing market too.
And when you have sellers that want to sell for like way more than what a property is worth,
(13:51):
you could do that a couple of years ago, a few years ago, but today, I'm sorry about
the bad news for sellers.
You're going to have to give up some of that seller's credit.
You're going to have to give in and just sell your house and make it a fair deal for everybody.
Yep.
(14:12):
Yep.
Yep.
So, yeah, so that's I think that's good news.
If you're able to buy a house and afford it and commit to for the next year or two to
make that monthly payment, here's the second good news.
There is almost 100% agreement and this is very rare within the economist community, right?
(14:40):
And the interest rates are going to be down next year.
And there's always somebody I do.
I can't say 100% because there's always somebody who thinks is going to be pushed out to 2025.
But 8% is crazy.
And hopefully we don't have any new surprises.
We don't have another war.
We have, you know, like hopefully that's the case.
(15:02):
There's no way to go but down.
So if you're able to buy a house today, do it.
Why?
There's the highest probability that the rates will go down next year at some point.
Let's say worst case scenario is towards the end of a year.
Then you're committed into one year of making that monthly payment.
And hopefully as long as you maintain your job, as long as your credit score doesn't
(15:27):
take a hit, you should be able as a buyer to refinance next year, be in a stronger position
to be able to lower that monthly payment.
And hopefully, assuming that the home values don't go down, which is also looking very
probable that the home values are going to hold and even increase in the next year, then
(15:47):
you should be able to have some equity to be able to negotiate that monthly payment and
that interest rate.
So how fast is it going to go down?
We don't know.
Potentially it goes down to 6%.
Many economists think that it's going to stabilize somewhere between 4 and 5, 4 and 5.5.
That is a more normal range for the last 20 years.
(16:07):
And then once it goes down, then we're going to have an incredible number of people who
are going to be in a position to either sell, again, inventory is going to go up, or refinance
and be able to lower that monthly payment.
So making that purchase and that sacrifice today should be a very good investment because
next year you either can sell, leverage that equity that you gained and buy a bigger house
(16:32):
or refinance and lower your monthly payment.
Right.
That is good news.
Like really good news.
I like that you stress like to research the purchase, right?
Make sure that you can afford it.
I never ever want to sell a house to somebody and have them be house poor.
(16:53):
You know?
Yes.
Like you should be able to pay your mortgage and still eat and still, you know, have some
money for recreational things.
Recreational things might change, you know?
Yeah.
Instead of going out to eat every day, it might be a, I'm recreationally barbecuing in
my backyard, you know, that type of thing.
(17:16):
And hey, you can still live humbly and live a very, very happy life.
So think about it as a short term sacrifice.
Yes, as mortgage loan officers and license officers, we can't issue a loan for more than
certain percentage on the, what we call DTI debt to income.
(17:38):
So if I look at all your income, you know, for an FHA loan, I can't go above 50, 55%,
right?
So I can use more than half of your income to be able to pay for debt and including your
home debt, right?
For a conventional loan, I can't go above 47% most typically, right?
(17:58):
So and for, you know, USDA and other kinds of loans is even lower.
It's 43%, 45%, 40%.
So we're not allowed, we're not even allowed, we cannot issue a preapproval because we can't
use all your income to buy a house and not be able to, you know, have money to spend
on all the other things, you know, gas, car, loans, entertainment, you know, food.
(18:23):
Et cetera.
But you're absolutely right.
Like it's, I want to stress and make sure that you can afford and you can pay, you can
make that commitment.
It's not, it might not be easy commitment, but as long as it is a commitment that you
feel comfortable, your job's stable and you can make that payment for the next year or
two, then go for it because the opportunity to buy a house right now is not going to come
(18:45):
back.
Right.
So you said there's three components of good news.
What else do you have for us today?
Well, the third one is that the MBA, which is the Mortgage Bankers Association, has predicted
and they use very strong predicting predictive analytics that the origination volume is going
(19:09):
to go up by 15% to 20% in 2024.
So what that means is they expect that there's a lot of pent-top demand for home buying that
is just kind of there and it just doesn't, it's like people who are like on the fence
(19:29):
thinking about it, right?
And that's that, by the way, that does not include refinances, which we'll expect at
some point when the rates go down.
This is in terms of new purchase mortgage applications and it makes sense, right?
So the more we stay in this path of high interest rates, as soon as something goes down, there's
(19:53):
going to be a lot of people on the fence that are going to be ready to either sell their
houses and be ready to buy up, which is going to increase the volume for mortgage applications.
Likewise, first time home buyers who are on the fence because all they're here in the
news is bad news, bad news, interest rates are high, right?
So and by the way, this is like, I hate Yahoo Finance because they love, they're like a
(20:20):
mix of very alarmist sensationalist type of news because that's how they get clicks,
right?
That's fear driven media.
So if you look at all the news and that's not just Yahoo Finance, but every single mainstream
media channel, it's all like, oh my gosh, we're all going to die of these interest rates
(20:41):
are going to kill us.
It doesn't matter if it moves an inch.
I mean, just do a Google search right now, interest rates, mortgage interest rates, and
it's all bad news.
So that's why I wanted to balance it out with a little bit of good news.
And what I'm also seeing, I'm going to give you a bonus, is there's a bonus good news
here, which is I am seeing the government and even private bankers looking at ways of
(21:09):
making it more affordable for home buyers.
So last year we saw Biden's government slash the PMI, which is the mortgage insurance for
an FHA loan, and that helped dramatically.
And we're seeing more of that.
We're starting to hear Fannie Mae just released, I think a few weeks ago, the down payment,
(21:34):
the minimum down payment for a multi-home was lowered from 15% to 5%.
Please somebody check, fact check those numbers because I think they're right.
But somewhere around there, regardless, is a pretty significant good impact, making it
more attainable for somebody to buy a house.
So it's good.
It's good pressure, and it's good things that is forcing all these institutions to look
(21:57):
at how do we balance it out?
How do we help people?
Right.
That is good news, man.
I have a lot of people that keep asking me, and I feel like I constantly have to ask you
about first time home buyer programs and stuff like that.
Is there any down payment assistance coming back?
(22:19):
Very, very, very safe.
We do have a couple of new programs.
So I always add a little bit of caveat to this.
First time home buyer programs, if you look at advertising-wise, that's a very common
ad that you see online, buy with 0% down.
(22:43):
It is doable.
There are opportunities and possibilities in California, we have Calhachaffee, which
provides a down payment assistance program that is currently available.
And there's a couple of other organizations that are also doing so.
So we can work with any of them.
And at Snapfie, we try to provide as many programs as possible to our customers, so
(23:09):
we have options.
It is more expensive because you're not bringing any money down.
So your paying is not free money, it's not a gift.
It's a second loan that you're getting to pay to provide that down payment assistance.
Now the terms are very favorable.
You don't have to pay them immediately.
Sometimes you don't pay interest rate for any interest for the first few years.
(23:34):
And there is some benefits to it, but you still have a loan that you're paying.
So there are options.
Always consult with a reputable mortgage advisor and a mortgage company like us.
Advertising.
And just make sure that they look at all the options and slice them, dice them in so many
(23:56):
different ways.
That's what a mortgage advisor, a reputable mortgage advisor should do.
They should not be a salesperson.
Don't go to anybody who sounds on the phone that they're trying to sell you, trying to
get your social security number to run your credit.
Run away as fast as you can.
And that's how I train our loan officers.
(24:21):
Don't be a salesperson, be an advisor.
Yeah, absolutely.
That's what we are.
Well, man, I appreciate your time today.
Oh my gosh, 24 minutes.
I thought you said we're going to try to keep it at 10.
It happens almost every time.
So I'm going to close it out and we'll talk to you soon.
Great to see you.
Thanks for having me.
(24:41):
Bye.
Hey, what's up, Rob?
(00:52):
It's been a while since we've done one of these, man.
What's going on?
Yeah, it's been a while.
We're going to try to do it as often as possible, and we all get busy.
I know how it works.
Yeah, well, I'd rather be busy than not busy.
You know, at the end of the day, that says our job is to stay as humanly busy as possible.
(01:12):
Right.
Exactly.
And to help as many people as we can.
That's it.
Change people's lives.
It's simple.
That's what we do.
So, I usually don't like to talk about politics, Rob.
I mean, we didn't just meet, you know, that about me.
But these interest rates went up to pretty high just recently.
(01:32):
Do you have insight on that as our economists?
Yeah.
Well, hey, listen, none of us have a crystal ball.
And I always say that.
I always like to start with that.
Just start with the bad news.
Just out of the gate here, just to kind of get that out of the way and talk a little
bit about what's going on in the world and in the industry and why the interest rates
(01:55):
are where they are.
So, today, for the first time in 25 years, the rates have hit 8%.
Man, bad, bad news.
It's been going up and down.
It's been kind of playing with the 8% kind of max.
And it's been below that.
(02:16):
It's been between 6 and 1 half and 7 and 1 half.
And he goes back and forth for the last, I would say probably the last six months has
been going up and down.
But for the first time, it actually hit 8%.
You can look it up.
That's crazy.
It's pretty crazy news.
Everybody is worried about it.
We're all trying to figure out what's going on.
(02:37):
How do we, where do we go from here?
We thought we had hit the highest point possible.
But nope, here we are.
That is the bad news.
Let's talk a little bit about why that's the case.
And maybe we can jump into some good news because I do have three good news I want to
go over just to counter a little bit of the bad news on the rise.
(02:57):
We all know what's going on.
We have a new war happening with Israel and Palestine.
We have that nobody expected.
Out of the blue was not even in the cards for none of the politicians slash world leaders.
That just came completely out of the blue.
(03:18):
We still have a war in the Ukraine.
All those things are funneling money out of our economy.
We do have a cash rich economy.
The jobs report of a week ago came back very strong.
And the inflation man, that just doesn't die.
(03:38):
It just doesn't die.
It doesn't go, it has to celebrate it, which is good news, but it's not where the government
wants it to be.
And I think that those are all those factors are impacting the interest rates, the Federal
Reserve, we call them affectionately as the Fed, but the Federal Reserve Bank is trying
(04:04):
to figure out what to do now.
They've been increasing the rates for the last few months, for several months now.
And the fastest increases in interest rates since we've seen actually in history of the
Federal Reserve, like the fastest, like boom, boom, boom, boom, boom, boom, back to back,
back to back, back to back.
So they're very serious about managing the economy and putting a stop at on the inflation,
(04:34):
but it's not working as fast as they think it would.
So they're toying the line between should we continue to increase or should we kind of
wait a couple more months and see what happens.
There's a split.
Some economists think that they're not going to increase the rates in the next meeting,
which is November, sorry, October 31st, just at the end of this month, a couple weeks from
(04:58):
now.
And half of the other people think they might put some additional pressure and see what
happens.
So that's what's going on.
What's the stage?
Well, yeah, that's bad news.
I mean, 8% yesterday, I thought 7.9 was bad.
And now it's even worse today.
(05:19):
So that's never fun.
But bottom line is, man, people still need to buy homes.
You know, a lot of people are going to be pulling back because they're going to listen
to their uncle who went through a wait.
I mean, we've talked about the scenario before and they're going to get a bunch of not bad
information, but, you know, misinformation from an experience that somebody went through,
(05:41):
which is fine.
But there's going to be a ton of buyers out there that still want to buy.
I mean, it still sucks to rent from somebody else.
I know you're a landlord and it might be a touchy subject for you, but, you know, it's
not fun to pay somebody else's mortgage.
I mean, the end of the day, 8% is 8%.
(06:02):
At least it's not 14.
Yeah.
I mean, there's a place for renting, right?
There is definitely a place in time in a person's life to rent.
I always advocate for it to be as short time as possible.
So it is, you know, people are changing jobs.
(06:22):
They don't know if they're going to live in the area.
They need some flexibility with school districts and stuff like that.
There's always a reason to rent and it's justifiable in some cases.
But as soon as you can stop renting, you should.
As soon as you're able to stop renting, you should because when you rent, you don't build
(06:42):
equity.
You're not building an asset.
You're not building a retirement account, right?
Because some people use that for a retirement account.
The amount of people who use the equity in their houses for retirement is absolutely
incredible.
It's extremely high.
So I always advocate for get rid of a rent as soon as you can.
(07:04):
Now, the other thing that's happening right now is affordability is impacted by not only
by the interest rate, by the fact that the inventory is quite low on houses and most
in many markets.
So affordability, meaning being able to buy a house, it's pretty challenging for most,
especially for first time home buyers.
Now that forces people to rent, right?
(07:27):
Some people just don't have the choice at this particular moment.
Now rates are not easing off either.
In fact, they're going up.
Why?
Because it's harder to buy a house.
Because it's harder to buy a house.
Remember, we just came out of two years of government intervention for rentals, right?
(07:49):
So they froze in many states, increasing rates were frozen or capped.
We're out of that, right?
So landlords are trying to make the money they lost during that time or they failed to obtain.
So interest rates are high, but you know what's worse?
(08:10):
How fast rents are going up?
They're in some areas is 10% to 50%, 15% more than the last year.
So if you're paying rents and you're paying, let's say $1,500 a month, why not buy a house
that might be $2,500 a month?
Yes, it's higher, but you're paying yourself.
(08:32):
You're buying an asset.
You're building equity.
And in some cases, in some markets, it's even more straightforward.
There's some markets where rents are in the $2,000 to $3,000 range.
I can think of Modesto, Sacramento area, right?
And those rents are pretty high for that area and you can buy a house for that same monthly
(08:56):
payment.
Right.
You know, I know here in our area, Yuba City, I look at rents and I mean, we have some clients
that are paying like $2,500 a month.
And you know, I mean, average mortgage here is probably between $2,500 a month.
So why not try to make that sacrifice for a short amount of time to be able to have the
(09:21):
affordability of $3,000 a month or relocate?
I mean, I know that there are areas around us that are significantly cheaper than Yuba
City itself.
Absolutely.
And if you're flexible and you can look at different neighborhoods and you don't have
to live in a specific area and you can still have a wonderful home for a price that makes
(09:45):
sense.
And remember, I always tell this the first time home buyers, this is not your forever
home, this is your first home.
Okay.
It is baked into the equation that you're going to buy two or three more times in the
future.
This is so that you can build equity so that it's easier to buy that bigger home.
Right.
(10:06):
And nobody starts buying the multimillion dollar home up in the hill that we all dream of,
that doesn't happen from Monday to the next.
But the way it happens is the fastest and the soonest you can buy your first home, then
you move up, then you move up, then you move up until you get to that house that you want.
It is possible.
So can we talk about good news since we've been talking about bad?
(10:29):
So there's a few things that I want to highlight that are good news.
First of all, the inventories in many markets is going up.
I think as a result of two things, and when I say inventory for people who are listening
or following, what it means is the number of houses that are up for sale in different
markets.
Right.
And it's going up and it hasn't been going up as fast in the last year because of two
(10:54):
reasons.
One is the sellers or the owners of homes are locked into very good interest rates between
two and three and a half percent.
Right.
And that's going to happen by a 7.5%.
But some people have to sell anyway.
Right.
And a combination of buyers holding off and more sellers coming into the market because
(11:18):
they have to sell.
They can't hold on anymore.
That is helping us see an increase in inventory.
I have a couple of realtors in different areas and Stockton just comes to mind.
An incredible number of new homes in the price point of three to three and fifty are coming
to the inventory.
(11:39):
And if you are a pre-approved buyer, you have the ability to negotiate the terms because
those people have to sell.
Right.
So you can get a discounted value on the home, meaning a lower price than what they're asking
for or credits and in some cases even both.
So that is great news.
(11:59):
This is great news for first time home buyers.
It's great news for those that are feeling on the fence because of the interest rates.
I urge you to please look at the whole picture, not just the interest rate.
That's just one component of the whole picture.
Look at what's available.
Look at what your monthly payment is going to be.
Look at what is the potential market a year or two from now.
(12:24):
So being able to buy that house right now, it's an incredible opportunity.
You might not be able to buy any year from now because if the interest rates go down
as everybody expects, then you're going to have double the number of buyers in the market.
In the moment you have the double number of buyers in the market, you're not going to
be able to get that discount or those closing cost credits.
(12:45):
Right.
Yeah, and I've noticed in the deals that we've been doing lately and we've been selling
a lot of what we call wheel of state, right?
Mobile home and parks.
But negotiations have been wide open again.
I mean, we're able to ask for $5,000, $10,000 seller's credit to go towards somebody's closing
(13:08):
costs or go towards buying down a rate.
It's been kind of wonderful on the buyer side.
On the seller side, it can be kind of a hard pill to swallow, right?
Like you have buyers that basically they're saying, I'm going to only pay this amount
(13:29):
and give for them.
They should.
If that's what they can afford and that's what the house is worth because there's the
whole thing with inflation, right?
It goes into the housing market too.
And when you have sellers that want to sell for like way more than what a property is worth,
(13:51):
you could do that a couple of years ago, a few years ago, but today, I'm sorry about
the bad news for sellers.
You're going to have to give up some of that seller's credit.
You're going to have to give in and just sell your house and make it a fair deal for everybody.
Yep.
(14:12):
Yep.
Yep.
So, yeah, so that's I think that's good news.
If you're able to buy a house and afford it and commit to for the next year or two to
make that monthly payment, here's the second good news.
There is almost 100% agreement and this is very rare within the economist community, right?
(14:40):
And the interest rates are going to be down next year.
And there's always somebody I do.
I can't say 100% because there's always somebody who thinks is going to be pushed out to 2025.
But 8% is crazy.
And hopefully we don't have any new surprises.
We don't have another war.
We have, you know, like hopefully that's the case.
(15:02):
There's no way to go but down.
So if you're able to buy a house today, do it.
Why?
There's the highest probability that the rates will go down next year at some point.
Let's say worst case scenario is towards the end of a year.
Then you're committed into one year of making that monthly payment.
And hopefully as long as you maintain your job, as long as your credit score doesn't
(15:27):
take a hit, you should be able as a buyer to refinance next year, be in a stronger position
to be able to lower that monthly payment.
And hopefully, assuming that the home values don't go down, which is also looking very
probable that the home values are going to hold and even increase in the next year, then
(15:47):
you should be able to have some equity to be able to negotiate that monthly payment and
that interest rate.
So how fast is it going to go down?
We don't know.
Potentially it goes down to 6%.
Many economists think that it's going to stabilize somewhere between 4 and 5, 4 and 5.5.
That is a more normal range for the last 20 years.
(16:07):
And then once it goes down, then we're going to have an incredible number of people who
are going to be in a position to either sell, again, inventory is going to go up, or refinance
and be able to lower that monthly payment.
So making that purchase and that sacrifice today should be a very good investment because
next year you either can sell, leverage that equity that you gained and buy a bigger house
(16:32):
or refinance and lower your monthly payment.
Right.
That is good news.
Like really good news.
I like that you stress like to research the purchase, right?
Make sure that you can afford it.
I never ever want to sell a house to somebody and have them be house poor.
(16:53):
You know?
Yes.
Like you should be able to pay your mortgage and still eat and still, you know, have some
money for recreational things.
Recreational things might change, you know?
Yeah.
Instead of going out to eat every day, it might be a, I'm recreationally barbecuing in
my backyard, you know, that type of thing.
(17:16):
And hey, you can still live humbly and live a very, very happy life.
So think about it as a short term sacrifice.
Yes, as mortgage loan officers and license officers, we can't issue a loan for more than
certain percentage on the, what we call DTI debt to income.
(17:38):
So if I look at all your income, you know, for an FHA loan, I can't go above 50, 55%,
right?
So I can use more than half of your income to be able to pay for debt and including your
home debt, right?
For a conventional loan, I can't go above 47% most typically, right?
(17:58):
So and for, you know, USDA and other kinds of loans is even lower.
It's 43%, 45%, 40%.
So we're not allowed, we're not even allowed, we cannot issue a preapproval because we can't
use all your income to buy a house and not be able to, you know, have money to spend
on all the other things, you know, gas, car, loans, entertainment, you know, food.
(18:23):
Et cetera.
But you're absolutely right.
Like it's, I want to stress and make sure that you can afford and you can pay, you can
make that commitment.
It's not, it might not be easy commitment, but as long as it is a commitment that you
feel comfortable, your job's stable and you can make that payment for the next year or
two, then go for it because the opportunity to buy a house right now is not going to come
(18:45):
back.
Right.
So you said there's three components of good news.
What else do you have for us today?
Well, the third one is that the MBA, which is the Mortgage Bankers Association, has predicted
and they use very strong predicting predictive analytics that the origination volume is going
(19:09):
to go up by 15% to 20% in 2024.
So what that means is they expect that there's a lot of pent-top demand for home buying that
is just kind of there and it just doesn't, it's like people who are like on the fence
(19:29):
thinking about it, right?
And that's that, by the way, that does not include refinances, which we'll expect at
some point when the rates go down.
This is in terms of new purchase mortgage applications and it makes sense, right?
So the more we stay in this path of high interest rates, as soon as something goes down, there's
(19:53):
going to be a lot of people on the fence that are going to be ready to either sell their
houses and be ready to buy up, which is going to increase the volume for mortgage applications.
Likewise, first time home buyers who are on the fence because all they're here in the
news is bad news, bad news, interest rates are high, right?
So and by the way, this is like, I hate Yahoo Finance because they love, they're like a
(20:20):
mix of very alarmist sensationalist type of news because that's how they get clicks,
right?
That's fear driven media.
So if you look at all the news and that's not just Yahoo Finance, but every single mainstream
media channel, it's all like, oh my gosh, we're all going to die of these interest rates
(20:41):
are going to kill us.
It doesn't matter if it moves an inch.
I mean, just do a Google search right now, interest rates, mortgage interest rates, and
it's all bad news.
So that's why I wanted to balance it out with a little bit of good news.
And what I'm also seeing, I'm going to give you a bonus, is there's a bonus good news
here, which is I am seeing the government and even private bankers looking at ways of
(21:09):
making it more affordable for home buyers.
So last year we saw Biden's government slash the PMI, which is the mortgage insurance for
an FHA loan, and that helped dramatically.
And we're seeing more of that.
We're starting to hear Fannie Mae just released, I think a few weeks ago, the down payment,
(21:34):
the minimum down payment for a multi-home was lowered from 15% to 5%.
Please somebody check, fact check those numbers because I think they're right.
But somewhere around there, regardless, is a pretty significant good impact, making it
more attainable for somebody to buy a house.
So it's good.
It's good pressure, and it's good things that is forcing all these institutions to look
(21:57):
at how do we balance it out?
How do we help people?
Right.
That is good news, man.
I have a lot of people that keep asking me, and I feel like I constantly have to ask you
about first time home buyer programs and stuff like that.
Is there any down payment assistance coming back?
(22:19):
Very, very, very safe.
We do have a couple of new programs.
So I always add a little bit of caveat to this.
First time home buyer programs, if you look at advertising-wise, that's a very common
ad that you see online, buy with 0% down.
(22:43):
It is doable.
There are opportunities and possibilities in California, we have Calhachaffee, which
provides a down payment assistance program that is currently available.
And there's a couple of other organizations that are also doing so.
So we can work with any of them.
And at Snapfie, we try to provide as many programs as possible to our customers, so
(23:09):
we have options.
It is more expensive because you're not bringing any money down.
So your paying is not free money, it's not a gift.
It's a second loan that you're getting to pay to provide that down payment assistance.
Now the terms are very favorable.
You don't have to pay them immediately.
Sometimes you don't pay interest rate for any interest for the first few years.
(23:34):
And there is some benefits to it, but you still have a loan that you're paying.
So there are options.
Always consult with a reputable mortgage advisor and a mortgage company like us.
Advertising.
And just make sure that they look at all the options and slice them, dice them in so many
(23:56):
different ways.
That's what a mortgage advisor, a reputable mortgage advisor should do.
They should not be a salesperson.
Don't go to anybody who sounds on the phone that they're trying to sell you, trying to
get your social security number to run your credit.
Run away as fast as you can.
And that's how I train our loan officers.
(24:21):
Don't be a salesperson, be an advisor.
Yeah, absolutely.
That's what we are.
Well, man, I appreciate your time today.
Oh my gosh, 24 minutes.
I thought you said we're going to try to keep it at 10.
It happens almost every time.
So I'm going to close it out and we'll talk to you soon.
Great to see you.
Thanks for having me.
(24:41):
Bye.
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