November 13, 2025 • 35 mins
In this conversation, Jon G. Sanchez, Dwight Millard, and Cory Edge delve into the complexities of builder financing and its implications for home buyers. They discuss interest rate predictions, the mechanics of rate buy downs, and how builders leverage forward commitments to offer attractive mortgage rates.
The conversation highlights the hidden costs associated with these builder mortgages, including inflated home values and the potential for buyers to find themselves underwater. The discussion emphasizes the importance of understanding concessions and the different rules that apply to builders compared to individual lenders.
👉 Watch this episode on YouTube: www.youtube.com/@thejonsanchezshow
👉 To learn more about retirement planning and wealth management in Reno, visit: sanchezgaunt.com
Compliance Disclosure: This program is for informational purposes only and should not be considered investment, tax, or legal advice. The views expressed are those of the participants and may not reflect the views of Sanchez Gaunt Capital Management. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Always consult with a qualified financial professional regarding your individual situation before making financial decisions.
The conversation highlights the hidden costs associated with these builder mortgages, including inflated home values and the potential for buyers to find themselves underwater. The discussion emphasizes the importance of understanding concessions and the different rules that apply to builders compared to individual lenders.
👉 Watch this episode on YouTube: www.youtube.com/@thejonsanchezshow
👉 To learn more about retirement planning and wealth management in Reno, visit: sanchezgaunt.com
Compliance Disclosure: This program is for informational purposes only and should not be considered investment, tax, or legal advice. The views expressed are those of the participants and may not reflect the views of Sanchez Gaunt Capital Management. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Always consult with a qualified financial professional regarding your individual situation before making financial decisions.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Good Thursday afternoon to you. Welcome to the John Sanchez
Show on News Talk seven eighty k. It is a
pleasure to be with you, in a pleasure to be
with my co host an Or.
Speaker 2 (00:10):
We shall go mis greed, Jeddriality.
Speaker 3 (00:13):
Hey Don Bixie, I'm doing fantastic, sir. How are you
very well?
Speaker 2 (00:16):
Thank you?
Speaker 1 (00:17):
A little bruised, a little beaten, a little better? All
good do it's laughing because that's that's that's always him too.
Speaker 4 (00:26):
Yeah, yeah, I don't know who got hit.
Speaker 2 (00:29):
Worse, you or me today, Holy wulling.
Speaker 1 (00:33):
It was a tough one, all right, folks. We have
a lot of things to talk about today. We had
a pretty dog gone good sell off in the market today,
when of course give you all the reasons behind it
and give you a little bit of advice what we
see going on which you may want to be thinking
about doing with your portfolios. So we'll get to that initially.
Then we're gonna get into our real estate topic. We
have two topics we're gonna get to. We're gonna start
with the one and potentially we may not get to
(00:54):
our second one because I think this one is gonna
boil Dwight and my large blood, and I hope to
get them fire. It's been a while and we can,
you know, just talk about it because it's it is very,
very fascinating. What I'm talking about is there was a
really really interesting article in the Wall Street Journal today
and it's titled builders cheap mortgages are a bad deal
(01:15):
for home buyers. People who borrow from a builder are
more likely to overpay for their property and be under
water after they move in. Folks, this is a completely
different take on what we've been talking about. And thanks
to Dwight and Corey always telling us about, you know,
the incentives that these national home builders are giving to Look,
were you into buying their home right and you're like,
(01:37):
wait a minute, how can they offer a four percent
mortgage and the rest of the markets, you know, almost
seven percent north.
Speaker 2 (01:42):
Of six but actually closer to six and a half
and seven. But the bottom line is, how in the
world can they do that?
Speaker 1 (01:48):
And so Dwight's giving us some explanation of it, but
we're going to go a little bit deeper into this
this this topic at this point because believe it or not,
there are some risk that some very influential people are
have delved into and went, oh wait a minute, here,
the values of these homes that these people come in,
they get the dirt cheap mortgage subsidized by the builder.
(02:09):
The value of these homes tend to be underwater more
than someone just getting all this called a regular mortgage,
like from someone like Dwaite or something similar to that.
So we're going to go into that because many of
you may be looking at that scenario. I'm not saying
that's a bad one, but I think, you know, again,
we need to let you know there's, like anything, it's
not always what it's cracked up to be on the surface.
(02:30):
So then we get through that. Then we're going to
try to get into what we call the Great migration.
You know, folks, there's a lot of people moving around
these days, and we want to talk about the pluses
the minuses.
Speaker 2 (02:40):
A lot of people of course moving for various reasons.
Speaker 1 (02:44):
But what's involved with it, right, what are the costs,
what are the pluses, what are the minuses of it?
And so we'll get to that one, but like I said,
I want to focus first on the builders cheap mortgages.
Speaker 2 (02:54):
Dwight, I'm surprised you were able to keep your mouth fulls.
Speaker 1 (02:56):
While I was mentioning that, I know it's going to
fire you up on that whole situation.
Speaker 4 (03:00):
Well, you know, John, the reality of it is. You know,
it's one thing when you're on the other side, when
you're the preferred lender, you know that. But but the
reality of it is is that I've always been integrity based.
I've always been. But when you get a joint venture
and affiliated, you know, you a lot of these big
companies have their own mortgage company and there's only a
(03:22):
certain amount of pie that can go around, you know,
I mean, you can't cut it and slice it into
the pieces they want. So it makes it very difficult
for and I'm going to just say it makes it
very difficult for a preferred lender, actually a builder own
lender to compete because they've got to share the pie.
I mean, and it's a big pie. They got to
share it. And so when somebody comes in and it's
(03:44):
really unfortunate because it's misleading to the consumer, they're not
getting the best deal. They're not getting.
Speaker 2 (03:49):
But John, I can't go into it.
Speaker 4 (03:51):
I can't go into a builder that does a preferred
lender and start pitching rates because I'll get kicked out
really fast. Right, I got to go with some products.
I got to give them products that they don't have
or that I can specialize in. That's the only way
you're going to get in because they're going to be
very protective of that because it's a money thing. I mean,
you know, I ran, Corey was involved in it. I
ran a joint venture in Reno with a very large
(04:12):
builder and it worked. But we we did it right,
and and you know, and we they get so nasty. John.
If that if there's an outside lender typically that comes in,
it's just quite amazing.
Speaker 1 (04:27):
Yeah, I cannot imagine the politics that are involved in
that situation real quickly before we get to the stock
market side, because obviously there's a lot to talk about
with this topic.
Speaker 2 (04:37):
It's noting that when you say preferred lender, no one
knows what that is.
Speaker 4 (04:40):
So there's two types of there's two types of arrangements
or or you know, there may be three, but let's
just uh. The first one is that the builder owns
part of the mortgage company, so there is a vested
affiliated business arrangement in that, and you have to disclose
that that either the builder owns it there's there's a
there's a monetary connection there, or then there's a preferred
(05:04):
lender either just straight up of preferred. Hey, I'm gonna
make the way I like you. I'm going to make
you the preferred lender. So everybody's got to get pre
called from you. What can you give us? You know,
And it's always that kind of thing, and you know
that is the other way, and a lot of builders
will have maybe one or two preferred lenders. That not
a monetary it's not a monetary set up here. It's
(05:27):
just hey, I like the way you do business that
we take our friend Peter Listener, I mean, you know,
a preferred he usually carries two preferred lenders. He's got
a pretty good pulse on the lenders out there. And
so that's you try to have the best you can
direct them that way. You cannot close. You cannot force
a builder, cannot force a borrow to close with a
(05:48):
specific lender. That's illegal. But they'll give hard incentives and
soft incentives to drive them your way. And uh, that's
what's going on. It's really unfortunate. John, I have a worry.
I can tell down line that you know that on
a particular one.
Speaker 2 (06:04):
Please, ye, stories are the best way we look.
Speaker 4 (06:06):
Okay, Well, so I right now, that's right, okay. I
was anxiously ready to go.
Speaker 2 (06:13):
I told you, Cory, I told you Blood, I promise you.
Speaker 4 (06:18):
I have lots of stories, but one particular.
Speaker 1 (06:20):
All right, perfect, Corey, anything you want to add to
that before we get to the stock market?
Speaker 3 (06:23):
Said no, it'll be interesting to talk about, but you
can't have your cake and eat it too, right. You're
not going to get a price reduction and one of
these three percent mortgages unless the market really goes down.
So we'll get into the details.
Speaker 2 (06:35):
Absolutely, all right.
Speaker 1 (06:37):
So it's gonna be interesting, all right, guys, let's get
to the stock market, said, what the heck happened today?
So I'm gonna take you back to this morning. Well, actually,
let's go back to the last couple of days. So
two days in a row, we had a record setting
days on the Dow Jones Industrial average. We saw a
little bit of weakness on on the the nailsdack side
of things. S and B was just you know, barely
budged a little bit on the positive side. But you know,
(06:57):
just going going back to yesterday is an example, right,
we had a three hundred and twenty six point gain
on the Doubt, but the NASTAK was down sixty two,
sp was up four day before. That's when we had
the over what was the five hundred and four or
so gain on the Dow Jones industrial leverage.
Speaker 2 (07:12):
So you know, in two days we've almost gained a
thousand points on the Dow. Just unreal. Now, why a
couple Why was the Dow strong? Why was the NASDAC week? Well?
Speaker 1 (07:21):
As Jason I mentioned on the show yesterday, we're going
through this rotation right now, right where the market's trying
to cut the ties a little bit with AI in
with tech and rotating into other areas of the market
consumer staples and utilities and healthcare and so on and
so forth, which is always a healthy thing to do.
Speaker 2 (07:39):
Does it usually last.
Speaker 1 (07:42):
What we've seen recently is when these rotations begin, it
starts to be a sign that there's something going on
under the surface of the market and it's starting to weaken.
It's very difficult for me to believe that someone wants
to give up.
Speaker 2 (07:56):
I was picked in the video as.
Speaker 1 (07:57):
An example, right, and you know, stocks up whatever percent
to date to go, Hey, I want to go buy
utility or you know, Coca Cola or a Nike or
something along those lines. So sometimes it's where the algorithms
and the institutional managers will go, Hey, you know what,
Tech's over value, right, We've used this term a million times.
It's over valued. So let's take some of the chips
(08:18):
off the table in the tech sector and let's move
the money over a little bit into again the rest
of these areas of the market.
Speaker 2 (08:25):
And that's what we've experienced these last couple of days.
Speaker 1 (08:27):
Hence why the Nastak's been down and the dall has
been strong, because remember the Dallas thirty stocks, there's some tech,
There's a little bit of everything in there, all right,
So now let's.
Speaker 2 (08:36):
Go into it today.
Speaker 1 (08:37):
Well, we all knew very confidently that the government was
going to that Trump was going to pass the h
and get the government open sign the new legislation or
the new bill.
Speaker 2 (08:48):
And everything was there.
Speaker 1 (08:49):
People a lot of people guys were asking me and saying,
you know, is this going to be a big rally
for the market. Well, if I go back to yesterday
morning on the stock up dates, and I think even Wednesday,
excuse me, Monday on the show I said, look at
the market. Reminder, the market is a forward looking indicator.
It knows pretty dog one well that the government was
going to reopen. So it's already priced in. Just like
(09:10):
when Dewlight and I talk about rates and things, it's
already priced in. You you cannot outsmart the market. It
just will not happen, no matter how good, no matter
how much money you have, no matter how much experience,
no matter how many degrees you have, you will never
ever outsmart the stock market. Okay, now we fast forward
to today. We are a little bit we can the
pre market session. I see my notes here. My first
(09:31):
report at five twenty three, Dow was down. Dow Future
is down seventy six. Now is that's down forty eight
and just a twelve point loss on the SMP. All right,
so we kind of drifted. But now going into Dwight's world,
all of a sudden, we started to see an uptick
in bond yields in a little bit more and a
little bit more, and before we know it, bond yields,
you know, moved very strongly. Is we'll discuss when we
(09:51):
come back to you what the five year or the
ten year did. And I will tell you what the
mortgage side did. But what happened, So what drove this
market down? It was the FED members. And it wasn't
just one, but it was a number of these FED
members today that really started to get the market nervous
and nervous in regards to are we going to get
our next interest rate cut?
Speaker 2 (10:11):
Okay, so only kind of go down the list very quick,
but before we go to break. Yeah.
Speaker 1 (10:15):
Boston FED President Susan Collins, who is a voting member
of the FOMC, yesterday evening after the market closed, she said, quote,
it will be likely, like let Mery phrases, quote, it
will likely be appropriate to keep policy rates at the
current levels for some time.
Speaker 2 (10:31):
Ouch. Okay, strike against the December rate cut.
Speaker 1 (10:35):
Then we had Saint Louis FED President Alberto Muslim, voting member.
Also he said the Fed quote needs to lean against
above target inflation, meaning no hurry to cut raids. And
then Cleveland FED President Beth Hammock, who is not a
voting member this year but she will be next year,
she got goed a similar sentiment, saying policies should remain
(10:55):
quote somewhat restrictive to continue putting.
Speaker 2 (10:58):
Pressure to bring in down.
Speaker 1 (11:01):
So there you have two out of three voting members,
one that's going to be a voting member next year
saying bottom line, it's not time to cut interest rates.
Speaker 2 (11:08):
So what we saw happen, guys, was very simple.
Speaker 1 (11:10):
A month ago, there was a ninety five and a
half percent probability that we were going to get an
interest rate cut in December. Yesterday, that probability, according to
the CMME fed Watch tool, was sixty two point nine percent.
Speaker 2 (11:23):
Today fifty one point six.
Speaker 1 (11:26):
So all it takes is again and it all started,
of course, when Jerome Powell had his news conference and
you know, it was adamant that you know, we're not
a snow guarantee that we're going to give you a
December interest rate cut. So now everybody's freaking out about this,
and that is what caused the sell off today. And
I'll tell you exactly what those numbers are when we
come back. Start over to christin Snow right now, Trump
(11:46):
Vick Center, Kristen I turn out, Welcome back to the
John Sanchez Show on Newstalk seven eighty kh Dwighten Lard,
Highlands Mortgage, Corey Edge of Edrillity. All right, So here
was the bloodbath today, a seven hundred and ninety eight
point loss on the Dow, down one point sixty five percent.
(12:08):
Hey put it on a percentage basis, not that forty
seven four to fifty seven was our closing level. And
now Zach lost five hundred and thirty six two point
two nine percent, SP down one hundred and thirteen or
one point sixty six percent. Again, the very very broad
based selling obviously told you the reasons again, uh, market rotation,
getting out of tech. Just concerned about a lot of
(12:28):
different things. You know, if we look back over to
the Dow, we had big pressure on Disney. They had
an earnings miss in the pre market. Stock finished down
about about eight dollars and ninety five cents and one
oh seven seventy. Goldman Sachs along with other banks were down.
Goldman down h thirty one dollars and forty five cents,
Navidia down six dollars and ninety cents. Caterpillar again another
one that's just been on fire, down nineteen dollars and
(12:51):
forty eight cents.
Speaker 5 (12:52):
JP Morgan down ten dollars and twelve cents.
Speaker 1 (12:54):
I guess the reason I'm laughing is, you know, it
was last night, guys that you know, Jamie Diamond of
JP Morgan and David Soloman of Goldman Sachs and all
these major Wall Street bank powerhouses, their CEOs had dinner
with Trump. So maybe something was said or I don't know,
leaked or so I don't know, but.
Speaker 5 (13:12):
That kind of cursed them, I think there. All right,
So there's that.
Speaker 1 (13:17):
Now we're going to get into this story about again
these publicly traded home builders and the buydowns. But before
a story just popped up on CNBC and we want
to mention this, and I'm going to read this guy's
real quickly and then we're going to get your opinion
on this because there's some info here and that this
article is stating that new foreclosures have jumped twenty percent
(13:38):
in the month of October, a sign of more distress
than the housing market. So listen to this, folks. Foreclosure
of filings climbed again in October after sitting in historic
lows in recent years. According to the new data release today, Well,
the numbers are still small, the persistent rise and foreclosures
may be a sign of cracks in the housing market.
There were thirty six thousand, seven hundred and six US properties.
(14:01):
It was some type of foreclosure filings in October, such
as default notices, scheduled auctions, or bank repos According to ADAM,
a property data and analytics firm, that was three percent
higher than September. But here's the number, nineteen percent higher
than where they were in October of twenty twenty fours.
Speaker 5 (14:18):
Significant jump there.
Speaker 1 (14:20):
And by the way, this is the eighth straight month
of an annual increase. According to ADAM, foreclosure starts, which
are the initial phase of the process, rose six percent
for the month, and we're twenty percent higher than a
year before. Completed foreclosures. The final phase jump thirty two
percent year over year.
Speaker 5 (14:36):
Quote.
Speaker 1 (14:36):
Even with these increased activities remain well below historic highs.
The current turn appears to reflect a gradual normalization in
foreclosure volumes as market conditions adjust and some hunters continue
to navigate higher housing and borrowing costs. According to ADAM
CEO Rob Barber, the areas hit where Florida, South Carolina
and Illinois, they led the nation of foreclosure filings. On
(14:57):
a metropolitan level, Florida's Tampa, Jacksonville and Orlando had the
most filings, with the riverside California.
Speaker 5 (15:03):
Oh, that's a bad side.
Speaker 1 (15:05):
Riverside, California and Cleveland rounding out the top five. Looking
specifically at completed foreclosures, Texas, California, and Florida had the most,
suggesting those states we'll see more inventory coming on the
market at distressed prices. Still a very strong demand for homes,
especially in lower price ranges, so it's likely the fore
closed properties we'll find buyers quickly. Corey, I don't like
that about the California side. Here we had Riverside and
(15:27):
then just the state of California and the completed foreclosures.
And the reason I say that and correct me if
I'm wrong, but the way we always gauge things here
in northern Nevada, how does California do we tend to
follow right along there? They're strong, we're strong, they're weak,
We get weak, but usually there's a lag. Is that
still the case?
Speaker 3 (15:44):
I mean it should be. And there's so many different
factors here. We'll get into the two to one buydowns
and people stuck, But if you look at pricing over
the last two years, you're kind of stuck. The pricing
has not shifted right, like the average price is pretty
close to where it was a couple of years ago.
So if you had some of these layers, whether they
bought brand new or bought resale, that got into any
type of mortgage where the hope was they could refinance
(16:08):
in twelve to twenty four months at a lower cost.
They haven't had that opportunity. The value hasn't gone up,
the rights haven't gone down. They're stuck. And then I
don't want to get Dwight too on fire. But then
you got rising taxes, rising homeowners insurance, right, you know,
and the other thing to remember about the other thing
to remember about final foreclosure. So the first step is
(16:31):
the notice of default. Then it goes through then the
notice of sale, and the foreclosure. So when they say
completed foreclosure, typically not every time, but typically that means
that person was overlevered for that property. Otherwise they would
not have let it go to foreclosure. They would have
sold it in the regular market. So it's just an
excess of debt, if that makes sense.
Speaker 4 (16:51):
Right, Well, I'm surprised John, you haven't seen Corey. I
mean short sales versus the foreclosure, right, I mean, if
you're a little bit if you're a little bit off,
but to Corey's point, John, this should be disturbing for
everybody because that means you had no equity. And Corey's
absolutely right. If anything, we've had stagnation values and rates
have stayed or now if you did a buy down
(17:13):
went up, so you know, and now you probably have
more credit card debt. You don't qualify like.
Speaker 5 (17:19):
You you don't have a job.
Speaker 4 (17:20):
Maybe do not have a job.
Speaker 1 (17:21):
I mean it, Yeah, there's it's it's a lot of
scenarios coming there.
Speaker 5 (17:27):
Quite want to go out to your point. That was interesting.
Speaker 1 (17:30):
Okay, so your typical foreclosure process is what about ninety days.
Speaker 3 (17:34):
One and twenty in Nevada? One hundred and twenty if
they go as fast as they possibly can one hundred
and twenty in Nevada.
Speaker 1 (17:41):
Okay, so we're talking four months to sell a property.
So why do you think they're not selling because they
just don't have the equity in there.
Speaker 3 (17:50):
To sell it more than likely more than so.
Speaker 5 (17:54):
So that means they're newer buyers.
Speaker 3 (17:55):
Then they could be newer, they could have high he locks,
they could have other debt. The other thing that you
don't see because they don't talk about a lot, there
are a ton of players in the alternative financing realm.
I mean, you don't have to go to a guy
like Dwight now to get a helock. You can go
to to the computer and get crazy helocks and these things.
(18:16):
And so it's hard to put your finger on how
much data is actually on these houses. But I've been
through enough of them that every once in a while
somebody just doesn't know the value they let it go
and like, oh man, I had value in that, but
at foreclosed. But most of the time if it goes
through the foreclosure process in this market, it was way underwater.
(18:37):
That's why it got there.
Speaker 4 (18:39):
John, consider this maybe the trend too. Think about in
the subprime days, mortgage companies, builders, everybody's sold, Hey, get
into it this way and you can refinance, you know,
down the line. Right. So now we have the newer
version of subprime is called non QM. Right stated way
journers bank statement loans ten ninety nine. You know they've
(19:03):
opened them up. So if you took that on the
auspices that I'm going to refinance like we did back
in eight oh nine, well here you are. You can't
afford this. You know, you can't afford this ten ninety
nine loan program. And here we are, and now what
do you do? I mean, what do you do? I
mean you can't. You just can't refinance?
Speaker 1 (19:24):
Real quick, before we go to great Corey, are you
seeing anything locally with an up tacking foreclosers?
Speaker 3 (19:31):
To be honest with you, I have not looked as
close to so I get a report every week that
has nods and then notice the defaults and notice the sales.
And it was so small for so long that I
stopped opening it. But I'll start looking at it again
to see It'll be interesting. Starch, what's happening?
Speaker 5 (19:44):
Okay, perfect, all right, we come back.
Speaker 1 (19:47):
We'll get into this situation speaking of you know, underwater
and stuff. Can you get underwater by taking a buy
down or a dramatically reduced mortgage from one of the
national builders. It's a great Wall Street Journal article today says, yeah,
watch out, be careful. It's not what you think. So
we'll touch on that with the boys. Firstus turned over
to Jack Saban, News traffick and weather check. Welcome back
(20:09):
to the John Sanchez Show on News Talk seven to eighty.
K waits for the coryage of vigubility to wipe my
Lard Highlands mortgage. Once again, we finished down seven ninety
eight on the Dow, if you heard me correctly, five
thirty six loss on the Nasdaq, down one hundred and
thirteen on the S and P five hundred. All right,
so this article again, that was I may have said
Wall Street Journal here I apologize it was in Blueberg.
Builders cheap mortgages are bad, are a bad deal for
(20:31):
home buyers. You may be thinking, wait a minute, I
can go get a mortgage for you know, three and
a half four four and a half, significantly lower than
thirty year money that you'd get from a traditional lender.
How can this be bad? Well, you got a lot
to learn, folks. We just had a great discussion during
the break. I told Dwight it's like, hold on, I
want you to tell the audience this. But first let's
hit the commodity side and then hit these Rachel quick okay,
(20:53):
oil twenty four cent game today fifty eight seventy four
a barrel, down eighteen bucks on gold forty one ninety
five and ounce five basis point increase?
Speaker 5 (21:00):
Do I ten year forty eleven? How are we doing
the thirty year?
Speaker 4 (21:04):
So three year fixed? John six point three four today.
I had this discussion with somebody today. We were at
six point one seven before the Fed's latest cut. So
you know, your your government's faham v are just above
the six percent. So you know, we had them inside
the fives pretty well or inside the six is. Yeah,
and again now here we are back above the six is.
(21:25):
So definitely headed the wrong way.
Speaker 5 (21:27):
Ye, in the wrong way.
Speaker 1 (21:28):
As we said earlier in the program, last segment had
two FED members today same you know, basically don't we
don't want to cut rates and the probability came down.
Then that third member is not a voting member yet
saying the same thing. So that's what spooked the stock
market and brought these yields up.
Speaker 5 (21:43):
All right, guys, let's get down to this.
Speaker 1 (21:45):
Very interesting story because Dwight, it's going to take us
behind the scenes as well as Corey. So here's the situation.
Bargain mortgages originated by builders are helping more people get
into a property sooner, right and cheaper and so on
so forth. But there's a hidden cost, which is inflated
home values which result in underwater loans. Now we just
(22:07):
told you before we went to break foreclosures are starting
to increase. Big home builders are offering the cheapest mortgages
in the market. America's largest home builder Leonar, right, do right?
Speaker 5 (22:18):
You say it was Leonar, No, I think it's Horton,
But Lenar's right behind.
Speaker 1 (22:24):
Him, offering to rate at three point ninety nine percent
on a thirty year. Now, you just heard Dwhite say,
you know, six point three four is the national rate.
So you're going, wait a minute, how can they three
point ninet nine?
Speaker 5 (22:32):
How does this happen? D R.
Speaker 1 (22:34):
Horton's latest promotion in certain housing committees is a temporary
rate buydown, where buyers get a zero point nine nine
percent mortgage for the first year, rising to three point
nine nine percent by year four.
Speaker 5 (22:45):
I've never even seen that one, do I really?
Speaker 1 (22:47):
They start out at point ninety nine and mop top
out at four and four years.
Speaker 4 (22:51):
Yeah, yeah, imagine the cost on that, John, Yes.
Speaker 5 (22:54):
And that's what you're going to enlighten us on.
Speaker 2 (22:55):
All right.
Speaker 1 (22:56):
So large builders can offer these i catching deals because
they buy ford This where it's gonna start getting interesting.
Speaker 5 (23:02):
Okay.
Speaker 1 (23:02):
Large builders can offer these eye catching deals because they
buy ford commitments from lenders, which is an agreement to
buy mortgages in bulk at below market rates. They then
allocate low cost loans to individual home builders or home buyers.
Speaker 5 (23:17):
Excuse me now, Dight, let's talk about it. Let's stop
right there. Okay.
Speaker 1 (23:24):
They buy forward commitments from lenders an agreement, which is
an agreement to buy mortgages in bolk.
Speaker 5 (23:28):
You put that in English for the rest of us.
Speaker 4 (23:30):
Well, what they're what they're doing, John, is they're going
to go buy a block of money, whatever it is.
Let's just say ten million dollars. Okay, Okay, So I've
got let's just say I have I'm gonna just use
just a single track. Let's just say, and I got
five million dollars of standing inventory. Well, I'm not gonna
go buy five million because they're gona put a little
money down. So maybe I'll go buy four million dollars
(23:51):
of forward commitment. I'm I'm the builder, I in essence
become the lender because I'm the you know, they have
a mortgage company. So I'm going to go buy the
four million dollar. I'm going to discount it. I'm gonna
spend a lot of money because I got to attract you.
I can't buy it at current market why would I
do that? So I'm gonna go buy four million to
sell my five million dollars of inventory. I'm gonna go
(24:12):
four million. I'm gonna spend a lot of money up
front to get you to a a number that's lower
than the market, and still have the flexibility to add
more case by case to the borrower. If that makes sense.
So let's just say, like you said, let's say the
rates six, I'll go buy four. Four is going to
(24:34):
be really expensive, but I'm gonna go buy four four percent.
I'm gonna buy the four million at four percent. And
I'm now I've already I've already now destroyed the.
Speaker 1 (24:44):
We get a spoon feed all of us. So you're
buying four million at four percent? How are you getting
it at four percent?
Speaker 2 (24:50):
Just it.
Speaker 4 (24:52):
I just spent a lot of money for it. Let's
just say it was about four points. So what is
that one hundred and six? One hundred and six the
one thousand.
Speaker 1 (25:00):
Of you, the builder then are buying down, just like
Corey went to buy a house from you and buying down. Okay,
you let that point out, all right, that's making sense.
So you go to Wall Street or your You're like
you said your wholesale lenders. Yet you told me during
the break you go, Okay, guys, I need four million dollars,
I'm gonna pay you four points. So therefore my net
cost to borrow that money as the builder is four percent.
Speaker 4 (25:24):
Correct, and just use that as enough. Yes, so'm I'm
gonna pay one hundred and sixty thousand.
Speaker 5 (25:28):
Dollars yeah for ford contract. Okay, keep going.
Speaker 4 (25:31):
Right now, I have four percent to go out and offer.
What's what's nice about buying it down in the forward? John?
Is I still have all my concessions available if I
needed them on a case by case with the borrower.
I mean, so I have not. I have not used
that concession, so.
Speaker 1 (25:46):
Will Okay, you have concessions available on a case by case.
So you, as the is the builder. You just spent
what four hundred thousand dollars right to buy this, buy
this chunk of money down right? You spend four hundred
thousand and four percent?
Speaker 4 (26:04):
No, No, I spent four points one hundred and sixty thousand.
I spent one hundred and sixty thousand in our scenario
to buy.
Speaker 1 (26:08):
Four Okay, So not bad leverage? Okay, I missed it right, Okay, right,
So not bad. So you spend one hundred and sixty
thousand to control four four million dollars, right, it's kind
of derivatives and stock marketing. Okay, so you're not into
it all that bad and this example all right, So
now what you were saying is you can use those concessions.
So if Corey comes to you, and Corey's just a
(26:29):
real stickler and he's like, now, you know, I love
your you know, four percent mortgage you're offered me to it,
but man, I want some granted, and I want all
these upgrades and.
Speaker 4 (26:37):
Things, closing costs whatever.
Speaker 1 (26:38):
Right, that's the little bit of yeah fluff that's left over,
is what you're saying.
Speaker 4 (26:42):
I can still yeah, I can still dig into dip
into my concessions.
Speaker 5 (26:46):
Following you out keep going yeah.
Speaker 4 (26:48):
Well so then what happens then is I'm attracting and
knowing that I can buy it down even further if
I need to. But I'm already ahead of the game.
But I'm going to do this in lieu of to
this this article's point. Instead of reducing prices, even if
the market around me is dictating that the values have
kind of stabilized or whatever, my trade off is lower
(27:09):
interest rates to you than a lower house payment. It
makes you get more bang for your buck, John, by
lowering the rates and you do discounting ten thousand.
Speaker 5 (27:19):
Off the price, and Wall Street loves you. I'm going
to throw my two cents in now.
Speaker 1 (27:23):
Wall Street loves you Dwight as a publicly traded builder
because in this example, you only spend one hundred and
sixty thousand instead of spending two million or whatever to
offer incentives in lower rates. Right, you're leveraging it. So
therefore your top line revenue is not being impacted by
dropping the price of your home, and therefore your earnings
(27:44):
for sure doesn't get hit and your stock should do better.
Speaker 4 (27:47):
So John, in real life, that's why they don't allow
you to go outside to another lender, because at least
they can make up a little bit in the loan
side of it. And you know, maybe you know on
a when you sell out, you know, you get your
service release premium. So if you if you did all
of that and you lost all your loans to an
outside lender, yeah, you're really in trouble. Yeah, you're really
(28:10):
in trouble.
Speaker 1 (28:11):
Okay, So when we come back from the break let's
hit the final point of this.
Speaker 5 (28:14):
It's been fascinating. We'll hit the final point of this, guys,
and that is.
Speaker 1 (28:20):
They also have a an advantage over lenders like yourself, Dwight,
because this thing called a concession and the limitations that
Fannie may puts on you but not quite on the
builder rights. Wrap it up with Christen Snow right now,
Traffic Center. Kristen, Welcome back to the John Sanchez Show
on News Talk seven eighty k oh Corey Edge of
Edge Reality phone number.
Speaker 3 (28:41):
Six seven three six seven zero zero.
Speaker 1 (28:44):
Thank you, Dwight Millard Home Islands.
Speaker 4 (28:53):
Hey, all these years, John, I'm proud of you, you know. Yeah,
I wish I could just call it mortgage.
Speaker 5 (28:58):
I've got in ten minutes and stuff that I'll ask
you about.
Speaker 4 (29:02):
Yeah, two four zero two zero two two perfect.
Speaker 1 (29:04):
Okay, all right, So once again we have a fabulous
discussion in regards to taking you behind the scenes. While
these builders, home builders, cheap mortgages are a bad deal
for home buyers. Okay, So do I give a great
explanation how they go out and they basically buy the
money down and therefore they can pass that on to
you so they can move inventory now do I we
get into two things we got to make sure we
get done before the show wins. Number one, let's talk
(29:26):
about concessions, right you guys, Corey, you always talk about concessions.
There's different set of rules for these home builders versus
a small guy.
Speaker 4 (29:34):
Yeah, well yeah, the concessions themselves fha VA and conventional
are the same. Where whether builder wins or they have,
the benefit is they they're utilizing some of their buying
power inside the commitment and then they still have the
concession on the backside to still offer to you.
Speaker 3 (29:54):
Okay, so here so and kirkm if I'm wrong by
those loans, the seller can give up to nine percent concession,
call it money towards the buyer to help them. Nine
percents the magic number upgrade builders followed, not even early upgrades.
I don't think it's mostly cash closing costs, those kind
of things. Yeah, but the the the builders have to
(30:17):
play by the same rules because these are FAHA FHFA rules.
When they go to buy these four commitments for these
hundreds of thousands, that doesn't count inside a concession. They
still have ninety years of concession to spend.
Speaker 4 (30:30):
Well, typically, John what they're advertising is FAHA and core
under FAHA at six percent, So John, I still have
even if so think about this, Let's say I paid
four points to get Let's say I paid four points
in our scenario to get you that four percent right
with the builder? Yeah, okay, right, I paid four Okay,
I give you another six. That's ten points I gave you, right,
(30:53):
How do I compete with that?
Speaker 5 (30:55):
Right? Right? Exactly? Well, here's what centeris.
Speaker 1 (30:57):
According to the article, these big builders again, they can
give much more generous incentives to the buyers because of
these forward commitments, like Corey said, that are not counted
towards the seller's commission. Leonard gave incentives equivalent to fourteen
percent of the average home price in the latest quarter,
an effective price cut of sixty four thousand dollars per
(31:17):
property and the highest level of contention activity.
Speaker 4 (31:20):
John. If you use six percent and what was that number,
fourteen fourteen, then they were paying eight for the forward.
Speaker 5 (31:29):
Okay, right, yeah, okay, huge, that's double the amount.
Speaker 1 (31:34):
Yeah, so they doubled the amount versus what someone else
can do. But to the final point, which is because
of this an effective price cut of sixty four thousand
per properties with this example shows So this.
Speaker 5 (31:45):
Is why again, if you have.
Speaker 1 (31:49):
Two properties in the same housing track, let's say they're
identical properties. One had the the buydown and all these
incentives we're talking about, and one doesn't.
Speaker 5 (32:01):
Well, theoretically, the one that that has all these.
Speaker 1 (32:05):
Incentives, because it's all financing, is really worth less than
the other property.
Speaker 3 (32:11):
So here's an easy way to think about it. So
if you go out to these if you go out
to this new house tract and you buy it and
that builder, knowing to you or anything else, gave sixty
four thousand dollars in financial incentives to get your rights
downe and go all this stuff, if you have to
sell that house six months later, you can't go get
the same bite on. You don't have sixty four thousand
(32:31):
dollars to get to the next buyer. You're gonna have
to reduce your price to get down to compete against
the market. That's why you're on. You're underwater automatically from
the jump in these things. Because it took sixty.
Speaker 5 (32:44):
Though, why does it affect the home price?
Speaker 3 (32:46):
That's what I'm stuck because you probably wouldn't have bought
it without these incentives. You would have negotiated a lower price,
but what the builder's saying is no, no, no, we're
leaving the price alone. We're going to give it you
on the back end. I guarantee that when buyers come in,
they're not giving them sixty four thousand. No, they're giving
them some other and sent because they need that top
line because of Wall Street, to stay flush. So that
(33:09):
when people like Richard Lace come across to appraise it,
it all looks copasetic. It doesn't have jumps up and down,
because then Richard can appraise it.
Speaker 5 (33:16):
Right.
Speaker 1 (33:17):
Yeah, The main thing is you don't want property A
to be sold for sixty four thousand lists that property
B being all things equal.
Speaker 3 (33:24):
Right, not in the time of Zillo, right, because the
person Bind's gonna be like, well, no, I see Zillo,
you just sold that one for sixty four thousand less.
That's the deal I want.
Speaker 2 (33:33):
Yeah.
Speaker 1 (33:34):
Okay, boys, music's plaining. Cort your final advice on this
and then say with.
Speaker 2 (33:38):
You do it.
Speaker 3 (33:39):
Just be careful, read all the documents, talk to somebody
like Dwight before you commit to these things, because it's
a lot of smoking mirrors.
Speaker 4 (33:45):
Yeah, John, I give free advice, so you know, just
reach out and I can guide you through it. But
there is a little bit You're not getting anything for free.
I mean it's cost you somewhere.
Speaker 1 (33:55):
Yeah. Fascinating topic again taking you behind the scenes. You
only can get it on the show. Great job, fellows.
We will do again tomorrow on the John Sanchez Show.
Gobblins have a great afternoon.
Speaker 5 (34:05):
DWAIGHTE.
Speaker 1 (34:05):
Mallard NMLSID Number two four one two five nine a
license mortgage loan officer with Highlands Residential Mortgage Limited and
Equal Housing Lender NMLSID Number.
Speaker 5 (34:15):
One three four eight seven one.
Speaker 1 (34:16):
The information shared on this live broadcast is for general
information purposes only and does not constitute financial or mortgage advice.
Listeners should consult directly with a license mortgage professional for
guidance tailored to their specific situation.
Speaker 5 (34:29):
All loans are subject to credit approval and program guidelines.
Not all applicants will qualify. Loan terms and availability may
vary by state and are subject to change without notice.
Highlands Residential Mortgage Limited is licensed in multiple states.
Speaker 1 (34:43):
For a full list of state licenses and disclosures, please
visit https slash slash www dot Highlandsmortgage dot com.
Speaker 5 (34:51):
Backslash licenses backslash.
Speaker 1 (34:53):
The views expressed during this program are their own and
do not necessarily reflect those of Highlands Residential Mortgage Limited
Good Thursday afternoon to you. Welcome to the John Sanchez
Show on News Talk seven eighty k. It is a
pleasure to be with you, in a pleasure to be
with my co host an Or.
Speaker 2 (00:10):
We shall go mis greed, Jeddriality.
Speaker 3 (00:13):
Hey Don Bixie, I'm doing fantastic, sir. How are you
very well?
Speaker 2 (00:16):
Thank you?
Speaker 1 (00:17):
A little bruised, a little beaten, a little better? All
good do it's laughing because that's that's that's always him too.
Speaker 4 (00:26):
Yeah, yeah, I don't know who got hit.
Speaker 2 (00:29):
Worse, you or me today, Holy wulling.
Speaker 1 (00:33):
It was a tough one, all right, folks. We have
a lot of things to talk about today. We had
a pretty dog gone good sell off in the market today,
when of course give you all the reasons behind it
and give you a little bit of advice what we
see going on which you may want to be thinking
about doing with your portfolios. So we'll get to that initially.
Then we're gonna get into our real estate topic. We
have two topics we're gonna get to. We're gonna start
with the one and potentially we may not get to
(00:54):
our second one because I think this one is gonna
boil Dwight and my large blood, and I hope to
get them fire. It's been a while and we can,
you know, just talk about it because it's it is very,
very fascinating. What I'm talking about is there was a
really really interesting article in the Wall Street Journal today
and it's titled builders cheap mortgages are a bad deal
(01:15):
for home buyers. People who borrow from a builder are
more likely to overpay for their property and be under
water after they move in. Folks, this is a completely
different take on what we've been talking about. And thanks
to Dwight and Corey always telling us about, you know,
the incentives that these national home builders are giving to Look,
were you into buying their home right and you're like,
(01:37):
wait a minute, how can they offer a four percent
mortgage and the rest of the markets, you know, almost
seven percent north.
Speaker 2 (01:42):
Of six but actually closer to six and a half
and seven. But the bottom line is, how in the
world can they do that?
Speaker 1 (01:48):
And so Dwight's giving us some explanation of it, but
we're going to go a little bit deeper into this
this this topic at this point because believe it or not,
there are some risk that some very influential people are
have delved into and went, oh wait a minute, here,
the values of these homes that these people come in,
they get the dirt cheap mortgage subsidized by the builder.
(02:09):
The value of these homes tend to be underwater more
than someone just getting all this called a regular mortgage,
like from someone like Dwaite or something similar to that.
So we're going to go into that because many of
you may be looking at that scenario. I'm not saying
that's a bad one, but I think, you know, again,
we need to let you know there's, like anything, it's
not always what it's cracked up to be on the surface.
(02:30):
So then we get through that. Then we're going to
try to get into what we call the Great migration.
You know, folks, there's a lot of people moving around
these days, and we want to talk about the pluses
the minuses.
Speaker 2 (02:40):
A lot of people of course moving for various reasons.
Speaker 1 (02:44):
But what's involved with it, right, what are the costs,
what are the pluses, what are the minuses of it?
And so we'll get to that one, but like I said,
I want to focus first on the builders cheap mortgages.
Speaker 2 (02:54):
Dwight, I'm surprised you were able to keep your mouth fulls.
Speaker 1 (02:56):
While I was mentioning that, I know it's going to
fire you up on that whole situation.
Speaker 4 (03:00):
Well, you know, John, the reality of it is. You know,
it's one thing when you're on the other side, when
you're the preferred lender, you know that. But but the
reality of it is is that I've always been integrity based.
I've always been. But when you get a joint venture
and affiliated, you know, you a lot of these big
companies have their own mortgage company and there's only a
(03:22):
certain amount of pie that can go around, you know,
I mean, you can't cut it and slice it into
the pieces they want. So it makes it very difficult
for and I'm going to just say it makes it
very difficult for a preferred lender, actually a builder own
lender to compete because they've got to share the pie.
I mean, and it's a big pie. They got to
share it. And so when somebody comes in and it's
(03:44):
really unfortunate because it's misleading to the consumer, they're not
getting the best deal. They're not getting.
Speaker 2 (03:49):
But John, I can't go into it.
Speaker 4 (03:51):
I can't go into a builder that does a preferred
lender and start pitching rates because I'll get kicked out
really fast. Right, I got to go with some products.
I got to give them products that they don't have
or that I can specialize in. That's the only way
you're going to get in because they're going to be
very protective of that because it's a money thing. I mean,
you know, I ran, Corey was involved in it. I
ran a joint venture in Reno with a very large
(04:12):
builder and it worked. But we we did it right,
and and you know, and we they get so nasty. John.
If that if there's an outside lender typically that comes in,
it's just quite amazing.
Speaker 1 (04:27):
Yeah, I cannot imagine the politics that are involved in
that situation real quickly before we get to the stock
market side, because obviously there's a lot to talk about
with this topic.
Speaker 2 (04:37):
It's noting that when you say preferred lender, no one
knows what that is.
Speaker 4 (04:40):
So there's two types of there's two types of arrangements
or or you know, there may be three, but let's
just uh. The first one is that the builder owns
part of the mortgage company, so there is a vested
affiliated business arrangement in that, and you have to disclose
that that either the builder owns it there's there's a
there's a monetary connection there, or then there's a preferred
(05:04):
lender either just straight up of preferred. Hey, I'm gonna
make the way I like you. I'm going to make
you the preferred lender. So everybody's got to get pre
called from you. What can you give us? You know,
And it's always that kind of thing, and you know
that is the other way, and a lot of builders
will have maybe one or two preferred lenders. That not
a monetary it's not a monetary set up here. It's
(05:27):
just hey, I like the way you do business that
we take our friend Peter Listener, I mean, you know,
a preferred he usually carries two preferred lenders. He's got
a pretty good pulse on the lenders out there. And
so that's you try to have the best you can
direct them that way. You cannot close. You cannot force
a builder, cannot force a borrow to close with a
(05:48):
specific lender. That's illegal. But they'll give hard incentives and
soft incentives to drive them your way. And uh, that's
what's going on. It's really unfortunate. John, I have a worry.
I can tell down line that you know that on
a particular one.
Speaker 2 (06:04):
Please, ye, stories are the best way we look.
Speaker 4 (06:06):
Okay, Well, so I right now, that's right, okay. I
was anxiously ready to go.
Speaker 2 (06:13):
I told you, Cory, I told you Blood, I promise you.
Speaker 4 (06:18):
I have lots of stories, but one particular.
Speaker 1 (06:20):
All right, perfect, Corey, anything you want to add to
that before we get to the stock market?
Speaker 3 (06:23):
Said no, it'll be interesting to talk about, but you
can't have your cake and eat it too, right. You're
not going to get a price reduction and one of
these three percent mortgages unless the market really goes down.
So we'll get into the details.
Speaker 2 (06:35):
Absolutely, all right.
Speaker 1 (06:37):
So it's gonna be interesting, all right, guys, let's get
to the stock market, said, what the heck happened today?
So I'm gonna take you back to this morning. Well, actually,
let's go back to the last couple of days. So
two days in a row, we had a record setting
days on the Dow Jones Industrial average. We saw a
little bit of weakness on on the the nailsdack side
of things. S and B was just you know, barely
budged a little bit on the positive side. But you know,
(06:57):
just going going back to yesterday is an example, right,
we had a three hundred and twenty six point gain
on the Doubt, but the NASTAK was down sixty two,
sp was up four day before. That's when we had
the over what was the five hundred and four or
so gain on the Dow Jones industrial leverage.
Speaker 2 (07:12):
So you know, in two days we've almost gained a
thousand points on the Dow. Just unreal. Now, why a
couple Why was the Dow strong? Why was the NASDAC week? Well?
Speaker 1 (07:21):
As Jason I mentioned on the show yesterday, we're going
through this rotation right now, right where the market's trying
to cut the ties a little bit with AI in
with tech and rotating into other areas of the market
consumer staples and utilities and healthcare and so on and
so forth, which is always a healthy thing to do.
Speaker 2 (07:39):
Does it usually last.
Speaker 1 (07:42):
What we've seen recently is when these rotations begin, it
starts to be a sign that there's something going on
under the surface of the market and it's starting to weaken.
It's very difficult for me to believe that someone wants
to give up.
Speaker 2 (07:56):
I was picked in the video as.
Speaker 1 (07:57):
An example, right, and you know, stocks up whatever percent
to date to go, Hey, I want to go buy
utility or you know, Coca Cola or a Nike or
something along those lines. So sometimes it's where the algorithms
and the institutional managers will go, Hey, you know what,
Tech's over value, right, We've used this term a million times.
It's over valued. So let's take some of the chips
(08:18):
off the table in the tech sector and let's move
the money over a little bit into again the rest
of these areas of the market.
Speaker 2 (08:25):
And that's what we've experienced these last couple of days.
Speaker 1 (08:27):
Hence why the Nastak's been down and the dall has
been strong, because remember the Dallas thirty stocks, there's some tech,
There's a little bit of everything in there, all right,
So now let's.
Speaker 2 (08:36):
Go into it today.
Speaker 1 (08:37):
Well, we all knew very confidently that the government was
going to that Trump was going to pass the h
and get the government open sign the new legislation or
the new bill.
Speaker 2 (08:48):
And everything was there.
Speaker 1 (08:49):
People a lot of people guys were asking me and saying,
you know, is this going to be a big rally
for the market. Well, if I go back to yesterday
morning on the stock up dates, and I think even Wednesday,
excuse me, Monday on the show I said, look at
the market. Reminder, the market is a forward looking indicator.
It knows pretty dog one well that the government was
going to reopen. So it's already priced in. Just like
(09:10):
when Dewlight and I talk about rates and things, it's
already priced in. You you cannot outsmart the market. It
just will not happen, no matter how good, no matter
how much money you have, no matter how much experience,
no matter how many degrees you have, you will never
ever outsmart the stock market. Okay, now we fast forward
to today. We are a little bit we can the
pre market session. I see my notes here. My first
(09:31):
report at five twenty three, Dow was down. Dow Future
is down seventy six. Now is that's down forty eight
and just a twelve point loss on the SMP. All right,
so we kind of drifted. But now going into Dwight's world,
all of a sudden, we started to see an uptick
in bond yields in a little bit more and a
little bit more, and before we know it, bond yields,
you know, moved very strongly. Is we'll discuss when we
(09:51):
come back to you what the five year or the
ten year did. And I will tell you what the
mortgage side did. But what happened, So what drove this
market down? It was the FED members. And it wasn't
just one, but it was a number of these FED
members today that really started to get the market nervous
and nervous in regards to are we going to get
our next interest rate cut?
Speaker 2 (10:11):
Okay, so only kind of go down the list very quick,
but before we go to break. Yeah.
Speaker 1 (10:15):
Boston FED President Susan Collins, who is a voting member
of the FOMC, yesterday evening after the market closed, she said, quote,
it will be likely, like let Mery phrases, quote, it
will likely be appropriate to keep policy rates at the
current levels for some time.
Speaker 2 (10:31):
Ouch. Okay, strike against the December rate cut.
Speaker 1 (10:35):
Then we had Saint Louis FED President Alberto Muslim, voting member.
Also he said the Fed quote needs to lean against
above target inflation, meaning no hurry to cut raids. And
then Cleveland FED President Beth Hammock, who is not a
voting member this year but she will be next year,
she got goed a similar sentiment, saying policies should remain
(10:55):
quote somewhat restrictive to continue putting.
Speaker 2 (10:58):
Pressure to bring in down.
Speaker 1 (11:01):
So there you have two out of three voting members,
one that's going to be a voting member next year
saying bottom line, it's not time to cut interest rates.
Speaker 2 (11:08):
So what we saw happen, guys, was very simple.
Speaker 1 (11:10):
A month ago, there was a ninety five and a
half percent probability that we were going to get an
interest rate cut in December. Yesterday, that probability, according to
the CMME fed Watch tool, was sixty two point nine percent.
Speaker 2 (11:23):
Today fifty one point six.
Speaker 1 (11:26):
So all it takes is again and it all started,
of course, when Jerome Powell had his news conference and
you know, it was adamant that you know, we're not
a snow guarantee that we're going to give you a
December interest rate cut. So now everybody's freaking out about this,
and that is what caused the sell off today. And
I'll tell you exactly what those numbers are when we
come back. Start over to christin Snow right now, Trump
(11:46):
Vick Center, Kristen I turn out, Welcome back to the
John Sanchez Show on Newstalk seven eighty kh Dwighten Lard,
Highlands Mortgage, Corey Edge of Edrillity. All right, So here
was the bloodbath today, a seven hundred and ninety eight
point loss on the Dow, down one point sixty five percent.
(12:08):
Hey put it on a percentage basis, not that forty
seven four to fifty seven was our closing level. And
now Zach lost five hundred and thirty six two point
two nine percent, SP down one hundred and thirteen or
one point sixty six percent. Again, the very very broad
based selling obviously told you the reasons again, uh, market rotation,
getting out of tech. Just concerned about a lot of
(12:28):
different things. You know, if we look back over to
the Dow, we had big pressure on Disney. They had
an earnings miss in the pre market. Stock finished down
about about eight dollars and ninety five cents and one
oh seven seventy. Goldman Sachs along with other banks were down.
Goldman down h thirty one dollars and forty five cents,
Navidia down six dollars and ninety cents. Caterpillar again another
one that's just been on fire, down nineteen dollars and
(12:51):
forty eight cents.
Speaker 5 (12:52):
JP Morgan down ten dollars and twelve cents.
Speaker 1 (12:54):
I guess the reason I'm laughing is, you know, it
was last night, guys that you know, Jamie Diamond of
JP Morgan and David Soloman of Goldman Sachs and all
these major Wall Street bank powerhouses, their CEOs had dinner
with Trump. So maybe something was said or I don't know,
leaked or so I don't know, but.
Speaker 5 (13:12):
That kind of cursed them, I think there. All right,
So there's that.
Speaker 1 (13:17):
Now we're going to get into this story about again
these publicly traded home builders and the buydowns. But before
a story just popped up on CNBC and we want
to mention this, and I'm going to read this guy's
real quickly and then we're going to get your opinion
on this because there's some info here and that this
article is stating that new foreclosures have jumped twenty percent
(13:38):
in the month of October, a sign of more distress
than the housing market. So listen to this, folks. Foreclosure
of filings climbed again in October after sitting in historic
lows in recent years. According to the new data release today, Well,
the numbers are still small, the persistent rise and foreclosures
may be a sign of cracks in the housing market.
There were thirty six thousand, seven hundred and six US properties.
(14:01):
It was some type of foreclosure filings in October, such
as default notices, scheduled auctions, or bank repos According to ADAM,
a property data and analytics firm, that was three percent
higher than September. But here's the number, nineteen percent higher
than where they were in October of twenty twenty fours.
Speaker 5 (14:18):
Significant jump there.
Speaker 1 (14:20):
And by the way, this is the eighth straight month
of an annual increase. According to ADAM, foreclosure starts, which
are the initial phase of the process, rose six percent
for the month, and we're twenty percent higher than a
year before. Completed foreclosures. The final phase jump thirty two
percent year over year.
Speaker 5 (14:36):
Quote.
Speaker 1 (14:36):
Even with these increased activities remain well below historic highs.
The current turn appears to reflect a gradual normalization in
foreclosure volumes as market conditions adjust and some hunters continue
to navigate higher housing and borrowing costs. According to ADAM
CEO Rob Barber, the areas hit where Florida, South Carolina
and Illinois, they led the nation of foreclosure filings. On
(14:57):
a metropolitan level, Florida's Tampa, Jacksonville and Orlando had the
most filings, with the riverside California.
Speaker 5 (15:03):
Oh, that's a bad side.
Speaker 1 (15:05):
Riverside, California and Cleveland rounding out the top five. Looking
specifically at completed foreclosures, Texas, California, and Florida had the most,
suggesting those states we'll see more inventory coming on the
market at distressed prices. Still a very strong demand for homes,
especially in lower price ranges, so it's likely the fore
closed properties we'll find buyers quickly. Corey, I don't like
that about the California side. Here we had Riverside and
(15:27):
then just the state of California and the completed foreclosures.
And the reason I say that and correct me if
I'm wrong, but the way we always gauge things here
in northern Nevada, how does California do we tend to
follow right along there? They're strong, we're strong, they're weak,
We get weak, but usually there's a lag. Is that
still the case?
Speaker 3 (15:44):
I mean it should be. And there's so many different
factors here. We'll get into the two to one buydowns
and people stuck, But if you look at pricing over
the last two years, you're kind of stuck. The pricing
has not shifted right, like the average price is pretty
close to where it was a couple of years ago.
So if you had some of these layers, whether they
bought brand new or bought resale, that got into any
type of mortgage where the hope was they could refinance
(16:08):
in twelve to twenty four months at a lower cost.
They haven't had that opportunity. The value hasn't gone up,
the rights haven't gone down. They're stuck. And then I
don't want to get Dwight too on fire. But then
you got rising taxes, rising homeowners insurance, right, you know,
and the other thing to remember about the other thing
to remember about final foreclosure. So the first step is
(16:31):
the notice of default. Then it goes through then the
notice of sale, and the foreclosure. So when they say
completed foreclosure, typically not every time, but typically that means
that person was overlevered for that property. Otherwise they would
not have let it go to foreclosure. They would have
sold it in the regular market. So it's just an
excess of debt, if that makes sense.
Speaker 4 (16:51):
Right, Well, I'm surprised John, you haven't seen Corey. I
mean short sales versus the foreclosure, right, I mean, if
you're a little bit if you're a little bit off,
but to Corey's point, John, this should be disturbing for
everybody because that means you had no equity. And Corey's
absolutely right. If anything, we've had stagnation values and rates
have stayed or now if you did a buy down
(17:13):
went up, so you know, and now you probably have
more credit card debt. You don't qualify like.
Speaker 5 (17:19):
You you don't have a job.
Speaker 4 (17:20):
Maybe do not have a job.
Speaker 1 (17:21):
I mean it, Yeah, there's it's it's a lot of
scenarios coming there.
Speaker 5 (17:27):
Quite want to go out to your point. That was interesting.
Speaker 1 (17:30):
Okay, so your typical foreclosure process is what about ninety days.
Speaker 3 (17:34):
One and twenty in Nevada? One hundred and twenty if
they go as fast as they possibly can one hundred
and twenty in Nevada.
Speaker 1 (17:41):
Okay, so we're talking four months to sell a property.
So why do you think they're not selling because they
just don't have the equity in there.
Speaker 3 (17:50):
To sell it more than likely more than so.
Speaker 5 (17:54):
So that means they're newer buyers.
Speaker 3 (17:55):
Then they could be newer, they could have high he locks,
they could have other debt. The other thing that you
don't see because they don't talk about a lot, there
are a ton of players in the alternative financing realm.
I mean, you don't have to go to a guy
like Dwight now to get a helock. You can go
to to the computer and get crazy helocks and these things.
(18:16):
And so it's hard to put your finger on how
much data is actually on these houses. But I've been
through enough of them that every once in a while
somebody just doesn't know the value they let it go
and like, oh man, I had value in that, but
at foreclosed. But most of the time if it goes
through the foreclosure process in this market, it was way underwater.
(18:37):
That's why it got there.
Speaker 4 (18:39):
John, consider this maybe the trend too. Think about in
the subprime days, mortgage companies, builders, everybody's sold, Hey, get
into it this way and you can refinance, you know,
down the line. Right. So now we have the newer
version of subprime is called non QM. Right stated way
journers bank statement loans ten ninety nine. You know they've
(19:03):
opened them up. So if you took that on the
auspices that I'm going to refinance like we did back
in eight oh nine, well here you are. You can't
afford this. You know, you can't afford this ten ninety
nine loan program. And here we are, and now what
do you do? I mean, what do you do? I
mean you can't. You just can't refinance?
Speaker 1 (19:24):
Real quick, before we go to great Corey, are you
seeing anything locally with an up tacking foreclosers?
Speaker 3 (19:31):
To be honest with you, I have not looked as
close to so I get a report every week that
has nods and then notice the defaults and notice the sales.
And it was so small for so long that I
stopped opening it. But I'll start looking at it again
to see It'll be interesting. Starch, what's happening?
Speaker 5 (19:44):
Okay, perfect, all right, we come back.
Speaker 1 (19:47):
We'll get into this situation speaking of you know, underwater
and stuff. Can you get underwater by taking a buy
down or a dramatically reduced mortgage from one of the
national builders. It's a great Wall Street Journal article today says, yeah,
watch out, be careful. It's not what you think. So
we'll touch on that with the boys. Firstus turned over
to Jack Saban, News traffick and weather check. Welcome back
(20:09):
to the John Sanchez Show on News Talk seven to eighty.
K waits for the coryage of vigubility to wipe my
Lard Highlands mortgage. Once again, we finished down seven ninety
eight on the Dow, if you heard me correctly, five
thirty six loss on the Nasdaq, down one hundred and
thirteen on the S and P five hundred. All right,
so this article again, that was I may have said
Wall Street Journal here I apologize it was in Blueberg.
Builders cheap mortgages are bad, are a bad deal for
(20:31):
home buyers. You may be thinking, wait a minute, I
can go get a mortgage for you know, three and
a half four four and a half, significantly lower than
thirty year money that you'd get from a traditional lender.
How can this be bad? Well, you got a lot
to learn, folks. We just had a great discussion during
the break. I told Dwight it's like, hold on, I
want you to tell the audience this. But first let's
hit the commodity side and then hit these Rachel quick okay,
(20:53):
oil twenty four cent game today fifty eight seventy four
a barrel, down eighteen bucks on gold forty one ninety
five and ounce five basis point increase?
Speaker 5 (21:00):
Do I ten year forty eleven? How are we doing
the thirty year?
Speaker 4 (21:04):
So three year fixed? John six point three four today.
I had this discussion with somebody today. We were at
six point one seven before the Fed's latest cut. So
you know, your your government's faham v are just above
the six percent. So you know, we had them inside
the fives pretty well or inside the six is. Yeah,
and again now here we are back above the six is.
(21:25):
So definitely headed the wrong way.
Speaker 5 (21:27):
Ye, in the wrong way.
Speaker 1 (21:28):
As we said earlier in the program, last segment had
two FED members today same you know, basically don't we
don't want to cut rates and the probability came down.
Then that third member is not a voting member yet
saying the same thing. So that's what spooked the stock
market and brought these yields up.
Speaker 5 (21:43):
All right, guys, let's get down to this.
Speaker 1 (21:45):
Very interesting story because Dwight, it's going to take us
behind the scenes as well as Corey. So here's the situation.
Bargain mortgages originated by builders are helping more people get
into a property sooner, right and cheaper and so on
so forth. But there's a hidden cost, which is inflated
home values which result in underwater loans. Now we just
(22:07):
told you before we went to break foreclosures are starting
to increase. Big home builders are offering the cheapest mortgages
in the market. America's largest home builder Leonar, right, do right?
Speaker 5 (22:18):
You say it was Leonar, No, I think it's Horton,
But Lenar's right behind.
Speaker 1 (22:24):
Him, offering to rate at three point ninety nine percent
on a thirty year. Now, you just heard Dwhite say,
you know, six point three four is the national rate.
So you're going, wait a minute, how can they three
point ninet nine?
Speaker 5 (22:32):
How does this happen? D R.
Speaker 1 (22:34):
Horton's latest promotion in certain housing committees is a temporary
rate buydown, where buyers get a zero point nine nine
percent mortgage for the first year, rising to three point
nine nine percent by year four.
Speaker 5 (22:45):
I've never even seen that one, do I really?
Speaker 1 (22:47):
They start out at point ninety nine and mop top
out at four and four years.
Speaker 4 (22:51):
Yeah, yeah, imagine the cost on that, John, Yes.
Speaker 5 (22:54):
And that's what you're going to enlighten us on.
Speaker 2 (22:55):
All right.
Speaker 1 (22:56):
So large builders can offer these i catching deals because
they buy ford This where it's gonna start getting interesting.
Speaker 5 (23:02):
Okay.
Speaker 1 (23:02):
Large builders can offer these eye catching deals because they
buy ford commitments from lenders, which is an agreement to
buy mortgages in bulk at below market rates. They then
allocate low cost loans to individual home builders or home buyers.
Speaker 5 (23:17):
Excuse me now, Dight, let's talk about it. Let's stop
right there. Okay.
Speaker 1 (23:24):
They buy forward commitments from lenders an agreement, which is
an agreement to buy mortgages in bolk.
Speaker 5 (23:28):
You put that in English for the rest of us.
Speaker 4 (23:30):
Well, what they're what they're doing, John, is they're going
to go buy a block of money, whatever it is.
Let's just say ten million dollars. Okay, Okay, So I've
got let's just say I have I'm gonna just use
just a single track. Let's just say, and I got
five million dollars of standing inventory. Well, I'm not gonna
go buy five million because they're gona put a little
money down. So maybe I'll go buy four million dollars
(23:51):
of forward commitment. I'm I'm the builder, I in essence
become the lender because I'm the you know, they have
a mortgage company. So I'm going to go buy the
four million dollar. I'm going to discount it. I'm gonna
spend a lot of money because I got to attract you.
I can't buy it at current market why would I
do that? So I'm gonna go buy four million to
sell my five million dollars of inventory. I'm gonna go
(24:12):
four million. I'm gonna spend a lot of money up
front to get you to a a number that's lower
than the market, and still have the flexibility to add
more case by case to the borrower. If that makes sense.
So let's just say, like you said, let's say the
rates six, I'll go buy four. Four is going to
(24:34):
be really expensive, but I'm gonna go buy four four percent.
I'm gonna buy the four million at four percent. And
I'm now I've already I've already now destroyed the.
Speaker 1 (24:44):
We get a spoon feed all of us. So you're
buying four million at four percent? How are you getting
it at four percent?
Speaker 2 (24:50):
Just it.
Speaker 4 (24:52):
I just spent a lot of money for it. Let's
just say it was about four points. So what is
that one hundred and six? One hundred and six the
one thousand.
Speaker 1 (25:00):
Of you, the builder then are buying down, just like
Corey went to buy a house from you and buying down. Okay,
you let that point out, all right, that's making sense.
So you go to Wall Street or your You're like
you said your wholesale lenders. Yet you told me during
the break you go, Okay, guys, I need four million dollars,
I'm gonna pay you four points. So therefore my net
cost to borrow that money as the builder is four percent.
Speaker 4 (25:24):
Correct, and just use that as enough. Yes, so'm I'm
gonna pay one hundred and sixty thousand.
Speaker 5 (25:28):
Dollars yeah for ford contract. Okay, keep going.
Speaker 4 (25:31):
Right now, I have four percent to go out and offer.
What's what's nice about buying it down in the forward? John?
Is I still have all my concessions available if I
needed them on a case by case with the borrower.
I mean, so I have not. I have not used
that concession, so.
Speaker 1 (25:46):
Will Okay, you have concessions available on a case by case.
So you, as the is the builder. You just spent
what four hundred thousand dollars right to buy this, buy
this chunk of money down right? You spend four hundred
thousand and four percent?
Speaker 4 (26:04):
No, No, I spent four points one hundred and sixty thousand.
I spent one hundred and sixty thousand in our scenario
to buy.
Speaker 1 (26:08):
Four Okay, So not bad leverage? Okay, I missed it right, Okay, right,
So not bad. So you spend one hundred and sixty
thousand to control four four million dollars, right, it's kind
of derivatives and stock marketing. Okay, so you're not into
it all that bad and this example all right, So
now what you were saying is you can use those concessions.
So if Corey comes to you, and Corey's just a
(26:29):
real stickler and he's like, now, you know, I love
your you know, four percent mortgage you're offered me to it,
but man, I want some granted, and I want all
these upgrades and.
Speaker 4 (26:37):
Things, closing costs whatever.
Speaker 1 (26:38):
Right, that's the little bit of yeah fluff that's left over,
is what you're saying.
Speaker 4 (26:42):
I can still yeah, I can still dig into dip
into my concessions.
Speaker 5 (26:46):
Following you out keep going yeah.
Speaker 4 (26:48):
Well so then what happens then is I'm attracting and
knowing that I can buy it down even further if
I need to. But I'm already ahead of the game.
But I'm going to do this in lieu of to
this this article's point. Instead of reducing prices, even if
the market around me is dictating that the values have
kind of stabilized or whatever, my trade off is lower
(27:09):
interest rates to you than a lower house payment. It
makes you get more bang for your buck, John, by
lowering the rates and you do discounting ten thousand.
Speaker 5 (27:19):
Off the price, and Wall Street loves you. I'm going
to throw my two cents in now.
Speaker 1 (27:23):
Wall Street loves you Dwight as a publicly traded builder
because in this example, you only spend one hundred and
sixty thousand instead of spending two million or whatever to
offer incentives in lower rates. Right, you're leveraging it. So
therefore your top line revenue is not being impacted by
dropping the price of your home, and therefore your earnings
(27:44):
for sure doesn't get hit and your stock should do better.
Speaker 4 (27:47):
So John, in real life, that's why they don't allow
you to go outside to another lender, because at least
they can make up a little bit in the loan
side of it. And you know, maybe you know on
a when you sell out, you know, you get your
service release premium. So if you if you did all
of that and you lost all your loans to an
outside lender, yeah, you're really in trouble. Yeah, you're really
(28:10):
in trouble.
Speaker 1 (28:11):
Okay, So when we come back from the break let's
hit the final point of this.
Speaker 5 (28:14):
It's been fascinating. We'll hit the final point of this, guys,
and that is.
Speaker 1 (28:20):
They also have a an advantage over lenders like yourself, Dwight,
because this thing called a concession and the limitations that
Fannie may puts on you but not quite on the
builder rights. Wrap it up with Christen Snow right now,
Traffic Center. Kristen, Welcome back to the John Sanchez Show
on News Talk seven eighty k oh Corey Edge of
Edge Reality phone number.
Speaker 3 (28:41):
Six seven three six seven zero zero.
Speaker 1 (28:44):
Thank you, Dwight Millard Home Islands.
Speaker 4 (28:53):
Hey, all these years, John, I'm proud of you, you know. Yeah,
I wish I could just call it mortgage.
Speaker 5 (28:58):
I've got in ten minutes and stuff that I'll ask
you about.
Speaker 4 (29:02):
Yeah, two four zero two zero two two perfect.
Speaker 1 (29:04):
Okay, all right, So once again we have a fabulous
discussion in regards to taking you behind the scenes. While
these builders, home builders, cheap mortgages are a bad deal
for home buyers. Okay, So do I give a great
explanation how they go out and they basically buy the
money down and therefore they can pass that on to
you so they can move inventory now do I we
get into two things we got to make sure we
get done before the show wins. Number one, let's talk
(29:26):
about concessions, right you guys, Corey, you always talk about concessions.
There's different set of rules for these home builders versus
a small guy.
Speaker 4 (29:34):
Yeah, well yeah, the concessions themselves fha VA and conventional
are the same. Where whether builder wins or they have,
the benefit is they they're utilizing some of their buying
power inside the commitment and then they still have the
concession on the backside to still offer to you.
Speaker 3 (29:54):
Okay, so here so and kirkm if I'm wrong by
those loans, the seller can give up to nine percent concession,
call it money towards the buyer to help them. Nine
percents the magic number upgrade builders followed, not even early upgrades.
I don't think it's mostly cash closing costs, those kind
of things. Yeah, but the the the builders have to
(30:17):
play by the same rules because these are FAHA FHFA rules.
When they go to buy these four commitments for these
hundreds of thousands, that doesn't count inside a concession. They
still have ninety years of concession to spend.
Speaker 4 (30:30):
Well, typically, John what they're advertising is FAHA and core
under FAHA at six percent, So John, I still have
even if so think about this, Let's say I paid
four points to get Let's say I paid four points
in our scenario to get you that four percent right
with the builder? Yeah, okay, right, I paid four Okay,
I give you another six. That's ten points I gave you, right,
(30:53):
How do I compete with that?
Speaker 5 (30:55):
Right? Right? Exactly? Well, here's what centeris.
Speaker 1 (30:57):
According to the article, these big builders again, they can
give much more generous incentives to the buyers because of
these forward commitments, like Corey said, that are not counted
towards the seller's commission. Leonard gave incentives equivalent to fourteen
percent of the average home price in the latest quarter,
an effective price cut of sixty four thousand dollars per
(31:17):
property and the highest level of contention activity.
Speaker 4 (31:20):
John. If you use six percent and what was that number,
fourteen fourteen, then they were paying eight for the forward.
Speaker 5 (31:29):
Okay, right, yeah, okay, huge, that's double the amount.
Speaker 1 (31:34):
Yeah, so they doubled the amount versus what someone else
can do. But to the final point, which is because
of this an effective price cut of sixty four thousand
per properties with this example shows So this.
Speaker 5 (31:45):
Is why again, if you have.
Speaker 1 (31:49):
Two properties in the same housing track, let's say they're
identical properties. One had the the buydown and all these
incentives we're talking about, and one doesn't.
Speaker 5 (32:01):
Well, theoretically, the one that that has all these.
Speaker 1 (32:05):
Incentives, because it's all financing, is really worth less than
the other property.
Speaker 3 (32:11):
So here's an easy way to think about it. So
if you go out to these if you go out
to this new house tract and you buy it and
that builder, knowing to you or anything else, gave sixty
four thousand dollars in financial incentives to get your rights
downe and go all this stuff, if you have to
sell that house six months later, you can't go get
the same bite on. You don't have sixty four thousand
(32:31):
dollars to get to the next buyer. You're gonna have
to reduce your price to get down to compete against
the market. That's why you're on. You're underwater automatically from
the jump in these things. Because it took sixty.
Speaker 5 (32:44):
Though, why does it affect the home price?
Speaker 3 (32:46):
That's what I'm stuck because you probably wouldn't have bought
it without these incentives. You would have negotiated a lower price,
but what the builder's saying is no, no, no, we're
leaving the price alone. We're going to give it you
on the back end. I guarantee that when buyers come in,
they're not giving them sixty four thousand. No, they're giving
them some other and sent because they need that top
line because of Wall Street, to stay flush. So that
(33:09):
when people like Richard Lace come across to appraise it,
it all looks copasetic. It doesn't have jumps up and down,
because then Richard can appraise it.
Speaker 5 (33:16):
Right.
Speaker 1 (33:17):
Yeah, The main thing is you don't want property A
to be sold for sixty four thousand lists that property
B being all things equal.
Speaker 3 (33:24):
Right, not in the time of Zillo, right, because the
person Bind's gonna be like, well, no, I see Zillo,
you just sold that one for sixty four thousand less.
That's the deal I want.
Speaker 2 (33:33):
Yeah.
Speaker 1 (33:34):
Okay, boys, music's plaining. Cort your final advice on this
and then say with.
Speaker 2 (33:38):
You do it.
Speaker 3 (33:39):
Just be careful, read all the documents, talk to somebody
like Dwight before you commit to these things, because it's
a lot of smoking mirrors.
Speaker 4 (33:45):
Yeah, John, I give free advice, so you know, just
reach out and I can guide you through it. But
there is a little bit You're not getting anything for free.
I mean it's cost you somewhere.
Speaker 1 (33:55):
Yeah. Fascinating topic again taking you behind the scenes. You
only can get it on the show. Great job, fellows.
We will do again tomorrow on the John Sanchez Show.
Gobblins have a great afternoon.
Speaker 5 (34:05):
DWAIGHTE.
Speaker 1 (34:05):
Mallard NMLSID Number two four one two five nine a
license mortgage loan officer with Highlands Residential Mortgage Limited and
Equal Housing Lender NMLSID Number.
Speaker 5 (34:15):
One three four eight seven one.
Speaker 1 (34:16):
The information shared on this live broadcast is for general
information purposes only and does not constitute financial or mortgage advice.
Listeners should consult directly with a license mortgage professional for
guidance tailored to their specific situation.
Speaker 5 (34:29):
All loans are subject to credit approval and program guidelines.
Not all applicants will qualify. Loan terms and availability may
vary by state and are subject to change without notice.
Highlands Residential Mortgage Limited is licensed in multiple states.
Speaker 1 (34:43):
For a full list of state licenses and disclosures, please
visit https slash slash www dot Highlandsmortgage dot com.
Speaker 5 (34:51):
Backslash licenses backslash.
Speaker 1 (34:53):
The views expressed during this program are their own and
do not necessarily reflect those of Highlands Residential Mortgage Limited
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