Hello everyone. Thank you to the thousands of people watching. I have been wanting to do a mortgage and real estate market update all week or last week even because there’s just a lot of relevant news out right now but I’ve been so dang busy locking loans and calling my clients and advising them and running scenarios to take advantage of where we’re at in the market right now.
Mortgage and Real Estate Market Update June 2019
I want to first start off by introducing myself. My name is Teresa Tims. I’m president of TDR Mortgage and Real Estate in Upland, California. I’ve been originating home loans since 1998 so I know a thing or two about loans and real estate and what have you. I also constantly educate myself. I’m attending meetings and reading things by all of these smart people that their job is just to study the market. I let them study it and then I follow them and read their findings.
I also follow Bruce Norris who to me is a guru. He is a local economist, data gatherer. He owns a company called The Norris Group. Bruce, if you’re listening, I want to interview you soon. I’m going to call Aaron and see if we can do a Facebook live because I just find your information fascinating. But more importantly, you’re kind of always right, like you do have a crystal ball. But really the crystal ball is via data and numbers.
When you have somebody that studies the data, they can predict the future. It might not be to the exact day and time, but they can predict the future. Bruce Norris predicted this a year or two ago that the rates were going to drop. Now we’re not at the level that he predicted. He predicted we would see rates that we’ve never seen before, in the twos.
Low Rates ARE the News (Lock in your rates now)
I remember when we had real estate market update for low rates a few years ago, I locked a couple of loans in two and a half. It was one of the most exciting things I’ve ever done. I was calling around people and telling them, “Oh my God, I could get you a loan at two and a half. Let me lock it.” This is exciting. Look, I’m getting excited just talking about it. Where we’re at today, the reason that you’re seeing a lot of your Facebook friends talking about the rates is because we are thrilled to help our past clients.
I locked a loan last week at three and a half, FHA. I’ve been locking loans all week at 3.75, 3.6, 3.7, 3.8. The reason of the variances, it’s there’s many reasons, loan amount, credit score. When we’re looking to refinance somebody, you just did a purchase for someone and they’ve paid all this money in closing costs and they got their loan and maybe they’ve been paying on it a year or two.
Well, you don’t want to start all over again. You don’t want to start those principal paying years all over again. But when your loan is really new, it’s really not that big of a deal. But the way it works is, when you. I wrote something down.
Let’s say you’re saving $200 a month and your closing cost around 2300. Now when we do these loans, we’re really, our goal is to do them no cost. But we also want to have the benefit of the monthly savings. So if I do a combination of the two, and so if you’re saving 200 with the closing cost for 23, that’s a break even on that cost or that investment of 11 months. So I would do that all day long to save $200 especially if that house is going to be a long term keeper. There’s so many things that go into an analysis.
THEY DON’T CARE ABOUT YOU – Don’t Make the Mistake of going to your Bank or Internet Lender
If you picked up the phone and called your internet lender, and this is the big disconnect why you do not go to an internet lender, because they’re you know what they do? It’s like a boiler room sweatshop. They’re taught to sell. It doesn’t matter if the benefit is to you or not. They are taught to sell and to close the deal. You might not even know because it’s still complicated. They could sell you a dang loan where you’re going to add $8,000 to your principal balance and you’re saving $50.
Well, a lot of people think, “Oh cool. I’m saving $50 and maybe I got 2000 at the close and I don’t have to pay a payment in August.” There’s be a line of people signing up for that. But I’m going to say, “No, you’re not going to add $8,000 to your principal to save 50 especially if I know the market, I know rates, I know where they’re headed, I know what’s going to happen.”
When Should You Refinance
I can’t tell you how many clients last year I told, “Don’t worry about that rate. I know it sucks.” I locked a loan at 6% last year. It was the last high one that I locked and it was like a big gulp. But I told them, “Listen, this is going to solve a problem and we’re going to refinance you in 12 to 18 months. The rates are going to be down in the threes.” Guess what?
The rates are down in the threes. I’m thrilled. I’m thrilled for my clients. That’s why I’ve been so busy calling people. Sometimes I feel like I’m having to talk them into refinancing because they think that a lot of people think if you’re in an FHA loan, it has mortgage insurance and you’re at four and a half. Well, they don’t want to refinance FHA to FHA. They want to refinance FHA to conventional to get rid of the mortgage insurance.
Then it just becomes the education process takes place, we’re like, “Okay, the benefit of FHA is that you could just streamline down with no cost.” The fact is, you’re not getting rid of mortgage insurance unless you have equity. It’s just a fact. It’s simple. But sometimes though, let’s say, like right now FHA is in the threes.
Conventional is high threes, low fours. So if you have a conventional loan and it’s at 4% or four and a quarter, you can actually and you have MI, you can refinance into a lower rate when the rates dip and do a lender paid in my scenario. There’s so many ways to evaluate your refinance opportunity. Don’t go to some bank or internet lender that’s really not going to be looking out for your best interest.
Okay. Is that enough about rates and refinancing? But that’s all we’ve been talking about because the treasury going below two is huge. That’s usually a precursor for a recession. The experts say that a recession usually follows in 12 to 18 months. Don’t think that we are not going to have a downturn. Don’t think that we’re not going to have a crash. It’s going to be mild, but it’s going to happen. I chuckle when I hear all these people talk about the market and don’t worry. Well, yeah, don’t worry, but be aware that it is on the horizon.
It’s going to happen. With rates falling the way they have. Last year, when the rates were going up, we started turning into a buyer’s market. Homes were on the market longer.
People were doing price reductions especially in the higher areas in Orange County. You know that luxury market, houses were sitting for six months. That’s a long time to sell your house. Now I think they’re at about three months or so. Okay. We were a buyer’s market, then we went even, buyers and sellers. Right now it’s turning into a sellers market again.
What happens when the rates go down? I did another little scribble so it’s easy. What happens when the rates go down? Okay. At 5%, you want a $2,800 monthly payment. That’s your limit. That’s your budget. Well, you would have bought a 390 house, and this is with FHA. You would have bought a 390 house.
With a lower rate of 3.75 and you could probably even get lower, but we like to give a little closing costs when FHA usually. So 3.75, that payment of 2,800, now they could buy a 435 house. That’s a lot, right? Almost 50,000 more buying power. There’s a lot of people that were looking at houses and they just weren’t feeling that, 390, $400,000 house, so they’re going to stay put. Well, guess what?
They’re not now. We put the word out to our database, but it takes a little bit for people to grasp it and things to stick, so to speak. Then the media will get a hold of it. I just saw something on the news just recently and there hasn’t been a lot of talk about the impact of the rates going down. It’s summertime, parties on, rates are down, get ready for multiple offers. Okay, I’m really thirsty right now. I talked a lot, huh?
Should I Buy or Should I sell Depending On the Terms BUY
So, should I buy? Well, our prices are still pretty high. I get a lot of people that are concerned that they’re buying at the top of the market. You should be concerned, right? Be concerned because that’s something to take into consideration. Nobody wants to misstep and buy at the top of the market and then a year later the prices dropped $50,000 or something.
That is keeping a lot of people out of the market and they’re waiting for the prices to come down. They will, but we just don’t know when. Will it be 12 months? Will it be 24 months? We just don’t know. But they will. So if you’re not in a position to buy a house right now, get your credit in order, talk to me, call us. Let’s do a pre-qualification, run your credit and see where you’re at and give you a goal.
We’ll give you a goal. You need to save this much money for a payment of this much and in this area. It’s okay to plan a year in advance for something so big, a major purchase. Now for those of you on the fence about whether to buy now, my opinion.
I would buy a house right now. I would absolutely buy a house right now. It would depend on how much money I have for the down payment and on how much reserves I have. I certainly wouldn’t go buy a house that was at the very top of my affordability and spend every last penny I had to buy this house that needed a lot of work. But would I go buy a house with a 3% or three and a quarter rate where the rent is about the same as the monthly payment? Yeah. Sign me up, I’d buy 10 of those houses.
Really your decision to buy is going to be layered with many factors. If you get sound advice from people that really know and understand the market and understand investing in real estate, I can be of great assistance in that area to talk you through. There have been a lot of people that I’ve told,
“Hey, you really shouldn’t buy right now, or, you know what? Don’t sell your house right now.”
In our market, that’s uncommon because we’re sales people too, just like the Internet lenders. But what’s a little bit different about myself and my company is that we want to be a resource to you now and next year and 10 years. It’s not that hard to give people real honest advice.
Choose Professionals that KNOW how to advise
The problem is, a lot of people don’t really know the market and know where it’s headed. So they don’t know to tell you to really sell. They’re always going to tell you to sell. They don’t know that you should keep the house to gain more equity or have the write offs. They’re commission salesperson, they’re going to tell you what’s in their best interest.
You need to find somebody that’s going to look in your best interest. I know a lot of you already have partnerships with people and and that’s awesome and you should support those people, they’re your friends. We should all take care of each other. But if you’re looking to refinance and that is your friend is with a bank or a direct lender, there’s simply not going to have access to the low rates that a mortgage broker has access to.
Get a Second Opinion
So go ahead and talk to your friend or family member and then give us a call and let us give you a second opinion and see if you can save money over the long run. If you’re going to refinance, you might as well be getting the most bang for your buck. Okay. What does the future hold? Well, like I said, we’re going into we’re turning into a sellers market. I really think there’s going to be a frenzy during the summer with the amount of affordability that has been increased so rapidly. I still think that people are very cautious. People that are buying right now are people that didn’t buy or new buyers coming on the market.
The profile of the millennial buyer is very conservative, I’ve noticed. They need to be conservative because they have a lot of student loan debt. So they have a lot of bills to pay. I appreciate that.
They’re dual income, they’re making good money, they have some savings. Oftentimes, they can go conventional but might choose to go FHA so that they can use less of their money and keep more in savings. Look for the rest of this year to pretty much go off like gangbusters. Some of the things we don’t know are all these the trade wars, the China thing, the Mexico thing, all of that. The economy could happen and affect where we’re headed or what it is that we’re doing. We’ll look to this year to be pretty strong, but I’m really concerned about next year and what’s ahead of us. Just act out of caution when you’re looking to buy or sell.
Let us run your credit, let us look at your documents and let’s work through it and see if now is a good time or wait. You don’t have to buy right now. It’s not like in 2012, buy right now, by right now. It’s not 2012 or 13 or 14. prices aren’t like this. Prices are just like this right now. You can afford to wait and take your time. Do that. Make sure you get what you want. If you’re looking to refinance, keep checking back with your lender, give us a call, give us the opportunity to help you. I think that’s it. Do I have any questions? Let’s see.
Thank you all for joining and I wish you a wonderful start of summer. I think summer is officially starting this Friday if I’m not mistaken. Anyway, I love you guys and thank you for all your support. Oh, by the way, Stephen Littlefield, I got this book, The Business of Gratitude. I can’t wait to dig into it. Thank you.