WILL INTEREST RATES CONTINUE TO DROP OR NOT? REAL ESTATE NEWS

all right how's everybody doing we're talking a little interest rates interest rates are going down and is that enough to get people away from that U tied log and to go out and house hunt I mean the weather's nice today I mean for all you haters on California it was a nice beautiful sunny day but not too sunny it was nice so Erin we're seeing interest rates go down we're talking a little bit like is this enough is it what people have been waiting for or are they kind of saying well we're good but we wanted to get better what are you thinking and by the way how are you doing I'm doing good man thanks thanks for asking things are uh things are definitely picking up because of interest rates which is weird because during this time of the year I mean we're like What 23 days away from Christmas or whatever and so normally everybody's laser focused on the holidays they don't really want to you know talk about buying houses yet the phones have been ringing the applications have been pouring in the pre-approvals have been going out the door and so buyers are definitely re-engaging um your question of is it enough well I think the answer to that depends on you know the person you know everybody's budgets a little bit different depending on how far Out Of Reach they felt like the you know the purchase price cost was you know at certain rates compared to where they are now um you know for some people they're like I'm pulling the trigger on this some people are still waiting some some can't afford it yet but um definitely seeing activity pickup and the the thing that that I've seen more so than just the activity you know on an anecdotal level in my brokerage um is that the The Narrative of the markets the talk track you know everybody's sediment in my industry has completely shifted um you know if you go back back in time just a month ago I mean it was like quasi apocalyptic you know what I mean it was like oh yeah very Doom and Gloom um even some of the the wisest forecasters were you know talking you know we're going to be in this rate zone until 2025 then over this last month or so we've gotten just back to back to back to back uh economic reports coming in all this data is coming in along with a lot of revisions of old data you know because as time you know in the saddle you know the maybe a report we got three months ago they've got more information in now so they revised those things and so um The Narrative has really shifted and now um you know everybody's like hey are our rates going to drop a bunch next month or two months from now or you know three months from now it's not like a a conversation of you know like a year from now it's it's imminent um and so uh I actually you know I thought it would be instead of just kind of giving everybody like my thoughts on on you know where I think this is going to go instead let's just look at the actual data and and give everybody the you know the the tools they need to make their own educated decision but I I think that for most people when they when they look at the data and they look at the things that you know that that cause interest rates to go up or down along with this data that that we're about to show you know it's it's pretty easy to make a conclusion that rates are going to be coming down pretty soon here even if you don't do this for a living you know well I think also there's a domino kind of effect with all this stuff as well too it's like one is okay interest rates are coming down how low do we expect them to go should I be waiting inventory levels are low what are we looking at as far as buyer demand and bu is buyer demand picking up so much that maybe if it drops down further we're going to see multi mle offers appraisal contingencies being waved is this still a slow time of the year if interest rates start to drop is buyer demand going to significantly increase where maybe I should be out there looking or you know will it Spike up again and all of a sudden like I missed this window of opportunity to maybe buy when interest rates were low and we're back up into the sevens I mean those are all things that price are in people's heads they're like you know just made my trip up to Lake Tahoe or I got my trip planned for next week I'm ready to go go some skiing and everything too I mean like when I come back are rates going to be about you know around 8% or S and a half again or are they going to be lower and all of a sudden buyer demand is going to be nuts do I have a little bit of time to wait like those are things that like at least for me those are conversations we have with our clients a lot of them are like okay interest rates are lower I mean what are we thinking in a week is there going to be crazy buyer demand is there going to be time enough for us to kind of like gauge the market and feel out because you know how it is real estate is such an important it's like such a relevant large purchase that it's a hard thing to kind of go like oh I I need to jump in now I I wasn't last week I wasn't two weeks ago I was ready to basically jump on stay on that fence for a little while at least maybe till spring but now I'm seeing interest rates go down is this temporary am I going to be like one of those guys that like now is saying oh man I wish I would have bought back in the 275s not saying it's as good as it was then but just saying like are we doing an opportunity pocket is it going to go down further and the biggest thing for me guys is we got no inventory on the market I don't care who tells you what inventory is still our problem so because interest rates are dropping does seasonal low buyer demand all of a sudden there's a fire that's lit underneath buyers where they're out looking and all of a sudden we get a crazy winter where buyers are out there they're taking advantage of the interest rates and inventory levels go even lower and by Springtime we got like one house on the market I don't know that's crazy okay let's hit your statistics I'll get off my soap box I promise yeah well I I I think you're hitting the nail on the head though but I mean we'll we'll get to that but like so what what we're looking at right here this is a a chart that you know goes back a good 20 years and it it basically it shows you what happens when uh interest rates move the the red line going across there is is mortgage interest rates and the blue line is existing home sales right and so one of the things that like you were just hinting at is do mortgage interest rates impact buyer demand which in turn would impact existing home sales and you know you can look here historically and can you go to the the next slide where I highlighted the inversions on here so you know those highlighted marks on there that's every time that basically interest rates began to drop and then existing home sales uh start started to rise and so when you look at those inversions you know when you go all the way to the right that's where we're at right now and with interest rates trending down and us being in a extremely low existing sales Market because of the inventory in fact historically the only time that we've been this low in quote unquote existing sales is if you look to the left of of of there you see the blue uh the line drops really low that's that's uh when covid hit but the reason that existing home sales stopped during that time is that everybody was like hiding in their house wearing a mask you know cleaning their their Amazon delivery you know all the crazy stuff that was going on for for that you know a period of time where like the world stopped yeah that wasn't because there was there wasn't any inventory to purchase you know and and so now when you fast forward to our current market with the very limited inventory as these interest rates go down we are going to see buyer activity and existing home sales go up um because those buyers they're going to they're going to mop up any existing inventory but we aren't going to see it's going to take a lot longer for that inversion because we're so low on inventory normally we'd have a a big glut of inventory for you know as rates come down buyers you know would would pick that up but you know that's that's not the world that we're living in right now so the the question that that I would you know throw out there for people is you know obviously just looking at the data looking at history um lower interest rates bring more buyers into the market you know basic supply and demand right right not not you know building Rockets here telling you know telling the audience anything that they don't they don't already know but when you when you look at what impacts interest rates I feel like you could could break it down into three things and yeah you know I'm sure you could break it down into like 500 things but the the three basics in my opinion it comes down to these three things the Federal Reserves monetary policy okay the inflation situation in in our country and then also the uh the economy in terms of the labor markets if you focus in on those three things those are the the things that impact interest rates the most most so go to the next slide and so what we're what we're looking at here is there's a market called the the uh federal funds Futures market so the the federal funds rate that the Federal Reserve they set their rate their borrowing cost that they lend money to Banks overnight well there's a whole Market of basically you know institutions investors that are betting on you know what what is the Fed going to do that's how the bond market works and so you know these these companies you know there's thousands of these companies and they employ tens of hundreds of thousands of analysts and Ai and all sorts of stuff that's way smarter than me and and you know everything and so you look at what the smartest people in the room quote unquote are betting on and you know basically we've got the the the next Federal Reserve meeting is on December 13th they're betting that the fed's going to do nothing on that meeting they're not going to raise the rate they're not going to low lower the rate they're just going to stay steady then you get to January 31st there's a three 4% chance that they lower the rate but when you get to the March 20th meeting now all a sudden there's a 35% chance that they're going to lower the FED funds rate by 50 basis points not 25 basis points but 50 basis points and I want to point out that if you go back just one month ago it was a 0% chance on this stuff so when I said earlier that the narrative and the Market is really really shifted this is what I'm talking about and so as you work your way through the year um the odds of the Federal Reserve lowering the FED funds rate by 50 basis points at those meetings becomes higher and higher and higher to the point where like the markets are betting in it's a sure thing that we're going to have at least 100 basis points in rate reduction next year if not more um and so that's one thing that that I would say that you would want to focus in on when trying to like guess what's going to happen with mortgage interest rates in the future is what do what are what are all the markets betting that the FED is going to do at their next meetings um because the FED although they do not directly control mortgage interest rates their monetary policy you know does um you want should we hit that question before continuing yeah one says uh do you think new home build ERS are paying attention to this and do you think um they'll produce more homes is there's a potential for more buyers with interest rates possibly going down um I think they probably will I mean I um you know not my sales folks that I love over there but I think Builders tend to be a little greedy I think if they see an envelope they might do it I don't think they're going to go crazy like they did last year but I think that they'll probably start building a little bit more um I think that honestly the way eron's kind of described it to me as far as interest rates going down and the amount that they're going to go down I think new home builders if I'm if I'm in the new home game right now and I'm saying to myself okay based on what we're seeing here interest rates could be down at 5% by next summer inventory is super low um buyer demand is increasing and in January February and March it's going to eat up whatever inventory in the resale Market we have I think it's going to be Disneyland for the new home developments I probably would make that bet I think it's a safe bet honestly if if interest rates go down the way everyone's thinking they're going to next year I think that for new homes if I was them I'd probably double down I think they'd probably increase the build and go and I I don't normally I think like oh you know they're greedy and they're they're not being that smart about it and they're not thinking but I think that this is one of those no-brainer moments where if you're saying to yourself okay let's say for example worst case scenario where it's 6% right which is basically like a point and point or a couple points less than we were like a month ago with and buyer demand was still kind of there then during like the hot season of summer we want to be in full throttle because then we can get people in contract even if people are in contract and we're building out during the course of the year it's still good business for us because then the build cycle is maybe six months to eight months and then if you know they lock in their rates and rates go up we're in a good position if rates go down they're still going to be okay with it because they know they're going to refy after they get their home so I don't know I mean all all the things that I'm thinking about that are like I think the new home builder should it makes logical sense to me um but a lot of times they make their moves based on like I look at them and I'm like seriously what where are we going with this like right now you know the crazy part about Builders is they're giving crazy incentives right now there there some of them are giving nuts incentives especially the Realtors I'm getting stuff that says hey we'll give you 5% commission if you bring someone in now that stuff never really matter factors into us but I'm looking at this stuff as indicators for you guys to tell you that now could be a good time to strike do I think it's going to be a good time to strike if rates go down to five and a half I think it's going to be brutal I think it's going to be like it was during covid where lenar was letting lines of people form outside and they weren't even letting people in the office and they were saying scan the QR code we're a bit too we're too busy in the office so I don't know what do you think eron I I think that Builders are in the business and making money at the end of the day and a lot of the builders these are public publicly traded multi-billion dollar market cap companies that either directly employ or contract out you know armies of analysts and actuaries and and and you know people way smarter than than I am to like you know basically guess on what's going to happen in the future and and you know help them predict what they should do with you know with their their inventory essentially which I say this all the time on our show um when it comes to builders inventory is Kryptonite they're not in the in the business of of building real estate and then holding on to it they're in the business of building real estate and getting rid of it as soon as possible so they're going to do whatever it takes to crank out as many widgets as possible without overexposing themselves to having you know too much inventory but they're definitely going to take advantage of all of this but you know even if you go back in time a little bit to when interest rates were were still in the twos and Builders were trying to you know make hay while the sunshine there's still labor shortages there's still somewhat of of uh you know material shortages and and all the little you know supply chain issues that you know that they run into when they're trying to you know hit Max Capacity so it'll be interesting to see what they actually do but if I had to guess I think that a lot of the incentives that the builders are handing out right now are going to go by the wayside once interest rates are lower and buyer demand is up because you know why why give away something for free if you don't have to you know just like you're talking about the the realtor co-ops you know a lot of times the especially lenar they're notorious for it they're like nah we don't do co-ops we don't need you right now so I I do think that will that'll shift as interest rates come down and as buyer demand comes down but I was just reading a a report within the last two weeks by Ivy zelman and zelman and Associates and she feels like a good 33% or more of the sales that are going to take place in 2024 are going to come from new builds so they're definitely going to play a big role in in the market probably more than that I mean it's it's really going to depend on interest rates right you know if you've if you own a house and you've got a 2% rate and rates are at five you know it's still double or whatever from what you're at so it's not like it's just going to be a free-for-all where everybody's going to want to sell their home so you're still going to have you know a lot of the resale Market clamped down by people just sitting in their really you know attractive financing versus new build you know you you don't own the home yet you know there's it's a it's a different you know game that they're playing imagine this though imagine this okay so Christmas or the holiday season rolls around and you want a new home you go into a new home company and you sign the dotted line you get the lender which is you know the company lender Taylor Morrison lender whoever lender to give you a nice big fat credit towards closing cost your house is built in six months you get to the keys to the house you say thank you lender for the closing cost credit refinance and you're on your Merry way I bet you you're gonna see a lot of that happen as well too dude that's I cannot wait I'm A lender I you know I'm gonna do a lot of those refinances which guys don't forget when you need that refi give your old pal Shameless plug that that's totally going to be the the the plan for everybody is you know you're going to get into that house at whatever financing is available at the time take those incentives from the Builder take their freebies you're crazy not to if it pencils um which a lot of them do pencil right now um and get that free money and then when rates drop go ahead and and refinance that's that's going to be the like the smart money move for many people dude buy the house get the closing cost credit houses built in six months rates drop refinance thank you lender for that closing cost credit but I'm refinancing that's going to be the game man it's GNA be crazy and also guys here's the thing if you guys are in a new home contract or if you're thinking about jumping in new homes and you're thinking about working with their lender you know their lenders tend to give you some massive incentives some good stuff going my buddy eron here will definitely like give you they'll give it the once over he's not going to give you the Hard Sell is why you go with him but at the end of the day if you're going to refi could be a great resource just throwing it out there here's you know and and let me throw this in there because I've had a lot of these conversations with people and you know a lot of people I I I couldn't help out it wasn't that you know it wasn't my fault they they should have never went into contract and what I'm talking about is that you know I'm I'm sure that the the loan officers that work for the builders you know they're they're really great people and everything but that environment doesn't really attract and Foster this the type of loan officers that really you know do the Deep digging and understand the guidelines and the products and all that stuff and so what I've I've had a lot of conversations with people that they were pre-approved by the Builder lender and then you know once you know it takes six months or so to build your house so you get pre-approved they you know slap you on the butt on your way out the door and then they don't talk to you for four months or five months and then when it's getting close to the Finish Line the lender calls you up and like hey Mr Smith you know we're getting close to your closing let's go ahead and get this thing going I need your pay stubs this this and this and all of a sudden we're finding out that you don't qualify for the loan and so I've had a ton of conversations with people that they never qualified they should have never been preapproved yet the Builder lender for whatever reason didn't realize that and so when you're shopping and all that whether you use my company or not let us take a look and make sure that you can get that that deal from the Builder that you will be approved for your loan and then call me for the refi down the road or whatever but don't feel like just you know to have a conversation with me I have to do your loan I talk to people all the time for free and you know I'd be happy to uh you know help people navigate that process so um okay we got oh here hold on we got Jason Thomas sack toown lender 6% consession let me try that again Jason Jason Thomas sack toown lender 6% concessions at Meritage Homes in El grve here's what I would do and that's just my own two I'd take the 6% apply to closing cost I'd wait six months for my house to get built nice and nice and nice then once I close I'd refy but that's just me that's my own two cents so I don't know what do you think eron about that I I I think that's a great plan and and I mean as far as waiting six months I mean you know like Jason's commenting on there I love eping the in-house lender EPO is early payoff that's an Insider mortgage thing but basically if if a loan pays off the loan officer has to pay their commission back but uh you know that's not the client's fault you know that's just part of part of the business of mortgage so um you know if if you were to buy a house with the Builder and for whatever reason rates drop a bunch in like literally two weeks after your transaction closed you could Dr you could refinance and save 1% on your interest rate or something there's zero reason why you should wait six months go get that refinance the Builder lender is going to tell you not to do it because you know they're thinking about their commission not your monthly payment so whatever you do get into the H assuming that you can afford it now like don't go you know YOLO and buy something you can't afford but if you're G to buy a house and you get in it now or next month or whatever you know you're going to refinance as rates come down that's just what people do as as financing becomes cheaper for me here's the thing eping I'm not a big fan of I don't think that that's a good thing to do to lenders but I do think that in my humble opinion I do think a lot of the builders lenders don't play fair you know what I mean I think for me I look at it that way I say to myself like if you got like a good lender you know doing their thing reputable local lender and their thing you know you know this is how they make their money and you know you should that that's not a good thing but I think as far as why I I always kind of say it against the Builder lenders is because I look at that and I just say in myself like there's something going on there how they can offer these massive massive like Buy incentives and everything too it's just not playing Fair it's like David against Goliath in a lot of these times and for me I just I I'm not a big fan of that you know because you see that sometimes in real estate you basically see the fact that you see the deck stacked against you and everyone kind of understands why it is no one's really talking about it and it's just it's not I don't think it's fair in this day and age um you know so so that's my own two Cs on that two they got they got one heck of a Lobby you know the Builders Association that's all I'll say man it's crazy the the things that they they get away with oh 100% all right to the next slide yeah so so we were talking about you know basically the three things that are going to really impact interest rates and we were just talking about the fed and the fed's decisions you know and basically the markets are now you know pretty much betting in that you know it's 100% chance that at some point throughout this next year rates are going to come down 80 to 100 basis points minimum so the second thing that I said that in my opinion is the main indicator of of what's going to impact interest rates is inflation inflation is the enemy of interest rates why because inflation basically erodes the value of long-term debt a a bond or a mortgage is a promise to make a payment on on a loan for you know a fixed period of time and as inflation increases the value of that payment that I'm making is worth less in the future and that's why inflation impacts mortgage interest rates and bonds and all that stuff well if you look at the most recent inflation reports which there's a few different ones but the most popular that everybody wants to focus in on is the Consumer Price Index which is basically like a you know the the cost of inflation for all consumer goods and what they really want to focus in on is what we call Core inflation and all that means is that they've removed food and energy out of the equation because energy fluctuates like crazy so do food costs and so when you remove those two things from the inflation equation what does inflation actually look like and when you look at the most recent CPI report inflation came uh we're we're now at a not an all-time low because we still have inflation but we uh we hit a two-year low on inflation so inflation's coming down the most it has over the last two years and all the indicators appear that that trend is going to continue and all the other uh inflation reports that we received over these last couple of rounds whether it was the producer price index the ism report the uh personal consumption expenditures I mean there's just tons of these different reports all of them indicated the same thing inflation is trending lower okay so that's the second thing that I would focus in on the third thing you go to the next slide is uh jobs is the economy in terms of the labor markets and so when you know that's one thing that has remained very resilient up until recently um you know if you kind of go back like over the last six months or so we've started to get some pretty good inflation data since uh like last May that was the May 20th I think was the first CPI report that we got where it was actually trending lower and lower and lower and what would happen it was really confusing because everybody's like hey we got good inflation data and so you would think mortgage rates would start to Trend down and we we'd see a you and I kept calling them pockets of opportunity but we'd see like for a day or a week or whatever rates would drop a bunch and then all of a sudden the ADP jobs report or the Bureau of Labor Statistics report comes out and it shows record you know uh employment for the month or or increase in wages all of those things well we're now seeing that uh there are less jobs being added both in the private sector through that's what the ADP report really covers and also through the BLS uh jobs report and so you're seeing not only that employers are hiring less unemployment claims are up uh extended unemployment claims are up meaning that you were already on unemployment and then then the next month you filed for you renewed basically you extended it and so we're seeing all these things that impact the labor market start to be negative um and all that sucks for you know everybody involved like I've mentioned before if you want lower rates you gotta you know basically you also got to want to have kind of a bad economy and so when you factor in those three things you factor in the Federal Reserves you know most likely what going to happen with the rate decisions with the fed you look at the trends with inflation you look at the trends with the labor markets all three of those things in my opinion are clearly pointing towards interest rates are going to continue to head down and if you go to the last slide on here um uh actually one more that was the BLS we were just looking at um so home prices okay now one of the things that you mentioned earlier is like well is the Smart money move to buy now and refinance later or do I wait until rates come down and and buy then at the at the lower rate and if you believe that interest rates are going to Trend lower which me personally I do believe that based off of you know the fed's actions the inflation data and the jobs Market those three things right so if you believe that rates are going to come down in the future then my other question is well what do you believe home prices are going to be in the future and if you look at all these all these uh various companies here that are listed these are kind of like your gold standard you know for measuring inflation K Schiller fhfa core logic Black Knight Zillow I mean there's a whole slew of these companies but if you look every single one of these the numbers that are in yellow that indicates an alltime high and so literally every single month look it it's everything except Zillow that went backwards by Point uh 1% uh this last this last month in September because this data by the way is back 60 days but it it just keeps ratch it up prices are going up because of the lack of supply and the you know even with a little bit of where interest rates are there's still demand there's more demand than there is Supply and so that's driving prices up so think about the supply and demand Factor when interest rates are 5% I mean do you really do you think prices are going to drop when that happens I don't I think prices are going to shoot through the roof so not only are you going to pay more for the house because you waited to buy you're also going to lose out on earning appreciation paying down your balance all that stuff that you would have if you bought today or next month or whatever so that's what I would throw out there to anybody that is questioning you know when's a good time to buy a house is you know look at the the cost of financing and the cost of the house and what's going to happen with those in the future I I think you're going to pay more in the future what what do you think about that I mean it's looking like it's shaping up to be a buy and refi type of Market you know what I mean like back in the day it was like you know you buy interest rates go down then you refi I mean if everything holds like basically based on like you know houseice buyer demand interest rates and everything too it looks like I mean you know like I said I don't know I'm just trying to like lay this out for myself I'm saying to myself okay interest rates are coming down will they come down further yeah they probably will based on all this data they probably will sometime next year come down but at the same time you kind of want to get interest rates where they're when they're coming down you I mean you don't want to wait till it hits Rock Bottom because or even comes close to that because then buyer demand isn't insane buyer demand coupled with like a strong spring Market of people coming out to Sacramento to buy it's just like it's like going to Disneyland during summer you know what I mean it's like in you know you're like in theory oh it's a great idea you know we're g see Mickey but at the end of the day everyone and their brother is planning the same thing and you're not getting on any rides so I I don't know I think it's going to be nuts I mean I think I think it's hard to trust anyone when they're talking about this Market just because you know everyone's been burned I mean guys here's the thing though too whether you're a buyer or seller this Market has treated you seller probably better than buyer way better but like if you're a buyer this Market is kicked you in the butt I mean you probably watch YouTube videos of people and you're just like these are people that are you know saying this and it just it leads to a whole idea of mistrust in this market and I get it I mean it just is one of those things though but if you're someone who has to kind of buy if you're someone who like maybe is waiting for an opportunity you know I would say Don't just look at a YouTube program that comes in I mean there's historical data that you can look at you can fied out some other people and just feel the market out but if some if this is going to happen the way eron's kind of talking about this and what it's gonna you're going to see a crazy surge of buyer Demand on inventory that we don't have I mean it's like Black Friday you know what I mean like one TV a big line of people only ones getting the TV and it's going to be just nuts um I want to go to Jason's uh comment because this is something that happens more and more to good lenders local lenders and this is kind of what I mean they kind of get like the deck stack against them when they're working with like you know with the builders I mean backstory it was my client I was offering a far better rate at the time of contract but they were going to take uh the solar credit off the table and increase the purchase price if their lender wasn't used and you know man that ain't Fair that's not right that's not the way it should be and honestly I will tell you this guys and this is this is my heartfelt feeling and if you guys are watching this and you guys bought a new home and you went with the in-house lender go with a local lender go with someone else man you know what I mean Vibe out the area just because they like in-house lender hits you back and says hey do you want to refinance I would say go shoot outside the box you know what I mean figure out someone talk to Jason talk to Aaron you know what I mean like these are people who play by the rules and kind of do their job and their Hustlers out there too for me I think the refi are where you know people who buy new homes and just kind of like oh the the you know lawn officer I used the in-house lender is telling me I should refi some don't smell right that's just my own two cents you know what I mean and definitely do the Pepsi Challenge on those guys that's that's what I will say and I think at the end of the day that's what I would do if I was buying a new home I definitely wouldn't I mean yeah that just there's something that just doesn't feel right about that what do you think eron yeah I mean you know the the scenario like Jason mentioned uh you know where the the Builder wasn't offering as good of a mortgage deal but they said hey if you don't use our mortgage then we're going to take all this other stuff off the table that's the game that all Builders play um you know the bigger Builders they own every piece of the process they own the Solar Company the insurance company the title company the mortgage Etc they own it all and they're the seller and so these like incentives that they're they're offering they just make it into the sales price and they charge higher fees on all the services that they make you use that you could go shop around and pay way less to for the same exact thing but you're stuck using those services so it's one of those things where like you feel like you're getting something because you're getting this incentive but really you're not getting much of anything um you know and a lot of times when the incentive is like literally like a tit for TAC credit and not like what he was talking about like where they're going to remove the solar and then raise the price or something that's kind of shyy but usually you know they're just offering like a credit or something and a lot of times like I was looking at one uh on Friday for somebody and I think it was with Taylor um and and you know they were offering like 2% uh credit which sounds great but they were charging like 2% in fees for the same loan that you could go somewhere else and pay no fees so it's like they offer you something but then they charge you a whole bunch it's just it's it's a shell game but you know depending on you know the house that you want and all that stuff you know sometimes you just got to go with it and and then refinance later you know that's that's the beauty of a mortgage is ever since 2011 after the Dodd Frank act there is no such thing as a prepayment penalty on any sort of traditional mortgage and although I'm not an advocate for eping people um you know technically you could refinance the day after your loan closed if you wanted to I mean it typically doesn't make sense to do that but just making a point okay now okay let's do a little connected dots so like we're let's assume that interest rates are going to go go down for a while right let's say like you know they're hitting down to like mid fives so inventory is already low some areas of Sacramento is 50% some areas is 30% Sacramento is hurting for inventory but we got this whole bunch of new homes let's just say let's go back to Juan's idea that if if new homes start building a little bit more I mean what we're probably going to find and new homes here's the thing about new homes and you know in our neck of the woods in the Sacramento area new homes are very competitive um in some areas like fome you can find new homes that are even more um are cheaper than brand or resale homes you know what I mean so it's going to be an interesting thing I mean I'm looking at all everything how it lays out and I'm thinking based on our inventory levels who's going to win right now or new homes I mean it just looks like if interest rates drop you know the resale markets going to be hurting um even more than it is now with low inventory I would say buyers right now that are looking and right now able to go to these new homes and there's no lines and they can actually like negotiate that's probably gonna be off the table if interest rates go down because so many people are going to funnel into new homes that I mean I kid you not like when new when covid happened and new homes became All the Rage it was like Disneyland for adults I mean I would go to like you know different developments like Taylor and whatnot and it was like it was just like open houses were just there's like 30 people in in like Model Homes looking around it was absolutely like crazy so for me I say like if interest rates go down that low resale is going to get eaten up as much as it can be new homes I think are like you know the the the popular thing right now I think everybody loves them and I think that with some of these new communities popping up like the one we filmed today like white hawk and Grand Bay you got some LGI community coming out they're a little bit more affordable DR Horton switched their building model to building more affordable homes and then you got other communities like tailor who just purchased a brand new piece of land in Elk grve and they're building in other areas and Toll Brothers already looking in new land as well too it could get very very confusing very fast and the buyers I mean man I don't know when you're going to get a break honestly interest rates drop and I know it sounds great like I said it sounds fantastic but I think summer is going to be brutal I think a you and I are going to have those calls where it's like they want to wave the they we can't even get we can't even get considered for this house unless we wave the appraisal contingency and you you tell me well okay what do you think what do you think it'll appraise that and I'm like um 20 30 below what we're offering and it's like that's your Market hello that's it enjoy likea case in point right so right now so it's so it's December 4th okay traditionally very slow time of the year for for the you know the resale market for home buyer activity right before we got on the show I had to update a preapproval letter for a client that's writing an offer on a house you would think and they're writing by the way a full price offer you would think that like that's a a sure bet like slam dunk they got it in the back of my mind I'm thinking it's like a one in 20 chance maybe that that their offer is going to be accepted why because there's going to be competition there's going to be other buyers and cash buyers as well because you've got these institutional level buyers that are you know buying up homes and making them rentals and all that stuff and so that's in this environment with higher interest rates and and less activity the holiday season all that stuff you know you get into like spring season with nice weather and lower interest rates oh I'm like I'm excited but then at the same time I honest honestly like I don't want it again like it was terrible trying to help people you know navigate the the home process of you know you like you said earlier people get beat up and I mean depending on what neighborhood you want to move into and the house and all that stuff you might be getting in the ring with Mike Tyson and he's throwing hammers I mean it's it's it's it gets very very competitive and frustrating and you know it's it it can be very uh taxing mentally to you know to be able to even get through the process so it's like right now it's still not a a cakewalk so having lower interest rates it's a double-edged sword it's it's a gift but it also comes with a massive cost because we just don't have enough houses like if it was 2009 or 2010 again and there was like 18 months of inventory and all of a sudden we had super low interest rates oh my God it would be amazing you'd be having people buying houses left and right right but we're we're so far away from that inventory situation where we're like What like one month maybe like close to two months depending on the neighborhood if you're lucky of inventory I mean that's that's really far away from even being a balanced Market let alone a buyer's market well I'm trying to look do you remember around what interest rates were maybe like a May of this year or June of this year trying to look at they were basically right around where they are right now so they were in like the high six range whereas you know as we got into the summer and you know everybody was like can rates really keep going higher and then we got into the eights at one point they've been trending trending down for a couple of months now but okay you know basically we were in the rate environment that we are right now last spring okay so check this out guys and this is the scary part and this is why you're like Mark you're making a this is not a big deal okay so like beginning of the summer May is June like Aon said we're still kind of in this rate environment okay now this is where it gets a little crazy inventory was like higher than it is now you know what I mean our inventory levels were a little bit better than they are now in fact there was still a big Surplus coming in from all the new homes that didn't sell like towards the end of last year so there was a surplus of new homes there was inventory well better inventory than there you know than we expected there was inventory hitting the market we had higher rates and still we are in this pressure cooker of a I'm going to list my house for this that listing price makes no sense but guess what I got two offers over that so now imagine fast forward like May of this year interest rates let's just say are like at 6% our inventory levels because of December January February and March have already been eaten away because there are going to be buyers who are going to postpone their trips to Cabo because interest rates are down and they're going to feel and they're going to probably be right that there is a pocket opportunity to jump into the market now before Springtime comes around this could be the chance to buy and then refy so we're going to have really low levels of resell inventory come this Springtime and then people are going to try buying with low interest rates and even lower inventory and it's going to be chaotic I mean at least you know back in the day when interest rates were like at 2.75 and whatnot there was inventory I mean they was going quick I mean don't give me wrong it was like oh someone listed a house an hour later it's gone with 30 offers but there at least there was inventory now when we're if we get somewhere somewhat and I know everyone's saying you know look six 6% is not going to move markets what we've seen recently is that even getting like underneath the 7% cap for just a bit you know going back and forth that moved markets I mean how many applications did you get when all of a sudden like they put a six in front of the interest rate I mean was it just like it's like Vegas ding ding ding ding I mean it was crazy no to no totally it surged I mean it's it it always amazes me the like from a consumer standpoint how attractive a 6.99 n% is compared to a 7.0% I mean the payments like pennies differ right I mean it's like the same exact thing basically but it's one's got a six in front of it it's like when you go to the grocery store it's that same mental you know the psychology of of you know consumer sales they you see that something's 99 Cents instead of a dollar or whatever you know and it's it's no different and so you know you think about it as rates Trend I mean rates only need to get a little bit better than where they are right now and we'll be at 5.99% before you know it and then all of a sudden even though it's really 6% for all intensive purposes it has a five in front of it and that right there that's what's going to break the dam and the water's just going to come flooding into the city at that point in terms of buyer activity in my opinion because 5% you know is is 1% lower than the average historical rate I mean historically rates are around six something percent so I mean five is you know really considered good financing um you know the twos that we saw that was like Willy Wonka land who knows if we'll ever you know have the government step in and stimulate like that again but you know fives maybe high four something like that I mean that's that's really attractive financing so it will bring in more buyers and you know when you were you were talking about you know the potential for this spring and everything it reminded me of for a long time during you know the the tw's uh 2% 3% you know interest rate timelines of when it was crazy for buyers I I got in the habit of of saying and feeling like you know a good deal as a buyer in this market is getting your offer accepted because you're going against so many other people for the same house a lot of them are going to be cash buyers a lot of them are going to have more money than you do you know etc etc and so you know that additional competition I'm I'm not looking forward to that for anybody and for myself in fact you know you guys know I want to you know move into the out into the country and so this doesn't this doesn't help my mission either um but I I think you know you you had mentioned uh you know earlier um you know as as as far as buyers and everything goes and getting beat up and and all that stuff and I I do feel like we're heading back towards that you know a good deal is is getting your offer accepted and so I almost feel like the getting in before it's in that style of Market you're going to be way better off because you think about all the wacky and wild things that buyers had to do to get their offer accepted it it wasn't a a you know it wasn't an amicable uh you know two-sided thing it was really the seller was getting everything that they wanted and you were getting your offer accepted versus like you know you got the credit that you were looking for the price or whatever the case is so it's things are going to shift with with interest rates shift happens hey guys if you guys are enjoying this broadcast we come here every mon talking about the real estate market at 5:30 please like comment and share it would hold a lot it would mean so much to us and to the YouTube algorithm which keeps bugging me and saying tell your viewers to like And subscribe and all that fun stuff um here's the thing for me guys and this is this is the big one I think that like prior to us getting in the the twos and you know the threes and all that stuff too I don't think conversation pieces were about what interest rate you had on a home what interest rate I mean I would never go up to Aaron and go hey Aaron how's it going buddy like what's your interest rate but the weirdest part right now is because the 2.75 and because people are wearing like a badge of like yeah 2.75 yeah you know like it's just gotten to be a little bit more like one is I think buyers and people than thanks to probably shows like that we're doing have become a lot more educated um about the process and about that stuff but I think also we're very much like we turned into like a mortgage in a number conscious Society whereas that like it really is almost like a badge of honor or it's a really thing of like oh you got that oh I got this and so it's weird because if you've noticed prior to co prior to those crazy rates like no one t i mean I don't remember ever talking to someone going hey what interest rate did you get on your house but now it's kind of weird because it's kind of a common common theme that people are talking about I mean I talk to people all the time no I'm not selling my house I got a 3.1 and I'm going to keep that until they have to drag me out of my house and it's like okay just ask if you could like move over so I can get my latte but I'm good with that too you know so but those are common those are common conversations PE everybody like it's their interest rate that's it and so I think with that as like the Catalyst when numbers change and the interest interest rates uh change people are very much aware people very much are like oh okay the interest rate is that I'm okay there I'm I'm you know that that work for me and so I think that like number conscious things like Zillow with estimates I think that's already was there but now I think interest rates are big part of the game and I think people really really there's a little bit of Pride um because like you said sometimes you know like a 7% and a six point you know 8% whatever the the payment isn't going to be that big of a difference but to a lot of people it's more about the number you know what I mean it's like coming home and telling your wife I bought something for $6 but it was really $6.99 it's the six you know crazy stuff man crazy Market we live in crazy world huh yeah AB absolutely I think too you're going to see as rates get you know lower and lower you're going to see a lot of those people that have been holding on to their badge of honor interest rate and they're going to be like all right you know although I don't want to get rid of my two or whatever ideally I I want to move or I need to you know I racked up a bunch of debt and I got to refinance and get rid of it anyways so you're going to see more of those things take place which will create some buyer opportunity because there there'll be some listings you know some inventory that'll come from that but not enough to create a a glut of inventory like everybody keeps hoping for no you're right I mean like here's the thing the like I always say the biggest myth in real estate right now is that like you know interest rates go to like 6.7 and all of a sudden every seller that's been thinking about selling is going to sell I mean all these sellers pretty much have like 2.75 or something like this and they're like yeah you got to do better than that to get me to put my house on the market so that's a huge myth I mean the thing is like and I always say this to people too interest rates up inventory up why less Demand right interest rates down inventory down why buyer demand is a lot more and there's a lot of houses that are being like bought and eaten up and the and there's just less on the market and that's kind of just how it is and that's just a straight talk on exactly how the real estate market Works um and it's it's a crazy Market you know all right here we go other question many people have to move back to the Bay Area that makes inventory better uh they try to rent but they cannot because no cash flow um they put it in markets for rent nobody rents those than high that high see here's the biggest problem I think you'll probably agree with this too is the fact that a lot of people when they when they moved out of the Bay Area they were promised a lot by their companies you know what I mean a lot of the companies were pretty much you know they won't say they read the read the fine print we can call you back anytime you want but they kind of you know they they kind of did some kind of Shifty stuff over there too but the crazy part is for a lot of the people who moved here from the bay area that are now being called back is they didn't buy a rental property they didn't like think to themselves oh you know what we're going to be able to rent it they were thinking to themselves I got a sweet house in the Sacramento area and Rental renting my forever home no no no no no this ain't it this is for the kids this is for the family we might bring in mom and dad and everything too and it really kind of stinks and it's it's a shame that no one calls out a lot of these companies that did this um you know and people need their jobs and people are making good Bay Area money and and you know I have my own thoughts about this I think I think we're all grown-ups I think we all have our production markers because I used to work in the corporate world before too and I think if you played your production numbers you should be able to live wherever you want to live and I don't think we live in a society that you know Mom and Dad can't go away for the weekend without thinking the kids are going to be throwing a party and I think it's ridiculous you know and I think you know companies like Google like Facebook really need to kind of rethink this stuff and really kind of because I think at the end of the day it would make happier employees people would go like wow I'm not living in a two-bedroom condo in San Jose I'm living in this amazing house in like the Sacramento area I got a pool I got my family here everyone's good I can focus in on work and I can do my stuff we're all professionals man there there you know no one's throw in a party when the parents are away at this point so you know I think I think it's ridiculous you know what I mean yeah I uh it's you know there's something to be said for you know the Synergy that you get when you're around people and everything and I think a lot of employers you know they lean on that as like the reason to pull you back but I mean I wonder like whether it's Google or Apple or whoever did do they actually like have the data they they must they must have the data because they have human resources and they're making you know they they pay them you know monthly you know pay stubs and all that stuff so they must know where these people live I just wonder like you know if Google for instance if they knew that you know 3,000 of their you know local uh team members relocated you know out of state or you know out of the area or whatever like did they did they know all that information before saying all right you guys got to come back or are they just you know arbitrarily making decisions on that kind of stuff because you you would almost think that it's like you know Pandora's already out of the box guys like you can't ask somebody to you know sell their home and start their life over again just because you want them to come back I don't know it seems like very uh unfair to say the least but we're we're seeing it all the time I I talked to a ton of people that they're having a move back and uh you know it's a it's not an ideal situation especially because a lot of them they bought when rates were at two or three or four or whatever and now they're like looking at where rates are and they got to buy and it's like a completely different scenario well I also think here's the thing like for me right I lived in the Bay Area and I did like R Tech all that stuff too and the thing is for me like one of the things that you know when whenever I wake up in the morning and I'm able to see like you know my family that they're good the house and I feel like I'm really like paying a mortgage for something that I want that that makes me happy right it puts a little pep in my step and it makes me like more motivated to get out there and hustle work and just be present you know and I think for a lot of people in the Bay Area they they probably lack that they're like yeah you know I got a little condo here and I'm making good money and I can go get a pizza and I can hang out with friends but like I do think that you know a company would be wise to say look we want we want to invest in you guys we want you to be happy what what is that happiness and that I think really does and because I was like a I was like a senior manager of one of these tech companies and it was just like a miserable lifestyle for a lot of these people that didn't really like they were living in an Apartments they were doing this and like I look at like what people have around here and I'm like man you know you could have created like some really good will with your like staff you know like saying like hey your production's off the chart you're awesome you know like go move somewhere get your house get a nice big house if you want it you have a nice office do good by your family feel like you're you know you're earning and you have something that is good because we're a company that believes in you you know but there's none of that it's like man keep people in cages let them work and if they don't want to be like five minutes away from where they work sorry you're gone we can find someone else and that's just wrong that's a wrong way to do business I mean I it never worked for me all right we got Mr Black saying does makes sense to reduce a purchase price especially in today's market or always knock off seller credits or rate buy Downs I feel many Builders have inflated their base price now this is interesting first of all if if the market is shifting into a into a lower rate Market you know we're kind of getting now to the point where myself I'd rather put the money towards like closing costs or something else because if if the rates are going to be down like let's say around 6% then I'm kind of wasting money so as far as the purchase price goes this is where it's like the biggest thing in new homes and I get it this is like let's say like Aaron goes into like this new home company he buys a house for $800,000 and all of a sudden I go into this new home company I'm like I want the house but I want it at 780 Aaron is going to lose his mind appreciation for all the houses sold at 800 are going to go down the tubes and it's going to start like a backward slide of the purchase price so what you what you notice is is that um Builders are very good about giving rate bu Downs are good at giving towards closing cost usually the lender does that part of it but what you're going to get strictly from the Builder is like okay we're going to wave lot of premiums we're going to throw in the Solar or we're going to give you um this much credit towards the design center um and they really the last thing they're going to do is try to reduce the price on a house because it just screws up everything as far as like past clients future clients and if if all of a sudden you see a house that was listed at eight now it's lit at 780 all of a sudden what do you think the next person coming in the contract is going to be when he sees a 780 he's going to be like I want it for 760 so it's not really something they're good on doing um but like you know like a caveat to that is at this point because rates seem to be going down like no guarantee for me and Aaron but if it's going that way I'd go more towards closing Kos and if I like that really pretty quartz countertop or even a lot premium what do you think Aaron yeah don't don't put any any money into a permanent rate buy down if you do a temporary rate buy down and you end up refinancing early before your temporary buy down you know Cycles out then you get that money refunded back to you that that money is yours but if you do a permanent buy down um then that money's toast so if you refinance in six months 12 months or whatever and it took you 36 months to break even well you just burned 24 months of money or whatever ever so um in this environment with rates definitely trending in the right direction and and uh you know the opportunity for refinancing being very very high that that wouldn't be a smart money move so don't don't uh like Mark said put that into offsetting your closing costs or upgrading the house do not put the money into your interest rate you you won't be in that rate long enough to to see the ROI all right now we got another uh is it technically that the broker are decreasing their gains so the interest rates appear lower to save the market hope that made sense no yeah you're talking about margins and no the uh margins have actually come up a little bit um it you know there there's a although I would say that over the last like year to year and a half or so as you know interest rates shot to the moon and everything there were all sorts of concessions made throughout the mortgage industry where lenders were doing loans for you know less profitability um but at the end of the day there's you know there's there's kind of you can only reduce your price so much before you know you have too much risk exposure and you're not making money and all that stuff so um no we're not seeing rates come down because people are dropping their pants it's just that the uh you know interest rates are improving just look at the you know to just take mortgage out of the equation just go look at the 10-year treasury yield because that not a direct direct correlation but the mortgage back Securities most closely follow that and you know you look at the 10-year yield and it's it's been shooting up so you know as as far as U as far as uh mortgage rates coming down I mean that's just kind of a natural thing all right guys well we are wrapping it up right now if you are looking for an amazing channel is GNA give you mortgage information on a daily basis check out the new Way Mortgage YouTube channel it's pretty awesome and Aaron drops so much knowledge on that thing it's fun um he does a lot of short videos too so if you want you can just scroll through and see the topic that fits what you're looking for um now if you are someone who's maybe in contract for a new home if you are someone who's like saying to yourself am I getting a good rate does this make sense give Aaron the opportunity to do a Pepsi challenge he's awesome he actually did my home loan that's how good he is so he's a he's a rock star and I would say give him a shot um if you just want a second pair of eyes and I would definitely do that especially with the new Homeland I would definitely give him a call um as far as we go guys if you're looking to move in the greater Sacramento area we're talking YOLO El Dorado um pler Sacramento counties we got your back when you're moving to the area feel free to reach our team we do questions we do real real estate therapy as well too and we are available for you guys whenever you need it because these markets and this Market is nuts and that's just what we do guys I will be back on Wednesday with a guest we'll be talking a little specifically about the Sacramento Market Aon any parting words I'll see you guys next week like guess what guys the video just ended but don't worry we have more videos just like that one right over there and if you miss that red subscribe button during the course of the video we got you covered right there hit that subscribe button we promise to bring you some amazing content we won't let you down now if you're looking for a team in the Sacramento Metro area to work with we'd love to talk to you one-on-one we always include a zoom link down below so book a time or we can talk to a little one-on-one find out exactly what your real estate needs are

Channel: Mark McDonough Team - Sacramento Real Estate

Views: 431

Keywords: mortgage bankers association, new home construction, new home sales, new homes, new houses for sale, homebuilders, housing market bubble, us housing market, real estate market predictions, housing market forecast, home prices, real estate market, interest rates, mortgage interest rates, mortgage rates, housing market, real estate, sacramento real estate agent, realtor, zillow, redfin, mark mcdonough, real estate news, HOUSING INVENTORY ON THE RISE, sacramento real estate, money

Id: _dgyUVadGiY

Length: 64min 1sec (3841 seconds)

Published: Wed Dec 06 2023