Join Gregory Ricks and Dwayne Stein as they uncover the truth behind common real estate myths, share valuable financial insights, and discuss the crucial role of roofs and insurance premiums in your home buying journey. Get ready to make informed decisions in today’s housing market.
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Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 01890342 – 7/23.
Gregory Ricks 00:00
But you know, there’s been a lot going on, I’ll tell you what our focus is going forward. And that’s tax efficiency. tax bills are going up. And you know, can you control inflation? No, we just have to make better decisions and get a bit more thrifty as well. So I do have have another article to talk with you about seven ways to bag a better deal. That’ll help us with inflation, if we can negotiate a little bit better. But one thing we can do that I think offsets inflation is we can work towards being more tax efficient. It’s something that’s there and available for us. And you’d need to do some planning to take advantage of that. You know, how would you like to save? Up to 37%? Depending on level of income? Yeah, opt out of taxes. Can you do that? Yeah, you can. It’s not that simple. But you can work towards. So let’s get started. We’ve got Dwayne Stein with us this morning. Hey, Dwayne, how are you?
Dwayne Stein 01:26
I’m fantastic, sir. Good morning. Great to be with you. As always.
Gregory Ricks 01:30
Tell me a little bit about summarize what you’ve covered with your audience this morning.
Dwayne Stein 01:36
Yeah, well, a lot of what we kind of talked about this morning was myths, Gregory, a lot of myths on what is keeping people from buying a home? And, you know, is it when you’re looking at? I think we have surpassed, Look, nobody likes where the mortgage rates are right now. Right. But at the same time, you know, those things that are keeping people on the sideline, I want to make sure that we are sort of helping those folks understand that a lot of it isn’t what they think it is. So we discussed some myths, the 20% down, that you’ve got to be debt free. A lot of these myths, I sort of wanted to, I guess, to use the word debunked, to help people understand that when purchasing a home, or there are these things that are keeping you on a sideline, versus, you know, that you’re hiding behind? Well, the rates are high, because now it’s not about rates, it’s about we’ve got plenty of buyers, Gregory, it winds up coming down to to be honest with you, boss is a it’s inventory, right. And it’s all the lack of so to speak, when it comes to inventory. So you know, that’s when we’re looking at what’s going on in the mortgage world. We want to debunk some of those myths, some of those things that are keeping people on the sidelines, because at the end of the day, it’s not a bad time right now to be purchasing, because home values are only going to go up as rates do recede.
Gregory Ricks 03:09
I think part of this is the mental adjustment interest rates. Or we’ve been in a 1% world for so long, which translated to what three to 4% and mortgages for so darn long. And I don’t know, did anybody get any? Did you ever do any deals that got under 3%?
Dwayne Stein 03:30
Yeah, we sure did. Yeah, absolutely. Yeah,
Gregory Ricks 03:33
that’s like steal your money, try to get them to refinance in the future out.
Dwayne Stein 03:37
And guess what, Gregory? That’s where when you’re looking at it, you’re spot on? Right? Because 92% of homeowners right now who are have who have a mortgage that are making payments, Greg have below 6%. Right. So, you know, then you start looking at if you want to break it down even further 82% have a mortgage rate below 5% 62 have a rate below for it, guess what, Gregory 23.5. So let’s just say one out of every four homeowners right now have a mortgage rate below 3%. So, you know, these are the things like you said it, I think it’s taken a while for the adjustment. But at the end of the day, and I know you’ve talked about this forever, as long as I’ve been contributing with the show is home ownership is always up great investment, right? It’s a wealth tool. homeownership, and I think that’s where people are what I’m seeing, nobody likes the rate, but they’re adjusting to the interest rate, if that makes sense.
Gregory Ricks 04:47
You know, recently I gave advice to one of our kids looking to buy a house and I said, you know, I really liked that property location, curb appeal. All, he knows where he needs to be in price. But I said, don’t let the interest rate holds you up on that, and over time, and I kind of fundamental thing I always look at in real estate is how long are you going to have that property? And even if you feel you might be overpaying you might be today. But what does that gonna look like 10 years from now or 20 years from now? You know, think of it from a business standpoint, Dwayne, you know, where we look at what companies may be so far 20 years ago, or 30 years ago or even 10? And then, and then look at valuations today is gosh, you know, should have bought that.
Dwayne Stein 05:45
Well, and I don’t know, I don’t know what the percentages are out there, because it’s a moving target. But Gregory, how many folks, how many folks buy a home, and, you know, and set and keep that same mortgage for 30 years? Right? I mean, and don’t ever refinance or don’t sell. So even right now, because of what’s going on with credit card debts and what’s going on, you know, I’m refinancing folks that have a three and a half, four and a half percent interest rate because Gregory I’m able to put these credit cards that were sitting at zero for so long, and their payments have started, I’m able to help these folks get a head of the game, and I’m saving people 300 512 hearts $1,600 a month. In that’s money in your pocket. So at the end of the day, that number on a piece of paper, it’s a it’s a feel good thing, right? It’s, it’s something you can maybe brag about, but what buys your bread and milk. And that’s the biggest thing. So that number I think like you’re saying you’re you’re you’re hitting the nail on the head there. The interest rate is a number that we use to figure out what your payment is to determine your buying power. But it’s not you’re not going to buy $100,000 home and you look at what it’s going to cost you over 30 years and go okay, this $100,000 home is going to cost me $287,000 That people refinance. So that that’s that that’s not the same effect.
Gregory Ricks 07:25
So what’s the average time a houses held?
Dwayne Stein 07:30
Well, it’s going up. I mean, now it’s it’s people, they are holding them a little bit longer. But you know, refires used to be every three years, I think now it’s a little bit higher, you know, you’re looking at a range of five plus years, you know, the average time that people hold on to homes. So and now I think you’re going to see where that’s going to probably change a little bit Gregory, because you know, all those folks saying, hey, the housings in a bubble, right? Those people have all disappeared now. Right? And when you’re sitting with three months of inventory, three months of supply, you know, people aren’t flipping homes like they were because of that interest rate. And what happened in 20 and 21. directory that’s changed the outlook of mortgages forever. And not saying it’s good or bad. But there’s, it’s going to be tough for someone. Their situation is going to have to change drastically. But them to want to get off if you’re part of those one out of four people have one to 3% Yeah,
Gregory Ricks 08:43
Ruby home says the average Americans live in their homes for 13.2 years. I saw another stat regarding first time homebuyers two to five. Yep. If you’re staying in there, kind of 10 Gosh, in most cases, if you if you’ve looked to be in the right area, curb a pill and keep that home in good shape or make improvements. You’re you’re going to be ahead of the game over a 10 year time I would have I would have to imagine in that case.
Dwayne Stein 09:23
Absolutely. And the other thing to what we do Gregory is we kind of have a crystal ball. We let people look into the crystal ball. And what I mean by that is, you know we can show historical data on a particular home that somebody’s going to look at in a particular market that somebody is going to look at, you know what is the chances of the appreciation? Because that’s what we want we get it right people are home it’s your largest investment. People want to feel good and they want to understand and we sort of give a crystal ball into Hey, if you’re buying you know if they’re going to look at three homes, Gregory and you know once 275 ones 300 wants 325 We’re showing them a lot of times when they’re going to look at this, Hey, of course you’d like to 325 home better, but look at what this 275 is going to do for you. You’re gonna make more money over time, because like your same advice you’re given to you, to your kids, you know, what’s the better investment? Where’s the opportunity? Where’s there some growth, right? So that’s what you want to sort of look at as well,
Gregory Ricks 10:25
with hurricane season coming up, people are gonna end up getting in bills and trying to buy a house, tell me how hurricanes and storms, you know, and we’re not only having to deal with hurricanes, but these other things that just sneak up on us called tornadoes can create some havoc, and that’s been experienced here in the south lately as well. How does that impact the home buying process?
Dwayne Stein 10:52
Well, anytime you have a named storm, once it goes into the golf, then you’re not able to write new policies. So if Gregory’s in the middle of purchasing a home, and that insurance policy is not bound, let’s say Gregory supposed to purchase, say, you know, July 1, if that if that insurance premium is not binded, by that before the name storms getting in, then naturally we can’t. So that’s how it is directly affected by hurricanes. What we’re seeing here in South Louisiana, is just the simple fact that we don’t have any competition right now. A lot of insurance companies, Gregory have moved away, the South Shore and particularly is just getting is getting hit big time. And the fact that you don’t have as many people competing for business. So what happens, you know, premiums are higher. Now you’re looking at, you know, Louisiana has their own insurance. And that used to be the Louisiana policy used to be sort of the insurance of last resort. But now that is where a lot of folks are going to to try and purchase a home because they’re the ones that are writing it. So right now you take in the fact that you’ve got elevated interest rates then throw into Oh, yeah, by the way, what I’m telling what we’re doing right now is before we even making offers on a house, what we’re looking at is it’s not even about interest rate is what is that insurance going to costs? You know, Gregory we had Hurricane Katrina, right? No, five. So now, a lot of roofs, a lot of these new insurance companies are now having to if the roofs are more than five years old, heck, some of them are two years old, they are charging a gigantic premium to purchase a home. So now that seller Alright, do I buy a roof? Well roofs on eight grand anymore, right? They’re very expensive? Or does the does the buyer still purchase the home with a higher premium. So that’s what I’m saying that’s blowing up a lot of deals right now our roofs, because they’re just you’ve got these lifetime or these 30 year shingles that the insurance companies now have said, hey, if they’re not, if they’re, you know, less than five years old, we’re going to charge you a premium, a higher premium to insure that property. So hurricanes haven’t affected us the last couple of years, from a physical standpoint, but the effects of what happened two years ago with Ida and, you know, out on in Lake Charles, is having gigantic effect. So I’m really hoping this year is quiet, so we could get more folks who are willing to come back in and help us ensure and kind of relieve some of these costs. Gregory,
Gregory Ricks 13:53
I think that just led us to probably that third point on the earlier question, three things to consider. But you’re considering your downpayment interest, how long you’re looking to keep a house but before you can get into Gosh, making an offer on it. You brought up now we got to think about the roof on these houses. We we got to think about the insurance premium between property taxes and insurance premium. Are you able to know that before going in because especially with insurance costs have doubled and then the impact of the roof? That deal may not go down? Because the seller might say Well, I’m not putting a new roof on it. And then the buyers gonna, well heck I’m gonna have to because I’m paying enough and extra insurance premium to justify that. And that’s I’ll throw one other point out here. That’s why I see houses being sold or getting new roofs cause events urns.
Dwayne Stein 15:00
Yes, absolutely. And But to answer your question, do we know that ahead of time we do for our clients, because we don’t we don’t like to play in a pretend world when it’s your largest investment. Right? And we’d like to know when we’re going in, we want to know, what is the age of that roof. And, you know, we can kind of dial it in, you know, with all the things you can find now online, you can kind of get an idea of, hey, was there a new roof? You can use Google Earth that, you know, the realtor, the insurance agent could zoom in on the house now and know those kinds of things, right, and see, so yeah, we want to know that ahead. Because we want our I want to help our Realtors and our clients know going in, you know, hey, we’re gonna make $1 They’re asking 200 grand, we’re gonna give you 200 grand versus going in and say we’re gonna give you 190 But we need you to fix the roof. Right? So because Gregory the premiums are crazy. I had a house this week $250,000 house if they didn’t fix the roof, the premium was 6800 when they fix the roof, it went down to 3200. Greg, that’s a game breaker. That’s a game changer. Something
Gregory Ricks 16:10
else I learned because they question about the high impact ability of the roofs that’s something else now too, not just the roof going on, but what type of shingles being put up there and I did not realize they had these up higher level of categories that they’re wanting to know in buying insurance.
Dwayne Stein 16:34
Yeah, it’s and it’s almost like insurance riders Right? Like Alright, hey, you know, you got this jewelry or you’re going to protect the jewelry. Right? So same thing when it comes to the route, what type of routes what are they looking at now, what I want to help people understand is this and many people don’t know this. Let’s say Gregory is coming to buy a house and the contract is July 1 that we’re going to close. All right, you do not that roof. While we want it to be on by that certain date. You have 30 days so most insurance companies are willing to give you credit if you go if you’ve got an agreement with the seller, right and maybe that money is going to be held in escrow with the title company. We’re going to be able to close your loan giving you the the insurance based on you getting the new roof even the day of the even if the day of the contract is June 25. But you’re not looking at it till July 1
Gregory Ricks 17:29