Podcast 95: How are Rising Interest Rates Affecting the Housing Market?


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Below is a transcription of the Ask Gregory Podcast 95: How are Rising Interest Rates Affecting the Housing Market?

Gregory Ricks  00:00

Hey welcome. I’m your host Gregory Ricks a financial advisor here to answer your questions and help you win with your money.

Podcast Intro / Outro  00:08

On today’s episode of the Ask Gregory podcast. Gregory is joined by Dwayne Stein, those the mortgage gumbo, and together they are going to answer the question, How are rising interest rates affecting the housing market. We also have a complimentary download waiting for you on this topic. If you go to gregoryricks.com/podcast95. Again, that is gregoryricks.com/podcast95

Gregory Ricks  00:32

I think houses are going to be worth more than they are 10 years from now. And 20 years from now. Right? You know, I feel that way about the markets as well. I was having a discussion the other day. And it’s here is how I look at real estate. It depends on how long you’re wanting to be there. And you could feel you’re overpaying at this point. But if you’re looking at why I’m gonna be there for 10 years, or 20 years, or I’m gonna be there from now on? Well, based on those future evaluations you’re under paying. Now, I made a real estate purchase some eight years ago. And at the time, because I really wanted the property I think overpaid above market about 70k. At that time, it turned out two years later, that was the valuation had increased by that much. And of course die, it’s worth a lot more. And I still hold it. But you know, what was my thought back then? Yeah, I’m keeping it for 30 years. That’s kind of the evaluation. So when when you think about that, if you kind of say, well, I’m only gonna be there a couple years, or at most five? Well, that is something to think about. But I believe most buyers are taking a longer view of that. We have Dwayne Stein, host of mortgage gumbo. Duane is a mortgage authority that that is his jam. Understanding the reasoning behind valuations and interest rates and how to get deals done because doing a mortgage. That’s not one of the easier things to do. It’s a complicated process with a lot of moving parts. Why and your thoughts on what I just shared about the mindset of buying and purchasing.

Dwayne Stein  02:38

Alright, so you nailed it when you talked about personal what I would love for your listeners, the winning at life nation to understand is this. The people that you’re working with? Are they asking you what you mentioned? Are you a first time homebuyer? How long do you plan on being in this home? Right? Because the reason why mortgage gumbo we do that Gregory is that’s a big difference on where we go with what loan program mainly is with downpayment right now 20% down, and my opinion is absolute. Even if it’s 30. And you go, Gregory comes to me and says this is my forever home. No way Gregory is going to sit there and pay 5.875 for the next 30 years. At some point when rates recede and they will. Gregory is gonna call or I’m gonna call Gregory and go, Hey, it makes sense now for you to look at refinancing. So what it’s all about right now, to kind of piggyback off of what you mentioned earlier, is your mindset has to be owning a home is better than renting. And how can I get in this cash is king right? You hear that on this show? You hear it on my show cash is king so let’s get you into that house as cheapest possible. So when you do go and move up or relocate or something like that comes about you still have your funds so when you’re making when you’re selling that home, there are some gains there without having to be your own personal money. It’s easy to buy a house for 100 grand listeners and put down 20% and go hey, I got 20% equity. Well, it’s all yours. Let that house work for you houses housing prices, houses go up. So that is not going to be the issue and Gregory I’ve created and again this is something else I’ve learned from you. I try to create as many crystal balls as possible, right? You’ve got your GPS and you know all these these tools. So, you know I’ve created where what I do is I show people I can show when somebody He’s buying in a certain market with the historical average of appreciation is, so they can see not only that, I show him with the amount of downpayment, how much money they save, right? If you put 20% down how much you capture back, if you put five or 10%, down how much you capture back, and it’s 99.9% of the time, you make more money by putting down less, because like you said, the markets going to go up home prices are going to continue to rise, heaven forbid, they’re not going to go up 18 20% every single year. But if we get back to where they’re five to 7% had three and a half percent, you’re still owning a valuable asset that’s increasing every single year. So when

Gregory Ricks  05:43

You’re talking about downpayment, every 1000, you you gave me a number, every 1000, you add to a down payment, and basically showing that you throw a lot of money at it, and you’re not really impacting the mortgage payment that much. So how much are you impacting? The payment? So you’re looking at a year, every?

Dwayne Stein  06:01

Yeah, you’re looking at? It’s like 50 bucks, right? So for every 1000, right, right. So when you’re looking at that, you know, you’ve got to make sure, what are we really chasing down, right? So we want to make sure from that, you know, you got to be careful. And I want you to be able to, I don’t want you to have to come back to me and go, Hey, Dwayne, I need to get some of my money back. And guess what, now you got to come back and get your money, you add a 2.75. And now you got to come back and get your money at 6%. Right, that’s what we want to make sure, especially if we don’t know that we’re in that forever home. So that’s the biggest thing that we’re looking at there. So that’s why I want to run those options for you. So you can look at it, we’re not going to do something we cannot and and I try to stress this, it’s not like I can go and say, Oh, I’m gonna put you in a house you can’t afford. The laws don’t allow us to do that. So I’m going to give you what your options are. And you may go wow, like the $50 payments cheaper. But when you’re looking at it, what is it? What does it really costing you? So we can’t put you in something that you cannot afford?

Gregory Ricks  07:15

Hey, here’s a question for you equity firms have really impacted the housing market the past couple years. So with what’s going on in the economy, and I doubt they’ve stopped buying, but are you seeing any change or hearing anything on the ground? on that? Yeah,

Dwayne Stein  07:36

I mean, that that’s a big thing. Right now, Gregory, I mean, the equity firms coming in, I mean, there’s areas in I was reading something not too long ago, like in Kansas, or they bought, you know, basically China has ghost cities. I mean, these folks are buying up neighborhoods. And it’s, it’s crazy, because that’s where when you start looking at some of the, you know, opportunities in where is some of the inventory at? Well, a lot of it now, unfortunately, it’s not making it down to our level. Because if you’ve got somebody with a big pile of cash, who can offer it? Look, those realtors are those banks there are, they’re going directly straight to those folks. So it doesn’t even get to us at this market. So that’s sort of why you’re seeing a little bit of a, you know, inventories, taking so long to rebound. And then like we’ve talked about in the past kick in forbearance and, you know, not having to make mortgage payments for 18 months. I mean, you know, we’re not even at a year yet where people had to stop making payments on mortgages. So, you know, we don’t know where that’s gonna go, are people going to keep paying those payments? Or are they going to, you know, be able to afford it? Or would they, you know, the 18 months, you know, unfortunately taken forbearance, where did they that put them financially? Were they able to get back? On the saddle? So but yes, equity firms or buying these things up? Look, that is what’s in your 401 Ks. That’s what’s it you know, a lot of these things. That’s exactly what’s happening, Gregory?

Gregory Ricks  09:10

Well, when we talked about the recession, and it’s, when does it show up? What I do see, and you see announcements, companies are laying off people, or what you’ve seen on some like Facebook, and some others have talked about, we’re going to slow the hiring growth this year. So you’re seeing those signs. So there is change coming recession does impact hiring. It makes companies go away that’s living on borrowed money because they’re inefficient and they’re sucking up resources that could be better distributed elsewhere, really. So those employees are going to lose jobs and other companies are going to tighten up because of spending slower Big. So that’s part of part of a recession. And that’s kind of why they kind of have to happen. We just don’t want them to last long. And right. So impacting housing in that way. Could that impact housing more from that standpoint? Or could that cause more repossessions, but I don’t think we have a blow up or what happened in the Great Recession a few years back. From that standpoint, the mortgage industry just doesn’t give money or mortgages out to anybody like they used to, you got to you got to be legit, and work through it and have resources. Are we right on that?

Dwayne Stein  10:46

Yeah, no, absolutely. And you know, so, number one, you can’t just give somebody a loan they don’t qualify for and it sounds bad. But you really have to choose in today’s day to be foreclosed on Gregory? Because, I mean, you have to show absolutely no concern or regard, because everybody has equity right now. Everybody, so you have so much equity that is out there. You know, the least amount of homes are underwater than that has ever been. So and So folks have equity. So look, all you got to do is call somebody and go, I’m looking to sell my house, and you could get somebody to buy it and pay off the loan and you walk away with a few dollars. So you’re not going to see like we did and oh eight no nine, you’re not going to see that because of when you’ve got two back to back years of 18% plus in housing gains and equity gains, right. I mean, there’s a lot of equity that’s built into these homes. So that’s where we’re at. So that’s why you’re not going to see a big flux of foreclosures, you might see foreclosure starting, right. Because the banks I gotta go a get this back. Because a bank right now, please don’t pay Gregory, please don’t pay me. Right, I will, I will come and get that look, I’ll pay you to get out. Because they know they can turn around right now and sell that house for more money. So it’s not like you’re going bad and they’re upside down.

Gregory Ricks  12:16

And I think somebody in this situation, and this is what I talked about, and I sure I’ve probably picked up some of it from you as well. But what if you’re struggling behind and we had a caller recently regarding this struggling on payments, and because of what’s going on in that kind of may may have impacted them. And what I suggested them to them is reach out to the lender to the credit card company and let them know what’s going on. Because they do want to keep you in good standing. They do want to get paid. And it might have been somebody asking about bankruptcy and I’m like, You really need to avoid that. But I would be proactive and reach out to them and let them know what’s going on or why you’re late or why you’re behind. And that would go for the mortgage company as well.

Podcast Intro / Outro  13:14

Thanks so much for listening to Ask Gregory where we answer your financial questions. You can find us anywhere podcasts can be found and on YouTube and Facebook Live every Saturday from 10 to 1! Subscribe, leave a review and tune in next time! And don’t forget we’ve got a complimentary download waiting for you on this topic. If you go to gregoryricks.com/podcast95 Again that is gregoryricks.com/podcast95

Disclosure  13:43

Gregory Ricks & Associates is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Gregory Ricks & Associates are not affiliated companies. Gregory Ricks & Associates, The Total Wealth Authority is our trademarked tagline, it does not promise or guarantee investment results or preservation of principal nor does it represent a certain level of skill. Investing involves risk, including the potential loss of principal. Any references to protection, safety or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the issuing carrier. This radio show is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Gregory Ricks & Associates is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Gregory Ricks & Associates. Any media logos and/or trademarks contained herein are the property of their respective owners and no endorsement by those owners of Gregory Ricks & Associates is stated or implied Gregory Ricks & Associates has a strategic partnership with tax professionals and attorneys who can provide tax and/or legal advice. AEWM, Gregory Ricks & Associates, WJ Blanchard Law, LLC, J Heath & Co. and Mortgage Gumbo are not affiliated companies. This show is a paid placement.