Mortgage Update LIVE 8.21.25 with Art Alvarez of MortgageWorks

Good afternoon, everyone. My name is Art Alvarez with Mortgage Works, where we have the answers and they're on the house. Welcome to this week's Mortgage Minute.

Kind of ending. Getting close to the end of summer, I guess Labor Day is sort of the unofficial end of summer. I don't think the actual end is till around September 21, I want to say. But I think we're fully back into school. The baseball season's winding down. I won't mention my, my team since they're wallowing under 500 and. But we're getting into a good time of year as far as sports go. I think into the fall, particularly when we get into this, the early fall or kind of start of fall, October. I, I've always found that to be a great month because you got playoff baseball, which I think is like the best thing ever. But then you got football, you know, fully into the season, both pro and college. So we're getting into a pretty good time here as we get past the upcoming Labor Day holiday weekend. And I'm coming to you from Palm Springs. The greater Coachella Valley area has been rather toasty. We've touched into the one teens again this week, although we're supposed to have a little bit of a cooling trend and get back down to the chilly low 100. So that's always a little bit of a relief. So let me go ahead and get right into what's going on into the market, both mortgage and financial. We're going to start with our rate grid, actually just pulling it up right now. And you know, I don't know what to tell you. It's the same old, same old. As we say, rates continue to be very, very stable. We just don't have much of a movement in virtually any of the mortgage product types. Conforming conventional loans. Contrary to the media saying we're off the highs near 7 and we're at 6.7 or 6.8. We're more like in the low sixes, 6 and 3, 8 range, 6 and a quarter for conforming fixed rate. Those buy downs, three, two ones. Two ones. You can start in the threes or fours on the lower end of the threes and fours, which is terrific. FHA VA is under 6 and equity loans are actually very, very good in terms of rates right now, particularly the helo type. That's the traditional fixed rate equity loan. And jumbos are pretty good as well. So nothing to complain about there. Mortgage rates are stable and have been for quite a long time. Of course, now we're bracing for The Fed to start lowering, quote, unquote, the rates, which is technically not accurate. The Fed is only controlling one rate, the Fed funds rate. We'll touch on that a little bit later in the program. But overall this again continues to be good news. Rates are stable and I think that provides home buyers and even home sellers opportunity. So let's go ahead and look at the bond market in the 10 year bond chart. We always like to pull it up. This is for a five day history going back to last Friday to today. And when you look at that, it's a little bit up and down. And Jeff and I were talking about when this kind of chart is pulled up online on various websites. It's interesting how what I call chart scale can sometimes be manipulated to make it look like the movement in the yield has been very strong or very significant, up or down. But then when you kind of look over on the right side of the chart and see the interest yield range, it's actually pretty narrow. This is what we would call technically in the industry a narrow trading range. And we've been at this range for an extended period of time. The 10 year bond yield has pretty much been hovering between four and a quarter to 435 now for quite a long time. And again, I call that good news. Its stability. I think there's a little bit more certainty in rates. Nothing on the horizon that would suggest that rates are gonna jump way up or jump way down. So from that perspective, I think this kind of stability is really truly a good thing, particularly if you're a home buyer. So let's go ahead and go into what's going on in the, excuse me, the economic calendar. The data points this week, extremely light. There's very, very little economic data points this week, most of which that have been released or be, are in the housing sector. So I want to touch on a few of those. Earlier in the week we had the Home Builder Confidence Index. It did slip a little bit. In fact it was at a, about a five year low in terms of confidence. And one of the things that this, this type of dip in sentiment by home builders triggers is they do more with incentives to get their home sold. Sales incentives are at a five year high.

And top it off that two thirds of home builders are offering incentives. So that is a signal that if you're a home buyer, home builders are basically yelling, screaming, getting on their soapbox, saying, hey, come buy our home and we're going to make it worth your while to consider buying your home from us. So in my opinion that's a good thing, rather than taking it as a negative. Housing starts, they're actually up in July, 1.43 million. They were 1.36 million in June, so that's good news. More homes are being built. Now, that number sounds great, but it's actually not nearly enough in terms of new homes, housing starts, but it's at least going in the right direction. So again, I would call that good news. Now, existing home sales, interesting. Were forecast to be down in July to 3.91 million from 3.93 million in June. And that number came out today. And guess what? The forecast was wrong. Existing home sales were actually up to 4.01 million. So again, that's good news. So on the one hand, you're hearing all this negative news about how awful the job market is, and yet we had an increase in existing home sales in July over June, despite all of these alleged negative conditions. Now, this number, these kinds of existing home sales are not back to what is considered normal, which is more like 6 million, not 4 million. But nonetheless, despite all the concerns about inflation's increasing again and the tariffs are the problem and tariffs are making everything more expensive. Despite all of that negative news, there were more existing home sales in July over June. And some of the other data points that I didn't put on the slide here, like the S and P Services and Manufacturing index were up a little bit, so that was good news. Jobless claims continue to be in the low 200,000 range. About 235,000 was released today.

No sign of an increase in layoffs. So despite the news again that the economy is softening and the tariffs are the culprit, the labor numbers in terms of claims for unemployment insurance have not borne that out, at least not yet. Still. So. And then of course, you know, last week that we had the CPI and ppi, you know, it was interesting because the CPI came out 2.7 annually. That's not far off the target, 0.7%. Now, the PPI was looked at as the watch out number because it was 3.3% in July annually, well above the 2% target. But, you know, when you look at those two numbers, CPI, 2.7, PPI at 3.3. What does that tell you? To the extent tariffs are an issue, it's looking like companies are absorbing the hit, if you will, from higher tariffs at the wholesale level and they're not passing it on to the consumer. That's not an entirely big surprise. After all, we hear a lot about corporate profits are At a record stock market, the booming. This may be an example, an example of where companies are, even if they are experiencing some increase in costs due to tariffs, for the most part, they're absorbing those and not really passing them on to the consumer. So that's basically all we have this week in terms of data points and the moves in the market, again, very muted, rates are again, very stable. That's a very good environment, I think, if you're a home buyer in particular, and why I keep saying you ought to consider taking, taking a look around and seeing if buying a home right now is the right thing to do. So with that, we're going to go into our talking points for today.

And it's going to be a little bit about, you know, this, this issue with the Fed. Again, there's a lot of expectation now about the Fed and what they're going to be doing in terms of the Fed funds rate and rates in general. And the Fed has a bit of a dilemma because as the bullet point there that you see indicates, the issue that they have is they've got a weakening housing market, but yet at the same time, there is now, it's very evident now, an aggressive AI expansion in the economy. And so with that combination of conditions, it's very, very challenging for the Fed in terms of what kind of decisions they have to make or they're going to make with, quote, unquote, interest rates. Although again, I keep saying it's not all rates that they control. They're going to be controlling just the fed funds rate. So what they have to do is consider, you know, what to do with these two kind of opposing factors or phenomenon that's going on in the market. For example, if they lower rates, obviously eventually, and I urge eventually, they start lowering the fed funds rate. That should trickle through to seeing some improved mortgage rates. They, that process is not immediate. It takes some time. But to the extent that they go that direction, it should help the housing market. On the contrary, as you lower the fed funds rate, it could, on the other hand, it could trigger even more growth and more aggressive growth in the AI sector and it would cause tech companies to increase their capital spending to a great degree. In fact, I don't know if you've ever noticed, whenever we see the Fed lower the fed funds rate and, or where we see the bond market reacting to an expectation that they're going to lower the fed funds rate, what you typically see in the stock market is the tech company stocks generally go up. And that's because lower rates, lower Fed funds rate, lower bond yield, that reduces borrowing costs for these tech companies. And that of course can lead to that increase in capital spending by the tech companies, which is going to be considered a potential inflationary impact. And then that works at cross purposes to trying to support the housing market. So then what you've got here is, you know, what we call, and Jeff's going to pull this up sort of the politician versus market reality. You know, we've got this issue where our president is urging, demanding substantial cuts in the fed funds rate to support housing. In fact, I think you've all heard probably, you know, he wants to see the fed funds rate reduced by 300 basis points down to 1%. But that's, frankly, for one, that's, that's just kind of bravado. That's, that's a little bit of an exaggeration as to what needs to be done. So I can tell you right now there isn't going to be any 300 basis point reduction in the fed funds rate anytime soon. They, the Fed has never moved it that, to that larger degree all at once. So what, what's going to happen here is the increase, I'm sorry, the decreases that are going to occur are going to be incremental. They're not going to take, you know, big whacks at reduction, reducing the fed funds rate. And you know, we have some recent experience, of course, it's been just about a year ago when the Fed surprised everybody and lowered that fed funds rate by half a percent last September. And what happened, we didn't see any improvement in mortgage rates at all. They didn't go down at all. They were 1% higher within 30 days after that reduction by half a percent. So I think the Fed is probably learned their lesson there to some degree and they're going to try to take a much more incremental approach. And in part that's because of concerns about, they don't want to fuel even further this AI tech explosion because that's gonna, that would put some pressure on the labor markets, it could put some pressure on supply, supply chain issues as they try to beef up their AI capabilities. And those kind of things are actually inflationaries, which can therefore undermine what the Fed may otherwise be trying to do with the housing market by giving us some relief on the fed funds rate. So then you've got to kind of look at the mortgage realities right now. And you know, those are kind of interesting. You know, we've got, on the, on the, on this screen here, just going to pull up Indicating the mortgage rates are 6 and a half, 6.6 range. I will call that more the median numbers. Again, if you look at our rate grid every day, we're a little bit better than that here at Mortgage Works. And by the way, those rates that we see that we post on our website, those are zero point rates. There's no points involved with any of the rates that we post on our rate grid. So keep that in mind because sometimes when you see lower rates out there, whether it's online or on TV or what have you, you read the fine print, then you find out, oh, it's not a zero point rate, it's got a, you know, it's a rate that they're going to make you pay a point or two point, something like that. In our case, we always post zero point rates. And you can see from looking at our rate grid, we are almost consistently always better than what you hear on the news media as to where conforming conventional rates are. So we are one of the lowest originators out there in terms of the kind of rates we can offer. And by the way, we charge no fees. We never have. We don't have underwriting fees, document fees, processing fees, nothing like that. That's not something we've ever done and we will never do that to our customer. We paid by the lender, not by the borrower. And we're not going to charge any other miscellaneous so called junk fees as a lot of lenders do. So again, back to that mortgage reality right now, given the Fed's balancing act of trying to improve the rates, the Fed funds rate specifically to help support the housing market against not being too aggressive about that because they don't want to fuel an ever increasing explosion in the AI tech industry. That's where they're trying to find some bal, you know, refis. We are starting to see some more refis in this environment. Now those refis are typically a couple of cases, a couple of situations I should say. One is we have seen some homeowners who are a little bit extended on other debt, consumer debt in particular, or they have some other pending needs, sometimes critical needs for pulling cash out of their property. So the cash out refinance transaction is somewhat.

Evident these days in terms of refi activity. Again, refi activity is still very, very low historically and most specifically and most recently compared to the pandemic period. But refis are kind of trickling back. But it's a very specific type of refi where we're seeing that activity. So it's mostly Cash outs. And again, because of either overextension on other types of consumer debt or, or a pressing need to do something like we don't want to sell our home and give up our 2 and a half or 3% rate because buying another home, we have to take a six and a quarter, six and a half rate. But yet on the other end of that concern.

We'Re seeing some homeowners being willing to give up that lower rate to pull a lot of cash out because they want to remodel their house, whether it's the whole house or the kitchen, or redo their backyard or build an ADU to generate a additional income, or get that child who's been living on the couch until they're 34 years old and at least get them in a separate structure on the property, those kind of things. We are seeing some of that. And by the way, I got to tell you, you know, when rates doubled from the pandemic to now, in particular like in 2023 and 2024, we, you know, people were buying homes, they were financing them, they were taking on those higher rates. And in some cases, in fact, several cases, people were doing that and getting rates in the sevens when they bought their home anytime in the last 12 to 24 months. Current rates. Right now, given our current environment and that conflict we just described with the Fed being challenged with what to do with the fed funds rate in terms of trying to support housing, but again, avoid an AI tech boom that could be inflationary.

Rates have moderated and remain stable in a low to mid 6% range. That is an opportunity for homeowners who bought their home in the last 12 to 24 months and have rates that might be seven plus seven and a half. You've got a refinance opportunity. If you think you don't shoot, give us a call. Let me show you some numbers and I think you'll be pleasantly surprised to find that you may actually in fact be able to get what we call a rate and term refi done and be able to get that rate you currently have down probably as much as 1% lower, maybe a little bit more. And that can give you some significant payment relief. So in that respect, keep in mind that refis are still an option in some specific cases, again, even lowering your rate as well as cash out for a multitude of needs. So that is why we, for some homeowners, refinance activity is a good option to consider. And in fact, refinance applications are up from where they have been over the last period of Time. Now the media will tell you that the application activity for refis is surging. I think that's an exaggerated adjective. They're certainly up a little bit. You always have to consider when you hear about or read about a surge or a big, a big percentage increase in something like a refinance application volume, what's that percentage increase from? What's the baseline? Well, if you look at the mba, that's the Mortgage Bankers association application statistics for both purchases and refis, what you'll find is on the refi side in particular, applications have been very, very, very low over the last couple of years. So when you read about applications surging by 25%, you have to ask yourself 25% from what? And then when you look at that baseline, then you realize the overall activity of refinancing is still a very, very small percentage of what they were at the peak in 2020 or 2021, when refinance activity was probably as strong as I've ever seen in all my years of doing that. So we're going to go ahead and go to the next screen so we can talk a little bit about. So what are the takeaways for borrowers given this environment? First thing I would tell you is if you are a buyer and you've been on the sidelines kind of keeping an eye on things but you're not sure it's a good time, again your brother in law is in your ear telling you no, you got to wait for rates to fall, you got to wait for home prices to fall. I would tell you ignore that advice and instead stay close to the market, keep an eye on what's going on, look at our rate grid every day. And you know, part of the challenge here is some of the data that comes out first. You got to, I say ignore the headlines, dive into the data a little bit yourself with an open mind and see what you can do to interpret what's going on. Because what you're going to find is, you know, we're hearing some negative things like, you know, home builder confidence is down, the inventory of homes for sale has gone up, the days on market for listing has become more extended, the number of homes actively listed has grown. But by the way, we're not back to a normal, you know, six months of supply. We're more like four, four and a half months supply. But those kind of data points and the headlines that go with them lead you to believe that the housing market is really suffering. Well, I would argue, I would push back that, push back against That a little bit. So that's why I say you should stick close to what's going on in the market and realize that in fact this could be a good opportunity. You know, rates may dip a little bit here, particularly if the Fed does follow through with what the futures market says is a strong, strong possibility of lowering the Fed funds rate in September. You know, if they do, it's only going to be a quarter percent most likely. And again, that's not going to mean a correlation to a direct decrease in the mortgage conforming 30 year fixed mortgage rate by the same amount immediately. That's not going to happen. But it's an incremental improvement that over time may allow for some dip in interest rates. That could be an opportunity for those of you on the sidelines waiting to buy but being told to wait for rates to get a lot lower because that's not going to happen. Remember, Fannie Mae has projected by the end of 25 mortgage rates might get down to 6.1. Well, guess what folks at Mortgage Works, we're almost there now. So don't wait till the end of the year to see where everybody else is at 6.1 because if they are at 6.1 at the end of the year, we'll probably be at five and seven eighths, maybe five and three quarters. So that's what I would urge in terms of buyers. Stay close to the market, keep an eye on what's going on. In fact, I would tell you that existing home sale number, that increase was expected to be 3.9 million existing home sales in July, but ended up being over 4 million. What that tells you is there are buyers out there who are buying. Now I talked to a lot of realtors. Realtors in my market area are complaining there's a lack of buyers. They're not seeing enough buyers in their open houses and so forth. And of course they're also complaining about their sellers. Those who have listings. Their sellers are unreasonably.

They'Re being unreasonable, I should say, in expecting what they can get in a price for their home. What the 4 point over 4 million existing home sales in July tells you is some buyers who are paying attention to all these data points and these conditions are actually realizing it's a good time to go out and try to buy. You have less competition from.

Other buyers and you've got sellers who are starting to wring their hands because their home has been on the market listed for sale longer than they expected. They thought they were going to list their home and within a Couple weeks, get an offer, maybe multiple offers, and get it sold within 30 days, that's not happening. In fact, I saw a presentation this morning from a representative from the California association of Realtors who was doing a presentation to new members of the Greater Palm Springs Realtors association, pointing out that our local market here, days on market, is now getting close to 70 days. Well, first of all, that's looked at as like an awful, depressing number. Frankly, that's kind of back to normal, you know, in, you know, good old normal times. That was expected, that was common. But right now that's considered a negative. And so when you combine 70 days on the market and the fact that there's more inventory for sale, and then at the same time, you're hearing Realtors saying, I'm not getting enough buyers coming to my open house. Well, a smart prospective buyer who hears all that, sees the data, sees that rates are in the low sixes, and if they can negotiate a concession, they could get a mortgage rate the first year in the threes. Low threes or low fours? Shoot. Why wouldn't you try to go out and buy something now? Because the other thing we know is home prices have not fallen in a significant way. Home prices, Home price increases have moderated, but they haven't dropped, you know, in any significant way at all. So why wouldn't you, knowing that rates are going to remain pretty close to these levels for an extended period of time. The Fed's going to be pretty cautious in lowering the fed funds rate because while they want to support housing, they don't want to ignite an AI tech boom that would definitely be inflationary. Well, that tells you, as a buyer who is privy to all this data and can interpret it correctly and without being biased or influenced by these headlines, you've got a chance here to go out, find a home you like and negotiate some concessions to get your financing terms to be very favorable. So you can get into the homeownership situation, see some appreciation of that home value over the next couple of years, and then when rates do fall more substantially, then you can refinance that mortgage and get a lower, you know, note rate on that mortgage long term. Again, goes back to that concept.

Date the rate, marry the home. These conditions, I think, could not be better for that purpose. And again, for a refinance, for a homeowner, the refinance active idea is not as bad as it seems. As I explained earlier, you have some cases now where folks are deciding, we're not going to sell. We'd like to have maybe a nicer home, a bigger home, some better amenities. They're realizing that in the scheme of things, you might be better off if you don't want to sell, because again, there are a lot more sellers now, there's a lot more inventory. If you don't want to join that crowd, but you want to change your homeownership situation in terms of amenities, size or other factors, then a refinance isn't as unattractive as you might think it otherwise would be. So I'm starting to do more of those kinds of situations where we're going and doing a refinance, pulling a lot of cash out, and in some cases, giving up that low rate mortgage because of wanting to improve the home they have and decide to stay there long term. So you want to kind of keep that in consideration if you're a homeowner. And of course, the other aspect of that is you decide to keep your home and you don't want to give up that two and a half, 3% mortgage. But you got so much equity. These equity loans are a very good option. I think we, we talked last week about how in some cases I can arrange an equity loan, a fixed rate, you know, traditional fixed rate, fixed term, second mortgage. If you need to do some of those improvements, you know, new kitchen, new backyard, add a room, add an adu. I've got one case where we did a substantial fixed rate, fixed term second for the homeowner to prepay the college tuition for their son for four years. Those kind of scenarios are perfect for an equity loan where I can actually get you a fixed rate, fixed term loan under 7%. I mean, that is a very, very good deal for an equity loan. Second mortgages will always have a higher rate than first mortgages. But to consider the idea that you can get a fixed rate second under 7%, that's phenomenal. And when you combine that with Maybe your existing 2.5% first, your blended rate, when you consider the two loans combined together, you've got some pretty cheap financing there to allow you, on the one hand keep your home, but on the other hand be able to get that cash to do some things with either that home or for other major expenditures. So that overall that cost of financing is actually very reasonable.

So. And then finally, when it comes to homeowners hesitant to sell, yes, you know, high rates may keep you staying put. So you may have to realize that for those of you who have put your home on the market, you have listed your home, you have been on the market for 60, 70 days without getting it sold. I think what you got to realize there is a couple things. One is, as I mentioned earlier, home builders, 2/3 of them are offering incentives. The amount of incentives that are being offered is at a five year high. Home builders are your competition. So if you're one of those sellers and your home has been on the market 60 or 70 days and you haven't adjusted your price, of course I always say don't lower your price, but talk to your agent and then maybe talk to somebody like us. Give me a call and I can, and I can find out first, what kind of concession and price were you thinking of doing? Then I can realize I can identify that in dollars. And then I could present to you what you can do in a marketing plan to offer much improved financing terms to prospective buyers so that you're providing basically loan terms that can compete with, and sometimes beat that home builder down the street with that new subdivision so that you can then distinguish yourself from all those other vanilla existing home sale listings where you know there's a price. The seller otherwise is not offering you anything towards your financing. They're figuring that that's up to you and that's your problem. And to the extent that they give you a concession, yeah, they'll lower your price, they will lower their price a little bit. But the impact to you if you're financing your purchase is just not as strong in terms of lowering your monthly payment than if you can use those concession dollars in a different way. I can help you put those numbers together and basically help you put together a marketing plan with your listing agent to then not lower your price, but offer.

Much improved financing terms with these temporary permanent rate buy downs, closing costs, or all three, that's going to distinguish your home from all the others that are out there. And, and it's going to get more buyers attention, attention, more buyers attention. And those buyers who are out there are the serious buyers. And that's going to help you sell your home probably faster and overall at a better price than the kind of the old tired, you know, lazy way of concessions of just lowering your price by, you know, 20,000, 25, 30,000. So I think that's what you would want to know in this current environment. And in fact, as Jeff just put on the screen, you know, asking me what would I tell my, my sister with these, who's thinking about buying a home in these kind of conditions? What would I tell her? Well, pretty much what I just said. This is, I know it, I know it Sounds like a, you know, old, tired, you know, realtors and you know, lenders say, oh, now's the best time to buy. You, you've all heard that for years and years and years. But truly, we've been through a very, you know, pretty challenging real estate market here for a couple years after the pandemic. But truly, truly, truly, this is a very good time to consider buying. When you factor in all of these forces at work that lead a lot of folks to think, oh, it's a very bad time in the market, not a good time to buy a home, push against that. Don't get into the, the madness of crowds as I call it. Don't get into group think, think for yourself, interpret the data yourself, call me, have a conversation with you. I'm a very good sounding board. I. You can bounce off your ideas, your perceptions of what the market is. I can give you my feedback as to what I think about that as I'm doing now, frankly, and help you realize that things aren't as bad as they seem. There's a lot of good opportunities out there right now to buy a home, a lot of good opportunities to get some concessions out from the seller, use that towards your loan, and then what you're going to find is you're going to be well situated to get into homeownership, start to see that wealth creation building, and then like I said, when rates finally do start to fall in a significant way, which is probably a year, two years out at least, then you've got that opportunity to do what has become a very, very efficient, pretty quick and low cost option, which is a refinance, lower that note rate and then you're set long term where you can really, really start to see that wealth creation take off. So that's really my take today on where the current market is in terms of the Fed, their challenges and balancing supporting home ownership, being careful of not causing a trigger in, you know, the tech industry, AI, and causing inflationary pressures on that side. I think there is a way the Fed can balance both of those and give us some results that are going to improve the situation for all of you home buyers who have been sitting on the sidelines waiting to buy. And frankly, for though, for those of you as sellers who need to find more creative ways to get your home sold.

Jeff, want to come back and any questions on that?

Well, you know, I just, I just think of a couple things. One is, you know, if you had $1,000 and you wish you could have invested in Microsoft when they first started or Amazon. You would, right. And the thing I, I, I'd hate for people to do is, is say, gosh, I wish I had bought back in 2025 instead of waiting until 2026 or 2027, because you have consistently used data, not something you made up, but something you brought in for statistical data, that home prices are still on the rise. And I love the whole thing of saying, hey, you know what, date that rate and buy, you know, and marry the home. I love that.

Well, you know, and I've got a couple of cases like this right now. In fact, more than a couple, but a couple come to mind. I'm, we're finishing up closing an equity line. Not an equity line of credit, a helo, a fixed rate, fixed term loan for a homeowner who bought their home in 2022.

And they bought new construction. Now, I had a shot at that deal actually at the time, but at the time, the builder was offering substantial incentives, financial incentives to the buyer for their loan closing costs, buying down the rate and so forth, and, you know, to the level that I couldn't compete with it.

But they came back to me for an equity loan and again, they bought the home in 2022, which, you know, most folks would say that was the start of when things fell apart, not a great time to buy. And of course, at that point, after the big run up in prices from the pandemic, the expectation was, oh, we're gonna, we're getting ready for a big fall in home prices. Well, here we are, two and a half years later, he comes to me and we're getting, we're on the final stages of closing this, this, this. Hello. And guess what? His home appraised. The appraisal it came in, I think it was around $40,000 higher than what he paid for the home.

And not too bad. Not too bad, right. For two and a half years of home ownership, he's got $40,000 more equity than he did when he bought the home. I've got another case where a family, the wife was a pediatric physical therapist and she bought her home. Again, I want to say it was just under about two years ago. And given the nature of her business, we had to use a non QM, what we call a 1099 only program, which, you know, does.

Mean a little bit higher rate. In fact, at the time, in fact, this was about two years ago when rates were kind of at their peak after the pandemic. You know, remember that period of time when conforming rates were like going over 7%. We were worried they're going to 8. Well, with this case we had to get the, the buyer a 1099 only program to buy the home and the rate they got was nearly 8%. Well, April of this year they came back and we did a refinance of their first mortgage to lower their rate a rate and term refi again by nature of her self employment activity and how she files her tax return, blah blah blah. We had to do a 12 month business bank statement program for qualifying income. We were able to lower their rate by one and a quarter percent, saved them over almost $550 a month in payment. That was in April.

Wow.

At the time in April when we got the appraisal, it was higher than what they paid for the home. I think in this case it was about 35,000 higher. And then here we are four months after that they came back and wanted an equity line of credit. So what we had to do again because of how their financial situation is as a self employed borrower, we had used 12 months bank statements for the HELOC, which by the way folks, any of you out there are self employed, you tried to get a HELOC from a major bank or a credit union and they said your tax returns don't support enough net income. They meet a debt ratio requirement. I can arrange a 12 month or 24 month bank statement HELOC which is what we did for this customer and got them a rate. If the rate's high, they're going all the way up to 90% because they're going to use it as essentially a.

A, a, an account for financing, to access capital to finance the growth of her business. But again we just had an appraisal done and it was I think $15,000 higher again. So another example of this person did the right thing in the face of very high rates two years ago and in her case even also the challenge of not being able to get the best rate on a conforming loan because of how they reported their income on the tax return they've been able to get into home. They're seeing their wealth building because of the growth in equity. And after getting their initial purchase loan, I've saved them over $500 a month on their first mortgage and then given them access to working capital for their business, up to 90% of their home value. And that was after they went to their business bank to try to get a business loan for capital purposes for their business and got turned down.

Wow.

And so I was able to give them this HELOC in lieu of that. And so then they can, you know, finance the growth of their business even more. So those are the kind of opportunities that are still out there.

Well, you know, one other, one other option or insight that I got from what you're talking about is that I want to compare it to new cars and used cars. And, and it seems like when used car, or excuse me, when new cars are not selling very well, we see a tremendous pressure to lower the price, give us better incentives to sell the new cars. But what it did is it really made the used car people a little sharper and the value, or excuse me, I should say, and the incentives also increase that side. It feels like the same kind of thing is happening when it comes to new home sales. If, if I as the buyer, I'm kind of in a win win situation because all the aces are in my hand as the buyer because now I can now go back to those, I'm going to say pre existing home sellers. And as you say, there's some things that are working against them. You know, 70 days on a market which again is not even kind of normal and, and the rates are pretty stable. And again using a 3, 2, 1 buy down or a permanent buy down, it seems like it's such a good idea to that it makes that I would say negotiating between the, the current home seller and the buyer pretty, pretty positive.

Well, it is in fact again this presentation that I saw this morning from the car representative, California association of Realtors, in our current, in our market here locally, Palm Springs, Greater Coachella Valley, he pointed out that in July the ratio of list price to sale price was about 97. Well, that's 3%, right? Well guess what? So what that's saying is homes are on the market now out here, 70 days on average and the homes are selling for about 97% of the list price. That means they're giving up a 3% concession. And of course in most cases through the old lazy kind of uncreative, let's just lower our price by 3%. Shoot. I mean you could as a buyer, I would say get with your buyer's agent knowing that data when you submit your offer and say, look, seller probabilities are you're going to end up selling this home for 97% of what you're asking for. So let's put that on the table and let's consider this. We'll offer you full price, but we want that 3% that you're eventually probably going to have to concede in Your price, give it to us in cash. And then what can you do with that? Well, with 3% concession, that'll finance 8 to 1 buy down and leave you about 3 quarters of a percent left over to cover your closing costs.

Wow.

So you can get a 30 year fixed that might be at 6 and 38 note rate. First year you're at 4 and 3 eighths, second year at 5 and 3 eighths. And depending on the price of the home, that remaining three quarters of a percent concession could very well cover maybe a very good portion of your closing costs. So you're getting in for not, not much more than your down payment. Why in the heck would you not do that? Again? You're at 4 and 38 for a year, 5 and 38 for a second year. That's going to put you all the way to almost to 2028 before you're going to hit that 6 and 3 8. Well, the predictions are between now and 2028 we might see general rates, you know, not in the low sixes, down to the fives, maybe the high fours. And then boom, you're ending the end of your 2:1 buy down period. If that happens in terms of general rates, you could be refinancing into what, four and seven eights and you know, summer of 2028 and you know, be on your way 30 year fixed and continue to see that wealth creation built.

And really they don't have to wait that long if we see a large reduction in rates before then. Correct?

Correct. Yeah. And as we pointed out in previous shows, if you find an opportunity refi after you've negotiated a temporary buy down, whether it's a 2:1 or 3:2:1, and you find that opportunity refi before the buy down period is up, that buy down money that was taken from the seller and put into your lender's account to apply towards your note rate when you're making your monthly payment, that money isn't kept by the lender, it's your money. So what they do is they take the remaining unused portion. In rare cases and used to be more often they would just send you a check for the unused portion. That doesn't happen too much anymore. More often what will happen is they'll just apply it to your, your payoff amount so that when you're paying off your existing loan, it's going to be reduced by the amount of unused buy down funds, which of course indirectly benefits you because you can then only need a, you know, less than you would not need as much of a new loan amount for the refinance as you would have otherwise. And that'll help you with your monthly payment a little bit by doing that. So it's a win win.

It just sounds like at this point right now, again, going back to that question I put on there, what would you tell your little sister right now? Is it truly is. All the options are in your favor if you're looking to buy a home. And you know, it's like, it's like even if it's raining outside, it's great if you're an umbrella salesperson. So there's always a positive side. So with that art on the screen, you can get a hold of Art at 760-969-5023. That's the office. And then of course, his cell at 714-612-9035. Art. If anybody just has questions about what they've heard today and they want to do a little bit more discussion, maybe they're not ready to jump into, hey, I'm ready to buy a house. Can they give you a call? Can you help them with that?

Oh, sure. Actually, I do that all the time. I mean, it's, it's remarkable how often I'll get a call, somebody who's kind of thinking about buying, but they, they're not sure. And in some cases I'll have conversations with people who are going to buy, but they have a particular plan in doing that. In fact, I just finished a conversation, in fact provided some specific numbers to a couple who are going to buy a home, but for, you know, various reasons, they're not going to buy until next May. Now, of course, I did suggest to them they shouldn't wait that long because prices may be higher by then, but they have a particular life plan. They're at least for now going to stick to it. But, you know, I'm helping them be better educated, better informed, and better prepared to do that purchase when they are targeting to do it. But in the meantime, I've had, you know, extensive conversation with them, educated them quite a bit on the process, what to look for, what to consider. And so they're in a much better position to make that home purchase decision at that later date that they have targeted. So, yes, I encourage that. Well, happy to do it. So, yeah, just understand, I'm just gonna be a good listener. I'm gonna give you some feedback. Let's have a conversation. I'm not. This is not a high pressure kind of a situation. I'm as patient as everybody. I'm gonna be around. So I'm happy to talk to you now and then be ready to help you whenever it's time for you that you decide, not me, so.

Well, you know, one of the things that if this is the first time to the show, just to give you an idea, Art's been doing this for over years, four, four decades. So if there's anyone you would like to have in your corner, it would be Art. Because over the my benefit over the last year, year and a half of doing these shows, I've learned so much about the Morgan industry that I guarantee you the average person out there, whether they're the buyer, seller, or even a loan broker, probably wouldn't know that could help you out last week if you missed two weeks ago the show he did two weeks ago. So it was like, oh, my gosh. It was amazing how you helped people put these deals together and actually do more than they'd already been told. No, it couldn't be done. And then you showed them how to do it with a down payment and using this. It was just amazing. You got to go back and check that out. So, Art, I want to thank you for another great show. Thanks, everyone for joining us. We had a nice, nice attendance today. Make sure you get hold of Art at 760-969-5023 or sell at 714-612-9035. Thanks, Art.

All right, thanks, Jeff. Thank you, everyone, for watching and listening to this week's Mortgage Minute. I'm Art Alvarez at Mortgage Works, where we have the answers and they're on the house. Have a good weekend. Stay cool out there, and we'll see you next week on the next edition of the Mortgage Minute. So long. Take care.

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