The Secret Powers of Home Ownership - Art Alvarez MortgageMinute 📱

Well, good afternoon, everyone. My name is Art Alvarez with Mortgage Works, where we have the answers and they're on the house. Coming to you from sunny Palm Springs, California, in the greater Coachella Valley area. You might notice that I look like I've been out in the sun for quite a while. Looks like I got a heavy tan going on here. Actually, it's more of a technical issue in terms of lighting. My, my, you know, lighting lamp that, you know, I use and I'm sure many of you out there use when you're on a zoom call and so forth went kaput this morning and I didn't have time to replace it. So I don't have the benefit of that lighting to show you that I'm not as dark as I look. So pardon me on that. We'll get that for the next time we get together. Of course, we're heading into the Christmas holiday. Well into it. Last weekend of shopping. I know that's when I'm going to get started. I always tend to be a little late on that. And, you know, I want to mention last week I was kind of almost making a little fun of the fact that the college football bowl season was starting and there was 41 games on the, on the calendar. And the first one that I mentioned that was, I think, starting the day after our show or maybe the day of was the celebration bowl. And I kind of, you know, made a little fun of it, that it's sort of a, you know, a bowl that maybe not a lot of folks are aware of and maybe lesser teams are playing, of course, and you may not see that many people in the stands. Well, I have to admit, I was kind of wrong, like in a big way. First of all, the game was pretty well attended. South Carolina State and Prairie, Prairie View A and M, both teams actually had a very good record. I think one was, you know, nine and three and the other was 10 and two or something. That game went into four overtimes. It would turned out to be a terrific game and South Carolina State ultimately came out on top. So I will retract any, any making fun of these lesser college bowl games because all of them, frankly, can be pretty entertaining depending on the situation. So with that, let's go ahead and get right into what's going on in the bond and mortgage markets that we're going to first show you. Our rate grid had the opportunity this morning to update that because of some improvement. You can see it right there. You know, it's funny, I, I keep mentioning this in the business news I see headlines all this, you know, all this commentary continues to talk about we're in the sixes. Most recent things I'm seeing is around six and a quarter. Well, again, if you look at my rate grid right there, other than the, other than the equity loans at the very bottom, everything is in the fives. So if you're looking to buy a home or refinancing your home and you're getting quotes from lenders where they're telling you are going to be in the sixes, well, if you have a good credit score and decent loan to value and you know the right property type, you should be able to get something in the fives. And in particular, you'll notice on this particular grid down north toward the bottom, the seven, one arm, that's a jumbo arm and five and five, eight is a pretty darn good rate for jumbo loan amounts. So again, an agent, those of you who are watching, if you've got buyers you're working with who are, you know, have their lender they're already, you know, dealing with and if you hear they're quoting, being quoted something above 5 and you know they have good credit scores and they're putting a decent down payment on a home, get a second opinion and we'd be happy to provide some numbers at least for them to use for comparison shopping. So the reason that I had to update the grid this morning is we finally had a little bit of improvement in the ten year bond yield. And Jeff's gonna pull up the five day chart of the ten year bond yield. And as you can see, this goes back to last Friday and it's got the kind of trend downward that we like to see. And what was odd about this, and this has been true now for better, better part of almost a month, the 10 year treasury bond about a month ago was actually more like 4%. In fact, it actually even dipped into the 399 range briefly. And that was actually in the October Fed cut of a quarter percent. And then it kind of got elevated after that, which is a little odd because as we approached last week's meeting of the Fed, normally that would entail the bond yield gradually getting better in anticipation of what was widely forecast that they would lower the Fed funds rate quarter percent this time. That didn't happen. Instead the, the bond yield tended to be stayed, it stayed elevated and we did have a brief drop, very brief drop from about the 4:15,418 range when they made the announcement last week on that was last Wednesday. But it was Very brief. And by the end of the day and the next day, it, it kind of climbed back up and at one point was getting close to 420. Now, a lot of that had to do with the Fed. Fed Chairman Powell again, after they make their announcement, he does a press conference and he was alluding to the fact that, you know, they may only do one rate cut for the entire year of 2026. So of course the market observers kind of grabbed hold of that feeling, like that was not good news. And I think that's what helped keep the Fed, the Fed funds rate from dropping after the announcement. And it's as you can see from the chart going back to last Friday and early this week, Monday and even Tuesday, we were well above 415. And of course you can see even Tuesday going into Wednesday, it almost hit 420. But what happened? Well, we finally got some good news, which I'll touch on in a minute as it relates to inflation. And so that's why we've seen some decent improvement today. And of course that again is why I had to update our rate grid to take or to reflect this improvement in bond yields. So with that, let's go ahead and get into what's moving the market. What kind of data was released this week? Again, it's still light, we're still not back to normal and getting all the economic data that the markets need to really affect both the bond and stock market. But there's, you know, we're gradually getting there, we're getting more and more data as each week goes by. So I think hopefully by the first of the year will be back to normal as to the US Economic data point calendar and we'll be able to get consistent numbers so that all market observers can do what they have to do accordingly. So in terms of the data that was released this week, we did have the employment report and again, this was a delayed report, but it actually was better than expected. There was a forecast of 48,000 new jobs. Turned out higher than that, 64,000 new jobs. So that was the good news. But then unemployment rate, it actually went up 4.6 from 4.4 previous. Now that should have had a good impact on the 10 yield. Again, I hate to say it, I've said it before. When it comes to bond yields and mortgage rates, it's often the case that bad economic news is good for rates because with a slowing economy, more people out of work, the suggestion is that that will cause the Fed to lower Fed funds rate, which eventually trickles down to Mortgage rates. And so as a consequence you would have thought this increase in the unemployment rate would have helped the bond market. But at least early this week, as I just showed you on the chart, that that wasn't the case. It didn't really move down at all. Another data point that came out yesterday, a couple of them, the US Services and Manufacturing pmi, that's not mortgage pmi, that's Purchasing Managers Index. Both numbers were showed a little bit of a lag or a sag actually I should say due to, and the sag was attributed to tariffs, inflation and softer sales. I think that's a little bit of a pessimistic take. I would argue we are not seeing a whole lot of effect on prices for example as it relates to tariffs. I know there's still a lot of talk about affordability and of course in the political arena there's a lot of arguments and debate between the, the political parties about affordability and so forth. But so I don't know, I, I'm a little bit skeptical of these kind of reasons being attributed to this, the slowdown today the numbers that were released were the initial jobless claims, unemployment claims, two 25,000, 225,000 were forecast and it came in pretty darn close to that number. 224 was the actual released number. So right where it was expected to be. So that of course suggests that there's not been an increase of any consequence in terms of people applying for unemployment benefits of course would make sense at this time of year. Maybe that wouldn't happen anyway because there is temporary holiday hiring for in the retail sector and so forth. So in any event, no big indication that suddenly the line of people applying for unemployment is getting longer. It seems to be kind of quite stable in this low 200,000 range. And then the final number, and this is the good news, this is what helped us today with the 10 year bond yield getting off of that almost 420 down to, you know, earlier this morning was 411. Our chart that Jeff just showed you was at 412. It was forecast to be 0.3% the monthly figure and 3.1% annual again for the CPI, the consumer price Index. Well the good news is it came in the monthly, came in at 2.7 and the core, remember that excludes food and energy was only 2.6. So a good deal better than normal or not normal, better than forecast. And so that's why you saw of course the stock market was up close to 500 points at one point today. And then of course the bond yield did drop to where we just showed you this suggests and increases in the futures market. The probability that we maybe will have another quarter percent reduction in January in the fed funds rate. And again, don't get too caught up on that. Don't over focus on that. That's not going to make a major change in mortgage rates, at least not immediately. But we want to see that go in that direction and get some gradual reductions going and hopefully have more than one reduction for all of next year as Chairman Powell had suggested last week at his press conference. So with that I want to go into another subject now. Normally we're going to, we would talk about a product spotlight right here. And I decided today I wanted to kind of fill you in on you know, a real controversial issue that's going on with the mortgage industry. Not related to a particular mortgage program but credit reports and in particular credit report costs. And I think it's important that I kind of update watching listening both borrowers as well as real estate agents and any other interested parties in the real estate industry. Credit report costs have skyrocketed, I mean incredibly higher than they were just four or five years ago. And we got notification, as all mortgage originators did from their respective credit reporting companies that they get their report reports from that they use in their loan files that we are going to be facing another substantial increase in credit reports right now. Even before this increase that's coming in January when we pull a joint, you know, two borrower, typically a married couple, a joint three bureau merged credit report that includes TransUnion, Equifax and Experian. It currently is $120 for an individual three bureau merge it's about 80 bucks. Well, we were advised our company that we use is called Cisco Credit, that coming in January, a joint three bureau merge report report, the cost is going to increase by $18.99 per borrower. What that means is when we pull joint reports in about two weeks, less than two weeks, that cost is going to go up to $159. To give you some perspective on that, I went back and looked at some of our closed loans even as recently as 2020 and 2019, a joint three bureau merge report at that time, 30 bucks. So imagine we've gone from $30 in less than four five years ago to almost 160 now. That is a tremendous, just an insane increase in such a short period of time. So what's going on there? Why has this happened? Because the last basically Two to three years. The credit report costs have been going up multiple times to the level we're at now. And so what's going on here is a couple things. There's a, there's a war going on. You know, the provider of mortgage credit scoring has been fico. We have all, all heard that acronym, fico, Fair, Isaac and Company. And so what's been happening is there's a kind of finger pointing going on between FICO and the three major credit bureaus. Experian, TransUnion, Equifax. FICO is pointing their fingers at the bureaus, suggesting that they're not being fully transparent. They've argued that, for example, on this average joint credit report cost of 120 bucks, that their royalty fee that they charge this would be to the bureaus is $4.95 per bureau. That means on a three bureau report, their royalty charge is $14, about $14.85. So they're pointing their finger at the three bureaus saying, why don't you disclose why it's 120 when our royalty fee for that report that you're, that's being purchased and distributed to their borrower, to the borrowers, to us lenders to put in their loan files. Why is it 120? There's a big gap there, right? 1485 versus 120. So FICO is pointing their fingers at the credit bureau saying you need to disclose and be fully transparent. Where is that difference going? Of course, the FICO is suspecting that the bureaus are pocketing that money. Now the other side of this debate is the three bureaus just came out with their own scoring models called a vantage 4.0. And again, this is a new scoring model, scoring approach developed by the three bureaus and the Federal Housing Finance Agency that oversees Fannie Mae and Freddie Mac have approved the use of the Advantage 4.0 scoring model to be used instead of FICO. And they argue that the bureaus do that this is a better scoring model and it will be less expensive to the borrowers than our current system. But the problem is there's a real roaring debate going on here between the two parties, the three bureaus and the FICO, the fair, Isaac Co. As to, you know, what's going on here, what's justified in terms of costs and so forth. So from that perspective, we as mortgage originators, all of you as borrowers, those of you already got your loan, you're good, you don't have to, you know, be exposed to this. But anybody looking to get pre qualified to buy a home or if you're looking to do a refi, you're going to be faced with these much, much higher costs. And it's put us into a little bit of a dilemma as a mortgage originator in terms of when we get inquiries to pre qualified borrowers, in particular when they're looking to buy a home. In past years when it was 30 bucks, in fact I can remember when it was even half of that, 18 bucks, 20 bucks, we would get a request for a mortgage pre qualification, of course we'd pull the report, we wouldn't collect the fee up front from the borrower, get them pre qualified and then hopefully they find a home, they get into escrow and then we would collect the cost we incurred to pull the report at pre qualification time when we closed their mortgage. Of course we don't always close every mortgage that we pre qualify a borrower for. Some don't get their offer accepted, some don't get approved for the, for the actual financing. Of course we do a pretty good job of avoiding that because we're not going to originate a loan that we don't think we can get approved. Some people choose not to maybe use a particular originator and they go to someone else. So back in those days when the price was much, much more modest for a credit report for those loans where we didn't get a chance to actually close and get reimbursed, we would just, we would eat the cost. It was, you know, considered a cost of doing business. We're now at a point where we can't do that. You know, particularly if you get a situation where maybe you've got three borrowers, like a married couple, joint borrowers and their child. I've got a couple of transactions right now involving that scenario. Well consider with these new prices, if we do one, if we get one of these in January, we're going to be looking at $160 for the parent's credit report and probably close to $100 for that individual person, the child for their report. So just to do a pre qualification even before they found a home to buy, we will be incurring somewhere in the range of 100 and well, what $250 just to provide this service of pre qualifying you for a mortgage. We're not going to be able to not charge for that. So unfortunately, I hate to do this, we've now started on pre qualification requests or if it's a refi and people are inquiring with us, but they haven't committed to using us if they want us to confirm they're qualified for the loan that they want. Where we need to pull a credit report, we are now having. Our credit reporting vendor has provided a link that we will now send to the borrower at the pre qualification stage where they can fill it out with their information and also provide credit card information so that the report is paid at time of order instead of being charged to the borrower when they close the loan. We already do that. On the appraisal side, when an appraisal is ordered, we have a payment link that the appraisal management company sends to the borrower and the borrower has to provide their payment information in order for the report, the appraisal report to be ordered and completed. So unfortunately we're going to have to do that on credit reports as well. So I just want you all to be aware of that. I hate to have to do that, but it's just not, you know, it's just not sustainable for us to start incurring, you know, 160, 200, 250 or maybe if it's four borrowers, two married couples, that happens occasionally where we're going to have to spend over 300 bucks just to say you're qualified for a loan. We just can't do that. We cannot sustain that from a business perspective. We've got to have the borrower who wants to get pre qualified to go ahead and pay for that at time of order. And of course we make sure they get a copy so that they have that for their records. So that's our product spotlight today, which is really more of a spotlight on a particular product that is a tool used to get you qualified a credit report. But I think it's very, very valid and important information that you need to be aware of for those of you who are contemplating getting into buying a home here in the hopefully in the near future. So with that, we're going to go into a little bit different subject here today. And it's something we've talked about and we've covered before the idea of, you know, renting versus owning. Is there a difference and what are the pros and cons and the benefits of each? And so we're going to go ahead and get into that now as it says there, the hidden secrets to home ownership. And is there a difference between renting versus owning? So what Jeff's going to do is he's going to pull up some facts that I think I want to go over with you a little bit just to give you an idea about what's really going on with this issue. And the probably the most important thing, and I've talked about this before, you know, I know there's still a lot of folks who think home prices are too high, mortgage rates are too high, and they're still on the sidelines because they're waiting, really hoping that, you know, home prices are going to fall or rates going to fall, going to fall to a level that they're going to be more comfortable getting into home ownership. But as they do that, we've talked about this before, they're, I think, overlooking the opportunity for wealth creation. And as this first bullet point tells you, the net worth gap between renters and homeowners is enormous. You know, the Federal Reserve studies this issue every couple of years. That's part of their mandate. And as you can see here, you know, for a median homeowner net worth, it's 392,000 versus a renter, 10 grand. Of course, this is dated a little bit to 2022, but I would argue this hasn't changed much at all. And so, in fact, this gap between homeowner wealth and renter wealth, it's been growing over actually several decades. And of course, again, the Urban Institute also points out to the same 390,000 or so level of wealth creation by homeowners versus the renters that are out there. And keep in mind, though, that home equity, in terms of how much equity you're going to be able to obtain and hopefully increase over time, it's only part of the story. It's the engine, as the bullet point indicates. But what's also interesting is studies have shown that those who get into home ownership, of course, you're building wealth just from the fact of owning your home, but those people will tend to build wealth with other assets, too. In other words, the homeowners out there, they've invested in a home, so they need lodging, they need housing, but they've chosen to invest in an asset, a home, to provide a roof over their head. And that is an asset that they are enjoying wealth creation from ownership. But the idea here is that those folks also tend to figure out ways to invest in other assets so that they're essentially diversifying their investments to build that wealth creation. They tend to do that more than renters do. And so in that sense, for a lot of families making that decision to get into home ownership, you are obtaining an asset and you are putting yourself in a little bit of a forced savings situation. But that way, in most cases, if they're able to do that, they're also able to stick with it. It's pretty rare that somebody gets pre qualified, decide to make the jump, buy a home, they bought an asset because they need housing, it's relatively rare that they do that and then decide, oh, I can't handle this, I made a mistake, I don't want to own a home, I'm going to go ahead and sell it and go back to being a renter. That's not really happening very often. Now. I've seen some articles out there over the last few years that kind of challenge this notion that wealth creation by home ownership is not the only way to achieve the same kind of wealth. As the Fed has identified, homeowners are able to achieve. They would argue, and I think in terms of just the way it's argued or stated, it's true. Renters can build wealth just as well as a homeowner, but they have to implement a strategy to take the dollars they have. They would normally apply toward that mortgage payment for that asset, that home that they would acquire. They've got to commit to a strategy where they would take those dollars and apply them into alternative assets to achieve the same kind of, you know, 390,000, $392,000 of wealth creation without owning a home. Intellectually, I can't argue with that. That makes total sense. Right? But here's the, here's the rub. And the data shows this in a majority of cases, in fact, I would argue a very high majority of the cases, renters demonstrate they don't do that. They don't put those additional dollars aside that would have gone into a mortgage payment to own a home. They don't put those dollars aside and then apply them to other investments. They just spend the money. So that, of course, underscores the fact that the Fed has determined that if you're a renter, on average, you've built $10,000 of wealth creation, not nearly 400,000, you know, 40 times. So it becomes an issue of, yeah, sounds good. No, no, you don't have to buy a home to achieve $400,000 in net worth over time. But if you don't, if you don't want to achieve that net worth through that homeownership, you've got to be willing to commit and be honest with yourself about the fact you will need to use your dollars in a different way, invest in a different way to achieve the same result. And for whatever reason, there's a lot of factors we won't get into, you know, a very high, I would say probably over 90, 95% of renters simply don't do that. Otherwise, these Fed studies that get done every couple years would show different numbers. It would show a narrower gap, right, between homeowners and renters. But we've seen consistently, because the Fed does this study every couple of years, it's not narrowing. And in fact, as our earlier bullet point shows, it's actually been growing over time. So that's one particular point I want to make now on the next slide here, what we're going to talk about, you know, happiness. Is there a difference? And it's interesting because some studies that we're going to show you here suggest that homeowners actually tend to report higher life satisfaction, often tied to housing satisfaction, which of course includes stability and control. That makes some sense to me if you are able to commit the dollars necessary. And actually, I'm going to come back a little bit later and comment on that. You know, the dollars you have to spend for a home on a mortgage versus paying rent. But if you're willing to commit to, you know, spending some of those additional dollars to have home ownership, you know, again, you've bought an asset, it's increasing value over time, at least in most cases. Fundamentally, that should provide you more satisfaction versus you're sitting in an apartment paying a rent payment where that money's just gone. It's providing you housing over your head. Right. But otherwise it's not an asset at all. It's just money bleeding out of your monthly household budget and you're not really getting anything in return that's going to appreciate over time other than that roof over your head. And again, for some folks, that's fine, I understand, but it would make just logical sense that that group as a whole probably aren't going to have quite the same level of life happiness and satisfaction as somebody who has owned, you know, who owns a home. And there's so they've got that same roof over their head, but they're at least able to see that over time they're building wealth, they're creating, they're seeing and creating more equity from making that mortgage payment and just from the market value of their home going up. But at the same time as the next bullet point is going to show you, another study has kind of identified the fact that people tend to overestimate the happiness boost that does occur from owning a home. And I would say one issue where I do hear about this sometimes is some would argue that, well, if you own A home. And some, you know, that's, you know, and having a mortgage payment, that's not the whole story. There's more expenses in owning a home than just your mortgage payment. Why? Well, maintenance and repairs. So some would argue that, you know, the mortgage payment, taxes and insurance, that's only really half the cost. You've got to realize that you're going to have maintenance and repair estimates that when you're a renter, in most cases you don't have to incur those. If something breaks, the AC goes out, the heater goes out, whatever it might be, you call the landlord and they fix it. And usually at their expense, not yours. Of course, you have to deal with the fact that maybe that landlord is not going to react to that need very quickly. You may have to bug them a little bit. Maybe they're going to make the repair or do the maintenance issue at a level of completion and condition that's not to your satisfaction. Again, you can start to see these trade offs. So as a consequence, yes, it may be true that the idea that owning a home is going to give you more happiness, but maybe not as much as you thought because of the, say, the maintenance and repair issue, I would think. I would suggest, though, overall, on balance, you're still better off, you're still going to be a tad happier if you're able to own a home than just paying rent. And then the other thing is, as the third bullet point points out, yeah, owning a home is not a Disney, as we put on this, on this bullet point, it's not a Disney spell, it's more like a small upgrade. But the point is that small upgrade where you're gonna decide to commit a few extra dollars over what a rent payment would be to actually own the home. And yeah, you have to deal with your own maintenance or repair issues. That small upgrade, if you're able to achieve that, it compounds over time. Why? Because in most cases you're getting a mortgage that's fixed. You don't ever have to worry about rent payments going up in the future. We all have heard about that, right? Landlord or renters all the time. Tenants all the time complain about how they can't fully rely on what they're currently paying for rent because there's always going to be future increases. So the idea here is, okay, maybe owning a home isn't going to give you a substantial amount of additional happiness or level of happiness, but it's going to give you that little bit of upgrade, a little bit more happiness than being a renter. And over time that's going to compound because if you're able to handle that payment, what you can be certain of is it's going to be stable. It's going to be the same every month. You're not going to have a, you know, a landlord, you know, sending you a letter saying hey, your, your housing expense just went up by 500amonth. You're not going to have to deal with that. So if you can accomplish that, that small upgrade, you're going to have a compounding process of wealth creation simply by the fact that on the cost side it's level in terms of the mortgage payment. And then on the asset side, that asset is going to grow over time. So I mean, for example, consider the fact that, remember when we all had the pandemic, the whole country was shut down. I mean, think of it that way in terms of happiness. Do you think that that person in a one bedroom apartment or let's say a two bedroom apartment versus those who owned a home, and you know, not all homes are, you know, the stereotypical single family residents on a lot with a picket fence. But generally speaking though, I would argue that during the pandemic you probably had homeowners at least had a better level of happiness or maybe a lower level of dissatisfaction versus a renter who might have been trapped in a one or two bedroom apartment where when everything shut down, they didn't have much room, they couldn't go anywhere, they didn't have a yard to go into and get outside and so forth. So you've got those little kind of things that can be a factor when you're again considering homeownership versus renting and the happiness quotient. So then on the next slide, here's an interesting tidbit that I think a lot of folks consider is there's been studies about owning a home and how it relates to your health. Now as it says there, there is evidence, mostly observational, that homeowners often show better health profiles than renters in large data sets. As it points out, a 2024 study lower indicated a lower prevalence of chronic conditions among homeowners, especially the middle groups. I think that means like the middle age type of category, even after making the appropriate adjustments. And so it follows these same studies in this case American Journal renters showed a higher showed higher health risks and lower preventive care access. In a national analysis that was done in. And then this 2025 article reports that renters had higher health risks and reduced access and engagement in those services. And then the last point is the affordability stress warning. When housing costs are unaffordable, health and healthcare utilization can get worse. You know, that's the notion of your housing expense is too high, it's not affordable, and it's eliminating the dollars that you would otherwise have to focus on your health and to in particular, on the preventive side, spend the money that you would otherwise spend to try to take the appropriate steps to prevent getting into, you know, poor health situations. And again, that can apply both to homeowners and renters. Yes, that's true. I would argue it's probably a kind of a worse scenario for a renter because of that lack of fixed housing expense quality quotient, the idea that if you're paying 3,000, $4,000 a month rent, you can't bet on that for 30 years. Like you can't if you have a, you know, 30 year mortgage. Now granted that 30 year mortgage may not be, you know, versus a $3,000 a month rent, it may be 3,800 versus a $4,000 a month rent, it May be 30 or 4,900. But the point is you're probably still going to be worse off being the renter because you can't bet on the fact that your rent's always going to be the same. It lacks certainty. Lack of certainty creates what? Stress. And of course a lot of stress can create health issues. So if you think of it that way, it makes a lot of sense. Why? Again, it's a subtle point. Owning a home probably is better for your health than being a renter. And again, some studies here, as we're showing you, point to that. And again, that's another reason why maybe it's not. It's no longer appropriate for you to sit in an apartment still waiting for lower prices, lower mortgage rates and payments. Check it out. Now we can help you that and help you figure out if it makes sense for you to make some decisions about how you spend your dollars every month and get into the homeownership side only because of the benefits that we're going over here. And then the last thing I want to go over, and this is our last slide, the outcome. You know, as this bullet point indicates, correlation does not equal magic. You know, higher income, more stable households are more likely to become homeowners. So part of the gap of who is becoming a owner. So part of the gap is who becomes an owner, not just what owning does. Now, even with that, housing is still the main wealth building tool for many families. As the Federal Reserve has concluded. In fact, I would argue this is going to be a better tool, wealth building tool for virtually any family versus continuing to be a rent, a renter. And then I can't talk about this without bringing up Warren Buffett. And we've talked about Warren Buffett on this show. It's been quite a while. But I'm going to show you the next bullet point here. A quote from him that's actually pretty well known. It's kind of a famous quote. If you know you're going to live somewhere for a while, finance it with a 30 year mortgage. It's a terrific deal. You know that that is so true and it continues to be true in very much true, including this current last couple of years, everyone moaning and groaning about how much rates have gone up since the pandemic. We went from two and a half to six. You know, a couple years ago we were at seven, going approaching eight. But if you consider, even forget about the pandemic, if you consider the fact that the average U.S. interest rate, mortgage rate over the last 50 years, the average is over 7%. And so the current rates that we have are actually considered affordable historically in the US versus what that average is. So think about other types of borrowing. Where else, what other kind of loan are you going to be able to get where you can borrow money from someone and use it for 30 years and pay something like as our rate grid shows, something in the high fives, fixed total certainty, no changes for that entire period of time. That is as Warren Buffett says, a terrific deal. What other kind of borrowing is going to give you that kind of rate for that long? It just, it doesn't make any sense to complain about our current level of mortgage rates because of what happened during that once in 100 year pandemic, the 2 and 3% mortgages. That needs to exit everyone's mind and focus on the, the true history of the U.S. mortgage and, and mortgage market and housing market. Because right now things are not as bad I think as a lot of people think. And of course as Buffett says right here, he doesn't always recommend debt, but he makes a clear exception for a well structured mortgage on a primary residence because it's a combination of predictability, refinancing, ability, flexibility and opportunity cost advantages. Now what about that? Refinancing, flexibility? What does he mean by that? Well, he has famously said that the 30 year mortgage is a one sided bet. The reason being is when you get that mortgage, it's fixed for 30 years. You know, the US is the only country in the world really that has that type of mortgage. And there's a reason why I think as a consequence we have a much more, a much better housing system than most of the rest of the world. And the 30 year mortgage I think is a key factor in that. And of course, remember that was created way back in the 30s during the Roosevelt administration as a tool, as a means to get out of, you know, not the Great Recession, the Great depression of the 30s. That was probably the most brilliant mortgage innovation we've ever seen in the world and it continues today. It's the primary way to finance the owning a home and building that wealth. And so what he's pointing out here is you get that mortgage, it's a one sided bet. So what that does is it protects you from the worst case. You know, with certainty what your rate is going to be for 30 years, what the payment is going to be for 30 years. But you have that flexibility that if rates do drop from where your current rate is, you then can refinance the loan into that lower rate for another 30 years. Or for those of you who are worried about losing or going backwards on term, you know, if you've had a mortgage for 27 years, I'm sorry, for seven years and rates drop and you want to refinance but you don't feel comfortable going back to a 30 year term, well, one thing you can do is do what we talked about a few weeks ago on our product Spotlight, get a 20 year loan. But still then you have a lower rate still the predictability, the certainty of its fixed for 20 years. And so you've again now established a lower cap on your housing and costs. And then if rates fall further after that, you can do it again. I mean, that is why Warren Buffett says a 30 year mortgage is absolutely the best deal out there. And then what matters most right now in terms of housing costs and build, if you, if you can lock in housing cost and build equity, would you trade some of the flexibility for long term stability? I would argue yes, that would make total sense. So what matters more to you right now? Monthly payment comfort or long term wealth building? I would suggest you should try to think about how you can try to take on that monthly payment and try to get it at a level that you can, you know, that'll be comfortable for you because long term it's going to give you that wealth building opportunity. And in fact, I'm going to tell you something else about this. You know, I went ahead and looked at Some numbers to look at. What is the average mortgage payment in the US Residential market versus rent payment? And you know what? That gap is not as great, at least nationally as people would suggest. It's actually fairly narrow. So really what you need to do here is realize that, you know, owning a home, having a mortgage, that payment that's going to result may not be as much higher as you think it will be versus renting. I mean, we've all heard about some of the rents, certainly in Southern California, have risen dramatically as well. Not just home prices, not just mortgage rates. Rent payments have gone up quite a bit over the last few years. And again, particularly in Southern California. And when you really look at the numbers, the spread between the average mortgage rate or mortgage payment in the US and the average rent payment in the US Is not as great as you might otherwise believe. And of course, that gap is in just gross dollars, doesn't take into effect the tax advantage that having a mortgage payment because of the interest that is part of your payment, the tax advantage of that in terms of a mortgage interest deduction that you don't get on a rent payment. So once you factor in that, which of course is complicated for a lot of folks, then that gap between mortgage payment and rent payment becomes even narrower. And so to the extent that you feel like, you feel like, oh, I've got to make too much of a sacrifice in terms of going for the house, the home ownership, and having that higher mortgage payment, you need to get with a good cpa, they'll calculate for you what the real net difference is going to be versus your current rent. And then of course, you'll realize that a byproduct of that is you are going to be building wealth at your. You're currently not doing. And then in terms of housing affordability, and particularly mortgage payment affordability, as I talk about all the time, we can help you with that. There is some ability right now as a prospective home buyer to negotiate a purchase where you can extract some concessions from the seller. And to the extent you're able to do that, don't just go for a lower price, go for getting a seller credit. We can then show you how we can use that credit, those dollars, apply it towards your financing to address one of your biggest concerns, and that is how to keep your mortgage payment affordable so you can get into the arena of building wealth from acquiring your housing, your shelter, which is an asset that's going to grow in value over time. In fact, one other thing point I'll leave you with and Then we're going to be done. Here is the if you look at a history of the US home prices over the last 50 years or even going back to literally the late 1800s, what you're going to see is the periods of time when home values dropped considerably and deeply are extremely rare. We're all still hung up on 2008. Yes, that was severe, but there were some particular things going on economically at the time that, you know, were the underpinnings of that phenomenon. If you look at the again, I urge any of you, pull up a chart, you can Google it, you know, you can probably get on chat GB GPT and find it. If you look at a chart of home prices over the last 50 years and again going all the way back to the late 1800s, what you're going to see is a line that's going to go like this. It's pretty impressive actually when you look at it now. Yeah, there's a couple of dips in there, but long term housing is a great investment. So if you can manage the affordability issue, which we can help you with, then I think that's still going to be your best pathway to building wealth. And as we've now talked about, you're going to be happier and probably enjoy better health from being able to accomplish that. So with that, that concludes this week's Mortgage Minute. My name is Art Alvarez with Mortgage Works where we have the answers and they're on the house. Have a great weekend. It's last weekend available for all of you to get your last minute shopping done. I'll be not doing just my last minute but all my shopping done. So in the meantime, have a great holiday, great Christmas that's coming up next week and then we'll see again on the next edition of the Mortgage Minute. So long, take care of it.