“Why Homes Are Sitting Longer – And How It’s Making Homeownership Affordable Again”

Good afternoon, everyone. My name is Art Alvarez with Mortgage Works, where we have the answers and they're on the house. Welcome, welcome to this week's Mortgage Minute. As you can see, we've got our lighting situation taken care of, so I look a little more pale than I have the last couple of weeks on our show. And of course, as I always do, I touch on the sports world a little bit. This weekend's the, the big NFL Conference championship games, AFC and nfc. The winners of each game, of course, will be our super bowl participants. I'm gonna venture a prediction. You heard it here first. I think, I think we're gonna see Seattle go all the way and win the super bowl this year. So I know that may sound strange since I'm here in Southern California, grew up in Southern California, so that should make me a Rams fan and I generally am. But I think Seattle's got a great team and I'm a little bit fond of their quarterback only because he's a USC guy and I grew up in a USC household. My dad went to SC way back when he didn't play football, but he went to sc. So growing up, that's who we rooted for all the time. So we'll see how that plays out. It'll be exciting no matter what happens. So looking forward to that. And of course, congratulations to Indiana for winning the college football championship. Was a very good game. It looked like Miami might have had a couple of shots there to, you know, get back in front, but it didn't really quite happen. So that was a great story, I think all year with Indiana because again, they're normally known as a basketball school. So great to see sort of a new face, if you will, in the college Football playoff scene. So with that, let's go ahead and tell you a little bit about the markets, the mortgage market and the bond market. We'll start with our rate grid. And despite more recent media and headlines of late the last week or so where there's some comments about, oh, we're back over 6%. Remember, the media was finally saying we were under 6% after the Trump administration announced that they were looking for Fannie Mae and Freddie Mac to buy a couple hundred billion dollars of mortgage backed securities, which did improve mortgage rates a little bit, about an eighth of a quarter percent. But again this week, with a difference in the financial conditions, the media was saying, oh, we're back over six. Well, not at mortgage works. You can see on our rate grid with most all products, we're still under 6%. So I think that's pretty good news. And that's true across the board. Conventional conforming FHA VA jumbos are up a little bit, but still, you know, the jumbo seven year arm in particular is still very aggressive and a good amount under 6%. So I'll tell you again, I don't think rates are the problem relatively speaking anyway. I think in terms of affordability and so forth, I think it's more about the home price. But we're seeing some changes there too, which we're gonna talk about a little bit later on the program. So with that I'm gonna show you the five day chart of the ten year bond yield. And there you go. You can see last week it was pretty low. And then what happened was last Friday you see the big jump going into early part of this week. Well, the issue there was of course Monday was essentially a closed day in terms of the financial markets, Martin Luther King Day. But what happened there was all the news stories, all the headlines about Greenland and potential tariffs against European trading partners for not supporting the Greenland effort and so forth. It really shook up the market. So beginning of this week after the holiday, you saw that 700 point sell off in the stock market and we saw the 10 year bond yield take that jump upwards and you saw it continue going into midweek and it pretty much has stayed there all week. In fact, earlier this week, in fact even yesterday we were getting close to 430. So it has settled down a little bit. But you recall that in the last several weeks we've been talking about how this 10 year bond yield has been very stable between about a 410 to 420 range. And now we're more like 425 to 430. I think there's a little bit now more disconnect between the 10 year treasury bond yield and mortgage yields. Sometimes they are very closely aligned, sometimes there'll be a little bit more of a spread. I think that's what's going on right now. Yes, these higher 10 year treasury bond yields have affected mortgage rates. That's why some of the media is saying oh we're back over six, but, but generally speaking I think the impact hasn't been that significant. And again that's why at least with us we can still get you that loan under 6% whether it's conventional or FHA Virginia. So let's talk about what's going on in the markets to cause these changes. Well, first of all you're going to see on the slide there's not going to be a whole lot on it because there's very little economic data points this week. It's a very, very light week. So but I have to touch on, I've got it here on the slide, the Greenland effect. And again, I'm not getting political here, so I don't even want to get, as the old saying goes, I don't want to touch that with a ten foot pole. But I think it's important to understand that in terms of the mortgage markets, the bond markets, international events, political events can be a factor. And that's what's really happened the last week or so with all the dialogue about us taking over Greenland and then punishing European partners for not supporting that effort and so forth and so on. Again, it created uncertainty and uncertainty is not a friend of the bond market certainly, or the stock market for that matter. And so really what's going on here, this is a good example where the economic data points to the extent we have them can be essentially overwhelmed by other things like the political news, the international news. And that's really what's been going on here the last again week or so. And of course later in the week we had some of the, you know, negative headlines, kind of reverse course. No, we're not going to take Greenland by force. No, we're not going to levy tariffs against the European partners and so forth. So of course the stock market turned around, yet the, the bond yields have remained elevated. And I think the bond market's a little, still a little bit more jittery and not quite ready to consider that things have settled down to the point where maybe we'll see more folks investing in those bonds and bringing those yields down. And then the only other data this week that is of consequence is the pce, that's the Personal Consumption Expenditures Index. That is the Fed's favorite inflation gauge. Now again, this is another example though we've had, you know, this is a delayed report. So we're still catching up on those periods of time where we just weren't getting economic data. And so in this case, the report is for November. It was forecast to be 0.2%. It was 0.3% in September. So of course you have a gap September to November. And so as a consequence, again, this is a little bit delayed information. And that number, by the way, did come out as forecast at 2%.2%. So it came in right on the button as to the forecast. And that's the monthly PCE number. Then there's the core pce, that's where you exclude food and energy. And that number, the core PCE year over year came out at 2.8%, one tick higher than the previous in September of 2.7. So I would argue overall that's a pretty benign set of numbers as it relates to an, an inflation gauge, albeit it is a delayed report. So I think in that respect it certainly didn't make things worse when you layer into that the Greenland effect I mentioned earlier. So taken together, I think it's, you know, look at it as good news that even with this inflation report and even with the annual number of the PCE being slightly above forecast, things are relatively stable when it comes to inflation. We're still in the twos. So look at that as a glass is half full. We're still in the twos. It's not climbing higher. I think it is pretty stable. And so I think that's definitely a friend to the bond market. The only other thing I'll mention is not on the slide. Initial claims for unemployment this week came out under the forecast again 200,000 when 208,000 was forecast. So that's being looked at as an indication that the labor market is in fact pretty darn stable. So the notion that we're seeing a lot of people are going to lose their jobs and so forth so far anyway has not than borne out in the numbers. So that should be considered good news. So there's your update on both the mortgage and the bond markets. What we're gonna do now is go into a product spotlight and this is pretty exciting and I think a lot of folks have been waiting for news as to when this is gonna happen. So let's talk about it right now. And that is, as you'll see on the slide, the California dream for all is back. And of course I got back. You know, this has been a very successful program, albeit one of very limited availability. Well, it is now the case that it is coming back this year and it's being offered through the California Housing Finance Agency, also known as CalHFA. That's the state agency that provides mortgage financing opportunities for, generally speaking for first time home buyers and this program. In order to participate in the program, a couple things to note. First of all, it offers up to 20% for down payment or closing costs not to exceed $150,000. So if you think about that, do the math. That basically means for a property of $750,000, you can get up to 150,000 to be used towards your down payment. That's huge, right? That's a big, big number. A huge help to a first time home buyer who's always struggling with coming up with the down payment and oftentimes wrongly thinking that you can't even buy a home unless you have that 20% down, which on a 750 price would be 150,000. Well, with this state agency you're going to have the opportunity to get that kind of help in order to buy a home all the way up to that level and essentially be able to get the entire down payment, 20% from this state agency. Now it's important to understand though with this program that what you have to do is you have to register for to get a voucher to participate in the program. So you have to register to get a voucher and then once the period to get vouchers has closed, then there's going to be a randomized drawing. It is not a first come first. I'm sorry, it is not a first come first serve program. It is a randomized drawing. So the key point here for anyone first time home buyers or agents, if you have first time home buyers where you think this would be a big help to them, which I can't imagine it wouldn't be, you want them to understand what they need to do is jump on this as soon as they are able, get a voucher, get pre qualified, get a voucher, so then you at least have a chance to get the funds. But again, it's a randomized drawing. You're not assured you're going to get them because you know based on how soon you get your voucher during the open period to get those vouchers. So you got to understand that it's a little bit of a probability situation as to whether or not you're actually going to get the funds or not, even when you get pre qualified and get that voucher. So let me talk a little bit about eligibility for the program. A few things to note. One borrower must be a first generation home buyer. Well, what the heck does that mean? What that means is that one of the buyers, in most cases there's going to be two buyers on these transactions. One of the buyers has to be a first generation, meaning they are a first time home buyer. They haven't purchased, purchased a home before or owned a home before. And for this particular criteria, that's for seven years, not for three. In addition, their parents, if they're still alive, cannot be homeowners for seven years. Now if their parents are deceased, they have to certify that to the best of their knowledge, when they were alive, they were not homeowners. So that's essentially what first generation buyer means, is at least one of the borrowers, assuming we have two, is someone who's a first time home buyer themselves and is essentially the first first time homebuyer in their family when you consider their parents. So that's really what that means. One borrower must be a current resident of California. So you can't have maybe a young couple who are in Nevada and they want to apply for this program and get a voucher in order to then buy a home in California. It doesn't work that way. At least one of the borrowers must already be a current resident of California. All buyers, all borrowers must be first time homebuyers. Now that definition is regarding the three year rule. You cannot have owned a home or be on title of a home for the last three years. That's the definition of a first time home buyer. Again, that's different than the first generation home buyer. So I know it's a little confusing there. In addition, there's going to be income limits. CALHFA publishes those limits. We can provide that to anyone who's interested in getting more information and maybe get pre qualified for the program. The income limits are pretty generous. Riverside County, Louisiana County, 168,000 annually for the family. You know, in some counties, like up in Northern California, Santa Clara county, it's over $300,000. But of course, keep in mind, property values in Santa Clara county are a lot different than say Riverside county or San Bernardino. Orange county is about 211,000. So understand that you do have to earn income that does not exceed these county limits in order to be eligible. And of course we would make that determination for you when we pre qualify you for the program. The program is going to have somewhere between 150 to 200 million available. That hasn't been finalized quite yet, but it's going to be somewhere in that range. So this should be able to help quite a few people. When you consider the max per transaction or per borrower is 150,000, do the math. That's quite a few transactions that this program should help support and of course help increase home ownership. The one thing, one other thing to understand is this is not free money. You do have to pay it back. So let's say you buy a home for 750 and you get your voucher and you do get lucky and you get in the randomized drawing, you get your funds and again, let's say you're buying a home for 750,000 and you're going to get 150. Well at a later time, usually based on when you later on sell the home, you got to pay the money back, you know that 150,000, you have to pay that back plus 20% of the appreciation that has occurred in your home since you acquired it. So that's important to understand. This is not free money. It's a huge, huge help to first time home buyers, but it's a give and take. There's a compromise here. This agency is going to give you a substantial amount of money for down payment. And of course if you're looking at 750 purchase price and you're getting 150, one of the kind of a side benefit of that is you don't have private mortgage insurance because you've got 20% down. But the trade off is later on. Let's say you sell the home five, 10 years from now, you got to pay that 150,000 back and 20% of the increase in value of the home between the time you purchase it and then when you sell it. So understand that important point. It's not free money. You do have to pay it back. And here's the most important thing I want to leave you with today so you understand, write this down. If you have any interest at all yourself or if you're an agent, you've got some first time homebuyers, you're thinking about where this would be a big, big help to them. Here's the registration period. It opens on February 24th and it's good till March 16th. So you've got there about a 20, about a three week window to get pre qualified, get a voucher, we get that registered with the agency, then you're all set to go to be hopefully, hopefully prevail in getting the funds after you get your voucher. And of course Jeff just put up a question here. If no appreciation, how does that work? Well, you still have to pay the money back. The fact that the property value may not have gone up much or at all doesn't cause you to avoid having to pay the money back. So of course the number of years later where you may decide to sell the home is a factor. Even if you have minimal appreciation. Let's say you kept the home for 10 years and then you're selling it. And let's say you're selling it for not much more than you paid for 10 years earlier, which of course that's not likely and it would happen maybe if we had a scenario like 2008, which remember there's only been three times in the history, you know, decades, history of home price levels where we've had that kind of dip, that substantial of a dip. But if you had that scenario 10 years you've had the house and the loan and then you decide to sell it, there was a dip in values overall right before you decide to sell. So your sale price will not be much greater than Your purchase price 10, 10 years earlier when you sell that house, get your proceeds, that 150,000 still has to go back to CalHFA. Obviously there's not going to be much left of appreciation to share. But that doesn't eliminate the fact you've got to pay back that principal balance that you acquired from the agency initially. So keep that in mind as well. That's all part of what you have to kind of put in the blender and kind of figure out whether or not this program will work for you. We helped quite a few people with this program last year. I think overall it's a great, great way for the state of California to help with the home buyer affordability problem and particularly to help first time homebuyers get off the fence and decide to buy. And to that extent I think that's going to be helpful in addressing our overall housing and housing affordability problem. So again, if you're interested in this program at all, please get in touch with us. Get in touch with me. I can go over in more detail the process, get you pre qualified, get you in there to get your voucher and then you'd be ready to go and then you're just going to wait and see if in fact you're lucky enough to get picked. And then, then you've got a 90 day period to go out and find the home, negotiate your offer and get into escrow. So wanted to share that with you since we just the news just came out this past week and did not want to delay so that you're all aware and you can start, you know, thinking about it. If you yourself this is not applicable to you but you know somebody who is where this would be of help or agents. Again if I mentioned before, if you have any people that you're working with first time homebuyer wise, inform them of this program and we'd be happy to give you and your client more information and help you get started with getting pre qualified. So with that I want to go into our next segment and we're going to talk about affordability. Again, we talked about it last week. I'm a believer in the fact that affordability is improving. And in that regard, we're going to focus specifically on a factor in terms of affordability that I think is at play right now and that's days on market. So before we pull up the bullet points as to things I think you should be aware of when it comes to days on market with real estate listed for sale, I want to throw out a few numbers and these are numbers that were published by here locally in the Coachella Valley, the Palm Springs and Coachella Valley area. And some of these numbers are pretty interesting. So let me give you a few. Paul Kaplan Group, that's a local brokerage here in the Coachella Valley in their blog In August of 25 they indicated the typical Palm Springs home spent 119 days on the MLS. Again, that was late summer. And they also noted that on average homes were on the MLS for over two months, which they argued created some space for negotiation and price reductions. Hamilton Real Estate Group, again, another brokerage here in the Valley, their data, their blog indicated their market update indicated that the average days on market was 88 days, which was 26% higher than in 2025. Again, this was August of 25 numbers. They argued that this is an example of a more balanced market allowing borrowers buyers more time to evaluate their options because that's important part of the problem. Like during the pandemic fever, buyers just got disgruntled and disappointed with they didn't have time to really consider their options because every listing was getting bombarded with offers. We're getting into this more balanced market with this extended days on market phenomenon. This is good for buyers. It gives you more time to consider your options and work out some details like how to make the offer. You want to get concessions, you want to try to get seller credits for buy downs and so forth closing costs. So that's why these kind of numbers are actually good for the real estate market overall. Here's another one, Greater Palm Springs Business Insider, their December housing report that across the valley median days on market was 53 days, 10 days longer than the previous year. And detached homes and attached homes were selling about two and a half to three and a half percent below list price and Only less than 12% of properties were selling over list price. So again, more indications that we've got more housing inventory and more room to negotiate. Again, another update from Paul Kaplan Group December, the year end update listed a median home price or median days on market at 47. So a little bit better than earlier in August, you know, and still six days higher than December. And again only about 11% of homes sold over list. And they also quoted the same two and a half, three and a half percent sale price to list price, you know, below on most transactions. Hamilton Real Estate again in December. Their numbers indicate 2071 days on the market, down from 81 days in November, but nearly the same as December of 24. Most communities saw homes selling 60 to 75 days. Desert Hot Springs north of us here in Palm Springs, 81 to 86 days. And again, one other thing very important as it comes to home values now. Overall home values I would argue are still gradually improving, but at a much decelerated rate. Palm Springs Property management November of 25 blog indicated the average home price here in the Coachella Valley dropped about 5% to 624,000. And that home stayed on the market for about 71 days on average. So when you put all this together, what is the data illustrate a clear trend actually. Although the average days on market shortened at the end of 25, they remain far higher than during the pandemic surge. And some neighborhoods still see houses lingering for months As a result, sellers are increasingly flexible and open to negotiations. I'm seeing that in our loan originations on resale transactions. When we get contacted to pre qualify a buyer, we are seeing more and more cases where the buyer's agent and the buyer are looking to negotiate concessions. And I'm seeing in most cases they are being successful. So with those data points about days on market, let me kind of give you some of the reasons why this is so vitally important if you're a home buyer and why you should consider this environment. Again, a very good time to finally get into the arena and try to buy a home because opportunities are out there. So what does the longer days on market mean to buyers and sellers? Well, the first one is increased negotiating power for buyers. As I said, we're seeing that now. We're helping buyers, when we pre qualify them to do this, negotiate some concessions when you're making, when you're, when you make the offer. As it says there, when homes sit on the market for weeks or months, sellers are motivated to attract buyers. Now there are some stories that sellers are hung up on what they think their home is worth and they're pulling their house off the market instead. I would argue even to the extent that has been happening, I think that's getting more diminished in terms of the actuality of it. And I'M seeing more indications that people are taking advantage of the opportunity to negotiate. What's the other thing? As I mentioned earlier, more time to shop and compare. Again, back during the pandemic surge, buyers were just frustrated to no end because everything was at a very rapid hurry up pace. I mean, people were making offers on homes without even seeing them. They would just rely on their agent to go view the home and maybe send them some pictures. But they weren't actually, you know, kicking the tires, if you will, themselves. Well, with this situation, with days on market and the fact that homes are now on the market on average for more than a couple of months for a buyer, that gives you more time to shop, compare and to look at other strategies such as buy downs, paying closing costs, things of that nature. The other thing to consider is, is these kinds of numbers, this extended days on market, it puts more pressure on the sellers, it puts more pressure on them to price the home correctly, you know, because what they have to watch out for, if they're too ambitious on their price and their home ends up sitting on the market for more than a couple of months, that becomes what we call a stale listing. If it's been on there for more than a couple of months and if, if there's an impression that that seller is kind of drawn a line in the sand and they're not likely to want to consider an offer that's below their asking price or consider offering some concessions, that's not a good outcome for the seller. You're going to find yourself in a lonely place where you're just not seeing any offers. You're going to see less people even looking into your home once they see you've been on there for two to three months. And if the word is out, you're dug in and you're not willing to negotiate, most realtors are going to take their buyers and bypass your listing and go on to the next one. So this kind of data, this kind of environment, extended days on market, theoretically, and I argue should put more pressure on the seller to price the home correctly. And if their initial price is not correct, if the market is screaming at them that you're overpriced, then at a minimum you can still address that. When you get that offer, negotiate some concessions that you'll offer, maybe in return for getting that offer at your list price, but give up some dollars, give that to the buyer. That way what you're doing is you're helping them, helping them address their biggest concern, affordability, right? So if you're pricing your home at a premium and the market is starting to tell you that it's priced too high. Get the word out that you're willing to negotiate some concessions and then that way those concessions, not in terms of a lower price, but in terms of a seller credit can then flow to that buyer and directly head on address their concern about mortgage rates, about payments. And so that's why this extended days on market should be and I think is starting to put more pressure on sellers. And we're starting to see that in some of these contract negotiations. And finally with this kind of extended days on market, as I alluded to earlier, and as one of the blogs I just quoted from indicates, it's a more balanced market. You've got a situation now where we don't have bidding wars, we don't have listings with 1620 offers. We're seeing a leverage toward the buyer and with that situation, more leverage to the buyer. They can negotiate not just the price. Now a lot of them still do. They just negotiate off the price. They keep it simple. That's fine. If I have an opportunity though, if I'm pre qualifying a buyer like that and they're thinking in terms of I'm just going to negotiate a lower price. Duly noted. I'm certainly willing and able and do pre qualify them based on that scenario. But I always try to leave them with the idea of look at another way of handling that, look at another way of getting that concession in terms of dollars from the seller rather than dollars off the price. And then what I do is show them how that can make a huge world of difference to them in terms of their most, their strongest concerns, their biggest concerns, rates and payment. So again, when you take all of this as a whole, this extended days on market in this market here in the Coachella Valley, Palm Springs, Coachella Valley area, and I would argue this is happening in many parts of Southern California as well as maybe the state throughout with this happening. This is why we say there's been a shift in the market, there's more pressure on sellers, there's more leverage for the buyers. And you put those two together and we're seeing the outcome of this in all the transactions that we're handling now and new ones that are coming at us and we can become a part of your team, with your agent to give you some ideas how to take advantage of this extended days on market and get some concession and then use that towards your loan in a more effective way. And given that's that presentation that I just gave you, what I want to do is show you a real life example. I had actually touched on this here a week or two ago on the program. But I wanted to dive a little deeper just to give you some real hard accurate, you know, live numbers on a transaction we have going right now that we're going to close in about 10 days. So Jeff's going to pull it up and again I'm going to call this afford home affordability in action. This was a resale transaction. I was approached by a real estate agent a couple of weeks ago about a buyer who I actually helped her. I pre qualified the buyer last year, last July. They're first time home buyers, young couple, they weren't interested in buying right at that time. They wanted to hold off and they wanted to wait until, you know, early this year. So sure enough, a couple weeks ago I've heard from their agent and them and they said we're ready to go, so let me show you. And I tried to kind of keep this kind of in a summary fashion but give you very pertinent numbers so you can. So I could better illustrate what I'm referring to. The list price of the home, 475,000. It's a listing in Indio. What we ended up doing is we're using an FHA loan with a three and a half percent down payment because these buyers had not a lot of money for down payment. And even though they're first time home buyers, by the way, we were using FHA more about because of their credit score level and because FHA rates are generally better than conventional. You don't have to be a first time home buyer to use FHA and be able to buy a home at three and a half percent down. So don't forget that. Don't think by this presentation and this particular transaction you have to be a first time home buyer to get these kind of terms. It happens to be in this case the borrowers are. But you don't have to be a first time homebuyer if this kind of approach might be of interest to you. So when I was presented with this transaction to pre qualify the buyer and given those parameters, what we did, what I first was told by the agent is they thought there was some concession likely and they were going to offer 450 instead of 475. And again I told them sure, I'll be happy to, you know, issue the pre qual based on that, the pre approval. But I asked them to consider another option and that is get the concession not off the price but in dollars from the seller. The agent, buyer's agent, ended up getting wind that the seller might actually entertain an offer that was at least 440. So based on that, I'll call it quote unquote intelligence, market intelligence. After talking to the agent and her buyers, we decided to kind of go after it in a bigger way and ask for a credit not just of 25,000, which would have been the same concession if they just took it off the price, but instead offer ask for a credit of 28,500. That number wasn't by accident. That's 6% of the list price. And on an FHA loan, even with 3 1/2% down payment, seller concession up to 6% of the price is allowed. So in this case the agent, based on what she gathered from talking to the listing agent so forth at 440, might be a serious offer that they would consider. They decided to offer 475, but ask for 28.5 in a seller credit, not off the price. So what does that mean as to the rate? Next line item, you can see there if they went with the offer, 450, 25 on your sale list price. So they're on their own in terms of the financing. No dollars from the seller to cover anything buying down the rate or for their closing costs. What kind of rate were they going to get? Well, with a 688 score it was going to be five and a half percent, 30 year fixed, no points. By the way, that's an example of how with a 688 score, FHA by far is a better option than conventional because at a 688 score on a conventional loan, you're not going to see five and a half. You'd probably see six and a quarter, six and three, eight. So FHA gives you a great and very substantial interest rate advantage when you're in that sort of middle tier in terms of credit score. So five and a half percent would have been the rate if they just offered 25 off the price in this case because they did get their offer accepted with the 28,5 seller credit at the fullest price of 475. We were able to take those dollars and they're getting a 4 1/2% interest rate 30 year fixed. That's like 1 1/2% below market. When you keep hearing about mortgage rates are sixes, six and a quarter and so forth, four and a half percent. I cannot stress enough the psychological benefit to these first time home buyers who've heard nothing but negative news about how unaffordable buying a home is and how rates are so terribly high. When I told them that they were able to get a 4.5% 30 year fixed by this strategy, they were ecstatic beyond belief. I mean, they could not have been happier and I don't blame them. So that's part of one of the subtle things I would point out with these kind of strategies. Don't underestimate the financial, I'm sorry, the psychological benefit to a first time buyer who's never been through this process before. They've heard nothing but negative stories about how mortgage rates are terribly high and or double what they were during the pandemic and this and that and the other. And they're like, guess what? I can get you four and a half. They're like, you got to be kidding me, right? They didn't believe it at first. It's like, no, no, let me show you. So here's the next line item, P and I payment. And this may look like not that much of a difference, but let me hear me out because it's more than what you think. If they were able to get 450 on the, on the home with no seller credit at all and they get a five and a half percent rate, the principal and interest payments, five and a half is 2,500. At four and a half where they offer the higher full price but got the seller credit, the four and a half percent interest rate, it's 2363. Well, you go, oh well, what the heck, I mean that's $137 a month less. That's not that big a deal. Well, understand too, you always want to look at these options relative to your baseline. And what's your baseline? Your baseline would be what if you had a, you couldn't get the seller to budget all, but you really wanted the house. And so you go ahead and offer 475 and they accept 475 and you don't ask for a credit, they don't give you a credit. So you're left with a market rate. You're paying all your closing costs. And of course at the market rate, using a 475 price and corresponding loan amount. The P and I payment, which I don't have on the slide here, would have been 2634 or actually 2648, almost $300 higher if they paid full list price and got a market rate versus going this direction, getting that seller concession and getting the 2363 P and I payment. So when you consider that that is a huge benefit in terms of a lower principal and interest payment by using this strategy over just going with the market rate or even going with the market rate and getting the concession in price by 25,000 at 450. So here's the bottom line. Oh well, actually before I get to that, the total cash needed. Now by the way, these two numbers down payment, all closing cost. Again, if you offer 450 and you get that accepted, so you've gotten a 25,000 concession off price, but you're going to take the market rate, you're on your own for closing costs. So between your down payment 3.5% and your closing costs, you're looking at about 31,500 total cash needed. Well, with this buy down strategy and getting the seller credit of 28, 5, the seller credit covered all the points necessary for that four and a half rate, which is about four and a half points. But there was money left over, like over $7,000 left over. So as a consequence, you can see that 23,853, that's the total amount needed to buy the home between your down payment and your net closing costs after you use the remaining portion of the seller credit to cover those costs after the credit you used to pay the points to get the 4.5% rate, if you follow all that. So that is why if you look at that bottom line there, this first time homebuyer, they're going to be able to, they're purchasing this home with 3 1/2% down a 6, 8. And given their 688 score, they've negotiated getting an FHA loan at 4 1/2% with less than $24,000 out of their pocket needed to complete the purchase. And then here's the bonus. There's a system that we use in real estate. Realtors use it. I use it when I'm originating mortgages because I always want to look at properties and get the detail on the property. I need to know about the property and so forth when we're going to put a loan on it. There's a system called realist. So I pulled a realist report on this particular property. This report provides public record data for homes. And when I looked at that, there's a section of the report now that uses automated valuation models software to identify the estimated market rent based on the type of property, the size of the property, the age and so forth. Well, guess what? For this particular property, the realist report shows that the estimated market Rent for This property is $3,400 a month. You know, by the way, we keep hearing all rents are a lot less than mortgages. You know, having a mortgage, not necessarily. Why 3400amonth estimated market rent for this property according to the Realist report? Well, if you look at that principal and interest at 2363, again, you've got to add to that property taxes, homeowners insurance, and in this case it is a planned unit development, It's a single family home, but it's in a community with HOA dues. So including taxes, insurance, HOA dues, add that to the 2363, guess what the outcome is. The total housing expense is only about $200 a month more than that, 3,400 for rent. To me, that's a really eye opening, big bonus to this whole scenario, this whole transaction, because what this illustrates again to these first time homebuyers, for only a little bit more than you would pay for rent. And if you're able to come up with this relatively modest amount of down payment and closing costs, a little under 24,000, you can own this home rather than paying $3,400 to the current owner and renting it and have no opportunity for appreciation, have no opportunity for wealth creation. So this, this particular transaction, a real life transaction, we're going to close in about 10 days. It basically does a pretty good job of exploding what I would argue is at least somewhat of a myth that you cannot negotiate affordable terms to finance and buy a home versus just renting it. Because in a lot of cases, the market rent for a property you have your eye on isn't going to be that substantially lower than what you can do to finance it, even with a minimal down payment. You just need somebody like us to help you with those numbers and illustrate that point to you. So you're going to feel much more comfortable with pursuing this deal because that's going to give you again, homeownership, wealth creation, the tax deductibility of mortgage interest, you can deduct your property tax expense. There are multiple benefits to owning the home versus renting it. $3,400 a month. Again, if you can own this thing for $3,600 a month and get all those associated benefits of home ownership, why would you not do that? So I would urge you then, given these numbers, affordability is back. It's possible and we are happy to help you see that and give you numbers to underscore that. So you're going to be in a much better frame of mind to go out there and take the time. You now have the time because of the days on market phenomenon we're seeing. You don't have to rush this. You've got adequate time in most cases to go out there and negotiate some very favorable terms to address affordability and feel really, really good about getting into home ownership. Because again, as I said earlier, that psychological impact, I mean, imagine when these young folks get, you know, their next cocktail party and they talk to people and their friends, they say, hey, yeah, we just bought a home. Oh, yeah? What kind of rate did you get? We got a four and a half percent, 30 year fixed. They're going to see jaws drop. They're going to go, how did you do that? When we're hearing that mortgage rates are like, still elevated, too high, unaffordable, not true, folks. We can help you see through that and get you where you need to be. So with that, I'm going to conclude today's edition of the Mortgage Minute. My name is Art Alvarez with Mortgage Works, where we have the answers and they're on the house. I want to thank you for watching and listening and I want to urge you, have a great weekend. Let's see what happens with the NFL playoffs. Like I said, I'm looking at Seattle to go all the way, regardless of who you're rooting, rooting for. Enjoy those games and enjoy your weekend. And then we'll see you again next week on the next edition of the Mortgage Minute. So long. Take care. Of.