303: Mortgage Rate Update December 2019

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Welcome to this edition of the Mortgage Minutes. We are joined by one of the lenders in the Jason Hartman Network, here to talk about what all is going on in our world of lending. How are you doing?

Not bad, man. What's shaking with you?

Oh, just trying to buy another property in the next future. So let's talk about for our investors out there who are looking to buy a new house right now, new investment property. If they're looking at a $100,000 house and they've got 25 or 20% down, what can they look forward to seeing whenever they get your estimate?

Well, the average individual I've been working with lately in that range seems to be 740 plus credit scores pretty commonly. And I've locked a lot of those deals lately. I've locked many people about 4.75% for 20% down $100,000 acquisition. And then I had some that elected to do the 25% down and that happened to come in at 4.25%. So it seemed like a much bigger gap between the two than what I'd seen in the past.

Nice. Now we've been seeing obviously the Fed has been doing their cuts and there have been talk about the US Potentially. I think Janet Yellen came out recently and said 2020 might be rough is the Fed's unease with the economy and people like Yellen's unease with the economy. How is that impacting the rates that we're seeing right now?

Well, it had had a negative impact to the rates just in the last little while. So at one point we did see rates get, you know, they were low like they are now. Then they actually went up for probably about two weeks. And then recently in the last, probably week, week and a half, they got right back down to where they were previously. And a lot of it is with the Fed rate cuts was actually kind of given some concerns of it being an inflation. And when we have inflation go up, that means, you know, the dollar is declining in value. The places where we go to get our Money, the mortgage backed security, those who invest in those mortgage backed securities like pension funds and retirement funds and 401ks and IRAs and mutual funds, all those that are putting their money there, they're not big on a long term instrument when the, the instrument they're being paid back with is losing value at a rapid rate. Now we all know with inflation anyways already losing extremely rapid rate, but the Fed tickling those numbers and trying to keep them within 2% and there was some inflationary concerns and that's what spiked that. Also in that last couple of weeks you noticed that we hit the stock hit the all time high again. Actually not really even again. It just reached another plateau. So there's also a lot of money being sucked over to that. Even though it doesn't make any sense, it's still being pulled over there. And so every time you start getting a jump in other instruments such as equities, you'll see long term instruments like bond suffer for a little bit and then investors will calm down, the heat will get a little bit cooler again in the markets and they'll work their way back to those long term safer instruments. So the economy worry is out there. I think one of the other things I believe will help interest rates going forward that there's a lot of conversation about because of the state of the economy, of the Fed warming up that quantitative easing again.

Yeah, I was laughing to myself whenever I saw the stock high. And I made me think back to the turn of the century whenever people were saying, you know, I think that book came out, it was Dow 30,000 and still waiting on that one. So.

Well, I saw, I remember when The Dow hit 10, that was a big damn deal. I was, it was my first year in the industry, 1998, when that happened, I got in in the end of 97. So I'm 22 years in as of next month. And I remember when it hit 10,000, everybody's running up and down the quarters of this courtyard of this company that was this office building I was at, like what's everybody dancing about? The Dow had 10,000. Like I don't know what that means, you know. And so now, now we're knowing what that means. And I'm shaking my head all the time. I can't believe we're even remotely knocking close to 30,000.

What are you thinking is going to happen in the next couple months? Like if we go into, if the worst fears come true and we see a recession starting in 2020, what are your thoughts on how the Rates will react and how much they might swing.

I believe we're going to be continued on a trajectory of lower interest rates. How much? Kind of hard to say. To me, it's insane that we're even as low as we are. But what I keep telling all my real estate investors I work with doesn't matter anywhere. Whichever way they swing, this person is still going to benefit significantly with where they're at because it's kind of hard to believe that they'll get much higher than, you know, 5 to 5.7% like where they peaked out in the last 24 months. And even at that, we had shown with the tax deductibility and the other benefits in the inflationary environment we live in, that the interest rates, even if they did swing up, does not really hurt the real estate investor. The homeowner, yes, real estate investor has very, very, very small movement. When you start factoring in all the things associated with their benefiting of being the most tax favorite asset class on the planet. They take advantage of inflation to offset compound interest. All those things play in their favor regardless of what the rate is. But I still believe interest rates are going to go down based upon what I'm hearing and the various economists that I subscribe to. And if that's the case, take advantage of the situation. And if the recession comes and forces some housing issues, all we're doing to do is create a larger pool of renters for us as investors to be able to give opportunities of housing to. And then we might even see cheaper housing again in certain markets because of, you know, isolated bubbles. I'm always bullish on, especially a recessive economy.

Now obviously investors have a tendency to not necessarily worry about the slowdown or pickup of home inventory necessarily. But have you been seeing more mortgage starts coming in or fewer? What's your kind of velocity going on?

Me personally, I know we've seen a lot of slowness or at least things slow down a little bit in the industry as a whole. Mine's been growing. I mean, I closed 83 transactions last month, or was it 84, something like that we're putting on on my team at least. I mean, we've seen as many as 10 contracts a day pretty commonly. So we're not, we're not slowing down, we're continuing to gain momentum.

If we compare the 83, 84 to maybe what you were seeing in like May or June, kind of where are we in that regard?

Very similar.

Okay.

I mean it really, it's been pretty heavy trajectory. We got a little bit more going on right now because we as an organization in the last six months, sat down as a company and we got with the board and we started digging into the margins and everything and really started figuring out where can we be rate wise compared to the rest of the market and be able to service our clients and not be in a negative position, but also given the best that we can possibly find. And since those days, sitting in the boardroom with the. With the executives of this organization and talking with those who buy our loans from us and the capital markets division who services our loans, and we found that sweet spot. We did see an increase, a rather significant increase once we started to be able to offer the best that we can find and the margins that we can cut down and really make sense of and still be profitable, but not the expense of our clients. And we have seen a large, large benefit to our pipeline as a result of that. So I could. I can honestly say that we've seen a huge uptick in the last probably four or five months. So June's when it really started to get traction, and then it's been nothing but really cranking since.

Well, that's fantastic. Is there anything else you want to say to the investors and listeners out there?

Just keep your minds open. Exactly what you're looking at. As far as the people you're working with, it's all about the groups you're working with, the individuals who are helping you achieve it. Not so much about all the other things are happening in the economy. The economy is designed to benefit you more than you can realize right now. It's not something you'll be able to figure out until down the road, but, you know, secure great people to work with and that will change the dynamics of your business.

All right, well, until next time, keep closing.

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