- It is time, guys.
Welcome to the Whissel Way Podcast.
My name is Kyle Whissel with Whissel Realty Group,
joined, as always by Mr. Jason Hall with Team Home Loans.
Jason, we're going to turn a lot of the attention
on today's show to you,
because there's been a lot happening
in the last week when it comes to
the mortgage industry.
For those of you that are realtors,
you're listening to this show,
you know the market has been changing.
We're literally starting to do events called
The Gift of the Shift because there is a shift
happening in the real estate industry right now.
You're starting to see
a lot more homes coming on the market,
you're starting to see that inventory grow,
it's taking a little bit longer for homes to sell,
interest rates have been you know going up and up
over the last year or two,
and so, the government has a little bit of control
over what happens in the real estate market, right?
There's a couple things that have changed
in the last week in particular.
So Jason, kind of get us up to speed on that.
- Yeah, so a couple things.
So the government has
pretty much taken over Fannie Mae and Freddie Mac
during the crisis that we went through,
the 2008-2011 time frame,
and they've always helped control loan limits,
and kind of setting the conforming loan limits,
or what we now refer to the high balance
in the higher county areas like San Diego, L.A., Frisco.
And every year, they look at,
hey, what's the average sales price, what's going on,
do we need to raise loan limits, keep them the same,
and there for a while it was the same, during the downturn,
in the last few years that they've been
raising those limits up,
while currently, as of right now,
the conforming high balance limit for San Diego County,
where most of us are located,
is been 649,750 for this past year.
But we just found out this week,
they're raising up to $690,000.
That's a $40,000 increase for San Diego County,
and what's great about that program
is the Fannie Mae program is much more flexible
when it comes to credit,
debt-to-income ratios, reserves,
and what reserves, of course, are is,
meaning you have money in the bank, saved,
after all your down payment, your closing costs,
a lot of your jumbo lenders out there want you to have
six, 12 months, 24 months of reserves,
where a lot of people buy it in this 650 to 800 range,
haven't had, you know a ton of reserves
because they're young, it takes a lot to buy
it takes a lot to rent, and you know
that's slowed down some of the buying in that price range,
and with Fannie Mae now raising that,
a lot of lenders are now taking that effect right away,
definitely will go into effect for January 1st
for all lenders, but a lot of them have already
taken that into impact.
It's going to be huge.
That's going to help a lot more people get in,
it includes FHA, includes VA, everything gone up
and so its going to help people get in,
and its still a good loan.
Meaning their underrating the loan,
it's not like you just breath Kyle,
we talked about this in the past when you and I first met,
I could get anybody a loan, right.
- You literally got me loans for
breathing onto a mirror and fogging it.
- I remember it.
- Yeah and now.
- I thought it was weird normally you sign
but you just put a mirror under my nose,
I thought it was super awkward.
- Yeah super awkward, but I tell people look
they go why, you know I'm afraid the government makin easy
and it's like no they're not it's still difficult to get
a loan, it's not just anybody gets a loan
you still got to have a job, you got to have credit,
its got to make sense.
But the Fannie Mae loan is one of the easier loans to get,
along with FHA and VA versus a jumbo bank.
Now what's also unique is the jumbo rates are a little bit
less then our Fannie rates now that the governments in
they've added all this additional costs
so that the government can get, you know paid for insured
and used and stuff, and that's a whole nother topic I could
you know get into, but everybody wants the low rate
but a lot of people don't have those higher reserves,
those higher credit scores, those lower debt income ratios.
So I'm excited about the loan limits.
- Alright so that's first loan limits have increased,
which for loan types that are easier to qualify for
now you can go a little bit higher on the price,
so that's a good thing.
Now there's a second thing that happened this week,
so get us up to speed on that.
- Yeah so the second thing that happened this week
is on Wednesday morning fed chairmen Powell
came out and, you know their take on rates has been
for the last year, year and a half.
The economies great we're going to raise rates,
we're going to continue to raise rates in 2019
we're going to do all this stuff,
and they literally came out on Wednesday the 28th
and said hey we're now not as bullish on increasing rates
we're starting to see a slow down,
you know in the world economy, definitely starting to see
stuff in the United States economy
and they're now taking, hey we're probably going to raise
maybe just a quarter percent here in December
and probably not going to raise early in 2019,
because we start to forecast and see things.
Now, you know, I'm a conservative,
I did vote for Trump over Clinton,
and Trumps pounding it for a year,
what are you guys doing raising rates,
he has not wanted rates raised at all for the past year,
and he's been screaming stop, stop, stop,
cause he could see the forecast of you know,
if you keep raising the rates its going to hurt the economy
we don't want to hurt the economy
as we're coming out of some tuff times,
and any setting president wants
everything to be great when they're the president.
So its kind of interesting now, you know fed chairmen powell
has, you know kind of come out on Wednesday saying hey look
we're going to slow down, the stock market went up 500 points,
rates actually went down, this rarely,
rarely happens together Kyle.
Typically when stock markets go up we see rates go up,
when the stock market goes down we see the rates go down,
but on that Wednesday 500 point up on the stock market
and rates improve?
- Dude, I'm looking at this second,
it is up 617.7 points right now, that is massive.
- 617 right and so.
- That's a big day.
- Yeah, and we closed, that should be the closing 617
- Yeah that's powerful.
So we got two things at play here,
we've got loan limits going up,
and we've got interest rates that were projected to
continue to increase maybe not happening so much anymore.
So what does that mean for us as realtors,
as mortgage professionals?
What does that mean for us?
Well that means that the direction we've been headed,
which has been inventory growing like crazy,
a big part of the reason the inventory has been growing,
is that your move up buyer market has been hit pretty hard.
The primary reason being interest rates,
because if someone got a loan three, four, five years ago.
Most likely they've got a loan in the threes
- Threes, yeah definitely low fours
- Worst case low fours.
The rate, maybe not today but a week ago,
the rates were around five right.
So its hard when you go to sell a home
for lets say 400,000 and then go buy a home for 600,000.
200,000 dollar difference doesn't seem that big,
- But when your talking about percent, percent and a half
on interest rates.
- But then when you throw on a two percent
higher interest rate, that's a significant jump
so what's only a 50% increase in price
becomes a 75, 80% increase in mortgage payment.
- Right
- So that has been one of the things that has been holding
the market back a little bit,
is the rates had already shot up
and then project to continue to shoot up.
That definitely, you know has been part of the reason
that the market's been struggling a little bit
and why you have seen the inventory increasing.
So I'm actually excited for this for the market,
because I think that this can calm people a little bit,
cause there's, people freak out right
and they freak out about what is forecasted to happen
before it actually happens, and this is why
you don't want to freak out over things,
because it's projected, a projection is purely a projection,
its like a hypothesis an educated guess.
Nothing is set in stone that rates were going to go up
so people kind of freaked out that rates are going to go up
oh my god this is going to screw the market over
what am I going to do?
But, nah maybe the rates aren't going to go up.
I would imagine with the fed coming out
and saying that today, I don't know if you've
looked at your rate sheets today,
but I've got to imagine rates have pulled back a little bit.
- We're starting to see slight improvements already.
They're coming down already, we've already seen
improvements during the day, which is nice to see,
and I think as this thing continues to hold as we get
other economic updates during the next month
here in December.
You know I think we will see rates
continue to slide back down.
- Cause what ends up happening with mortgage rates is,
mortgage rates their projecting,
they kind of adjust the rates based on,
what their projection is right, so if they believe the feds
going to raise rates mortgage rates tend to rise in
anticipation of the fed raising rates,
and when they anticipate that and the fed
does not raise rates there is typically a pull back
on the mortgage rates and so I'm pretty excited about this.
I'm not going to lie to you because there's been so much
out there and a lot of fear in the market right now,
and this is something that I think the market needs
both for us as real estate and mortgage professionals
and for the consumer out there to understand that
hey its okay rates aren't going to go to 10% in the next year
right, I mean there's people that are fear mongering
and putting that out there, so I'm excited about that,
and I'm excited about the fact that the loan limits
are increasing because the qualifications for a jumbo loan
are really tuff right.
I mean what is it, six months reserves typically
- Minimum, minimum.
- Minimum six months reserves.
- They're usually more.
- And how many people have, lets say you've got a 5,000
dollar mortgage payment how many people are going to have
30 grand left over, after their 20% down payment,
right how many people have that it's so rare.
So both of these things are things that if your
a real estate agent, if your a lender or if your
thinking about buying or selling a home,
this should give you a bit of optimism for the direction
that we are headed, because there's been so much
pessimism about the market and the direction that its headed
because of the projections of what's out there.
But this is going to change things.
- Its going to change things, cause you hit it right there.
Move up buyers have been halting and we need move up buyers
because move up buyers free up their homes,
which is kind of the beginning inventory
for most first time home buyers.
And we don't see builders out there building first time
home buyer homes, definitely not in southern California.
So this is huge it's going to create more inventory
it's going to you know help the economy
and as you and I know as real estate goes,
the economy always goes.
So I'm looking for positive signs,
we're excited about it, it's going to kick off for 2019.
Thanks for having me on the show again.
- Yeah and if your listening to the podcast
and you are a realtor or a mortgage professional
your job is to take this information
and control the narrative of what's our there,
because the typical media, the news,
I mean pull up CNN.com right now and I guarantee you
80% of the stories are going to be negative.
It's your job as the professional to control that narrative
so you need to get this message out there,
because all the media is going to do is
latch onto the fact that the inventory here in Sandiego
increased 42% from a year ago.
Their going to latch onto that, they're not going to talk about
the fact that even though its gone to 42%
there's only 2.7 months of inventory.
A normal balanced market is 6 months of inventory.
They're not talking about the fact that we still have half
the inventory we have in a balanced market,
they're just latching onto that 42% increase
cause that's scary and gets clicks and views.
So your job is to control that narrative above
and beyond what the media is doing,
let people know this is awesome news,
this is optimism, its your job, control the narrative,
that is your message for the day here
on the Whissel Way Podcast.
I want to thank you so much for tuning in,
if you want to stay up to date with what we've got going on
@thewhisselrealtygroup we got a group on Facebook its called
The Whissel Way conveniently same name as the podcast
we'd love get you connected on there.
We're sharing all kinds of tips and tricks
and things that we are doing at our office to help grow.
And again if your in real estate, mortgage,
or just a general business professional
there is going to be a lot of opportunity to learn
and connect in there.
Want to thank you so much for tuning in to the Whissel Way.
We'll talk to you next week.
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