Navigating the Housing Market Crisis: The Key Factors Behind Skyrocketing Home Prices

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Hello. Hello everybody. This is Mike Mills with Mike Mills Mortgage and Finance. And this is Mike Mills Mortgage and Finance. Sorry, maybe I'm a little unusually nervous than I normally am just because today I'm going solo on this sucker.

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So I am just going to give this a shot. This is kind of something that's new for me. I've never done this before. Usually I got somebody to talk to, but if you want a glimpse into what it's like living inside my head, I guess that's what this is going to be today because this is like living inside my brain, talking back and forth. This actually isn't that unusual because I don't know how many people out there actually talk to themselves all the time.

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But I'm a frequent communicator inside my own brain, so maybe this will go well, maybe it won't, but we'll see. So I've done 60 of these in one form or another and usually I got somebody else sitting across from me. But I find things incredibly fascinating about real estate and finance and that's why I like talking to people and finding out what they know so I can kind of add to my knowledge base and get my little tiny brain moving in the right direction. But I'm deciding today that I want to talk a little bit about the housing market, about interest rates, about where I kind of think things are headed. Because often when I talk to people, more often than not I'm getting their opinions and I just want to kind of share where I stand on some of this stuff today.

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So hope you guys enjoyed, hope you tune in. And if you have any questions, if you're watching live, please ask in the chat. I'll be happy to answer when I can.

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Where are we going to start? Here, basically. So I'm trying not to ramble too much. I got my notes here and I'm trying to go back and forth a little bit, but where we're going to start is I'm going to talk a little bit. I'm going to give you my opinion on the housing market, kind of how we got here, where we are, where we might be headed.

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And then I'm going to discuss everybody's favorite topic, which is interest rates and kind of go through where I think they are right now and how we got here. And then when I think that they're going to actually come back down again if they do, and then if we have enough time towards I get to the end of it, which I really hope that we do, I'm really going to dive into refinancing, because a lot of things regarding interest rates is all about what are we looking at when we're trying to refinance our home and when is it going to make sense to do that? When rates do come back down and refinancing? Could be anybody that bought their house in the last couple of years and they're sitting on a six to 7% interest rate. Or we also have another facet of homeownership right now where people have hundreds of thousands of dollars in equity in their house.

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And when you're sitting on that much equity and you don't have access to it, it's really difficult to take out another loan at two or three. When you're sitting on your primary loan at two or 3% and take out a second lien at 12%, or take out a new cash out loan at five or six or 7% is where they're at right now. So that makes it challenging. So what we're going to do is talk about when would it make sense to refinance, how you can tap that equity if you choose to, and then kind of look at some scenarios and see if that makes sense. So first thing I'm going to start with is where the housing market is right now.

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I really am not trying to be a Buzkill on this stuff because I've said forever and I always say anybody that's sitting in here with me, the best time to buy real estate was yesterday, okay? Because home prices have done nothing but continue to climb since the dawn of time, basically. And that's where they continue to go. And there's a lot of buzz and a lot of talk about housing market crashes and home prices falling through the floor once interest rates went up. But if you've been paying attention, you've seen that that just hasn't happened.

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Home prices are still elevated. As a matter of fact, right now the median home price in the United States is the highest it's ever been. We're at all time highs as of today with interest rates in 7%. So why is that? Why are we there?

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Why haven't home prices come down? Because usually we're living in an environment, or if we have an environment where rates are in seven or 8%, you're going to see home prices come down because demand is going to go down. And demand has gone down. Demand has dramatically gone down. I mean, I think we're just in real estate volume alone in sales.

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We're somewhere in the neighborhood of 20% to 30% below where we were just last year. So demand has decreased significantly. That's not the issue though. The issue is the supply of homes. We're sitting right now underwater on the amount of homes available for sale that the demand is pushing for.

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So we still have plenty of people that want to buy a home right now. The issue is you'll see that whenever you're looking at home demand, people are going to move in certain circumstances no matter what, okay? So if you get a new job, if your kids you want to move to a different school or you're downsizing because you're retiring or whatever the case may be, there's a certain amount of the population every single year that's going to have to move, right? They're not going to have a choice. Okay.

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And then there's a certain amount of the population that's going to want to move, but may not be able to because of whatever reason, right, prices are too high or whatever the situation may be. But there's always going to be some level of demand in the housing market because people are going to be churning no matter what. So then the question becomes, do we have enough houses to meet just that basic level of demand? Not even the high stress demand that we've had over the last couple of years when rates were so low. And right now we just don't, we don't have enough homes to support the supply.

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Now it's getting or to support the demand, I should say it's getting better. There's an improvement, I mean better in that maybe not in the real estate market, but for the home buyer, perhaps it's getting better. There are a few more houses coming online that are being optioned for sale, but the prices are still staying elevated. So when everybody thinks of the recession or when the market's shifting like it has shifted and people are starting to see this in jobs and people are starting to see this in their pocketbook and the cost of goods and inflation and all this stuff that's affecting the economy right now a lot of times. And where this started was we were blaming or thinking that this was going to be some sort of a housing issue, right?

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And I think this goes back to what I call recency bias. Because if you go back to 2008, that recession, the Great Recession, was caused by housing. The reason that we got to a place where people lost their 401 KS and lost their jobs was because the banks essentially set up a situation where they were creating all of these instruments around mortgages. Because if you look at historical data on how mortgages are tracked, the default rate on a mortgage is very low. I mean, right now anybody that's waiting on a foreclosure is going to have to wait a little bit because foreclosure rates are still at all time lows.

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And so people just aren't and not making their home payments. Well, in the history of investments, that's always been a good place to park your money. So if you're going to bet on the housing market and say, hey, I think that people are going to continue to pay their mortgages, that's generally a pretty safe bet, right? And that's what mortgage backed securities are. These are the bonds that are backed by US.

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Mortgages that people invest in to kind of protect their money. So back in 2008, they created so many different products around these mortgages that they incentivize banks to do more mortgages, right? Well there's only a certain number of people in the United States and there's only a certain number of families. And so in order to create or to continue to feed the demand for these mortgages you had to have more of them. Right.

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And so the only way to do that is to, by doing bad loans, to start giving loans to people that otherwise you wouldn't if there wasn't such a high demand for these mortgages. Okay? So that was what caused the crash in 2008, because once they started giving out the bad mortgages and started packaging them with the good mortgages and everybody was investing and they were investing in the insurance on those investments and all kinds of I mean, there's thousands of different type of instruments that were created around this. And when the underlying mortgages that they were all based off of started to fail because people were getting mortgages that they couldn't afford to pay because they were no income, no asset or no verification, anything like that, then you get to a place where you're giving out mortgages to people that can't pay them. And when they didn't pay them, then the whole thing collapsed.

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Right. And then the housing market went through. And even still I call it a collapse but I think the highest affected state in the country was California and I think they still only lost maybe 25% to 30% of their value at that time. I mean I say only it's a lot of money but at the same time it wasn't like it fell 50, 60, 70% like some stocks do, right. It's still the housing market.

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People still pay their mortgage. So that was just the portion of the market that essentially shouldn't have been in the mortgage to begin with. So when you look at today and now we have higher interest rates. Okay, well rates were low back then or excuse me, before the recession rates were high. And then after in order to kind of re stimulate things, the Federal Reserve, the Fed, they decided they were going to start lowering the Fed rate.

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Okay? So they went in and said, okay, we're going to lower the Fed rate down because we want to stimulate borrowing so we can stimulate the economy and promote spending. Okay? So once that happened, what they also did that not many people are aware of is they started buying the mortgage backed securities. Okay.

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So they decided that they were also going to purchase mortgage backed securities and drive mortgage rates down. Because some people know this, some people don't. But the Fed funds rate, the one that we keep hearing about on the news every day, where they're raising the rate, has nothing to do or I should say is not directly correlated to mortgage rates. It's certainly considered, but it's not directly correlated. It's not directly related.

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They don't affect each other directly. It is certainly impacted. But when the Fed raises their rate, that's the rate that they charge other banks to borrow money from them. So they're charging. Bank of America chase, Wells Fargo large hedge funds.

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Anybody that's borrowed the US. Government, anybody that's borrowing money from the Fed, that's the rate that they're going to charge them. And then of course that trickles down to everybody else that's borrowing, but it actually doesn't directly trickle to mortgage rates. What mortgage rates again are based on are mortgage backed securities. So when the Fed decides that they want to help bring mortgage rates down, they're going to then buy mortgage backed securities, which is going to drive the demand for mortgage bonds up just like it did in the Great Recession.

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It's going to drive the rates down. Okay? So that's what caused the interest rates to stay at that two to 3%, which by the way, anybody hoping that we're ever going to get back to that two to 3%, I would put it in the category of very unlikely. Okay, I'm not saying we're not anything can happen. I don't have a crystal ball.

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I don't know what's going to happen. But because it was artificial and because it caused the problems that we're having today, the likelihood that we're going to see interest rates get into the twos and threes again is probably pretty low, if at all, or at least anytime in the near future. So then it put us in a situation in 2019 because really the rates, they weren't at two and 3%, but they were in the fours and fives and low sixes up and down from let's call it 2010 or eleven all the way up to about 2019. Towards the end of 17, 1819, they started to continue to buy a little bit more and so they drove the rates down a little bit. Stock market was getting a little volatile.

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So you saw people moving their money into bonds because it was safer. So that did start to occur, but where they really took a dive was when COVID occurred and we shut down everything. Especially everybody went through their own thing. But in the real estate mortgage side of things, when we're sitting at home wondering is anybody ever going to buy a house again? Is anybody even going to be able to go outside?

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We're all seriously considering whether or not we were going to still be employed in six months. And then of course from there, which by the way any of my real estate professionals listening right now, just remember how you felt the first couple of months of COVID or the first little while there. If you're feeling the same way now, just remember things turned around in a dramatic way. I'm not saying that that's what's going to happen, but I am saying you got to stay positive and hope that things tend to work out. All this stuff cyclical.

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But anyway, back to the interest rate side. So then the Federal Reserve, because the entire economy shut down, we basically went through a recession, a very mini recession as it were, because there was no commerce happening. Everybody was staying in their homes. Shipments had shut down. There was no trade.

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Everything had just kind of come to a grinding halt. So in order to be able to bounce back from that, the Fed decided to cut interest rates again because they had to really turn things down. When you shut it off like that, I guess it's kind of like you're opening up the dam as big as you can again and letting all the water flow through. So they cut the rates. They started buying mortgage backed securities again pretty heavily, which is what ultimately really drove the interest rates down.

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And then there became a frenzy of housing, right then everybody was buying a house. Because when you have money that cheap, right when it's that inexpensive, it's not zero, but it's pretty much close to zero. When you have money that is that inexpensive to borrow, the demand for assets is going to go through the roof and you're going to start to see people oh, thanks Dan, appreciate it. Budy. Somebody tuning in saying hello.

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Thank you Dan. But you're going to start seeing or in that situation you're going to start seeing individuals buying up houses like crazy, okay? Because especially related to homes. But that's why you saw things like in the crypto market, crypto went through the roof. Those NFTs, if you guys remember those things because there was so much money flowing around, NFTs still exist and they have a useful case by the way, but that's for another podcast.

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But there was so much money flowing around that even speculative assets like NFTs were the price of those were going through the roof. Because when money's cheap to borrow, there's going to be a lot of spending. So the problem with that is that housing has a very difficult time keeping up at that kind of a pace because you have to remember when you build homes, okay, let's not even take into account current inventory. But when you build a house, you have to get permits, you have to find labor, you have to get city inspections. You have to obviously buy the land.

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You have to get the financing, and then you have to lay out the plans, and then you have to develop the you know, one of my good budies, Conrad Jackson, who has been on here with me several times, he's going through developing property right now and learning about all the water lines you have to run and the utilities. And I can't even give it justice know, as far as what he's going through. But my point is, is that it takes a lot to build a house or build a neighborhood. And it's not something that happens in three months or six months or it could take twelve to 18 months from the start of a project to the end. And I'm sure if I have any builders listening, they probably say it takes longer than that.

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It might even be two years. I don't know. I'm not a builder, but I know it takes a while. So you're not going to have enough housing to immediately help with that pent up demand because rates are so low. So that in turn is going to just take the price of homes and it's going to go through the roof.

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So just in the last three years, just to give you some scope on this, at the start of COVID the median home value was $320,000 in the United States. I'm in Texas, and every market is a little different. So I'm acknowledged that. California is much higher, florida is a little higher, parts of the country are different, but the median, which is the middle of the road, it's not the average, but it's the middle. Home price that's sold in the United States was $320,000.

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Okay? In just three years, that price is now $480,000. That's the median. Okay? That's a 50% increase in the median home price in just three years.

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That's insane. That is something that is I say nobody could have predicted. I mean, of course, if you just know basic economics, you probably could have predicted that. But at the time, nobody was thinking about it. And when you're living in the world of doing loans every day, and I'm picking up the phone 20 times a day for people calling, wanting to refinance or wanting to buy a home or get pre qualified, and agents are out there just not having to market anything, you just tell everybody you're a real estate agent.

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You're going to have ten people call you that week and want you to show you houses because everybody wanted to buy a house, and that's normal. And we're all what do they say? You're living in high cotton. Like things were great, but there wasn't really an understanding of what this was going to do long term, or at least nobody was paying attention to it. And so now that brings us to today, where right now the expectation was when the Fed decided to make their shift and started realizing inflation was out of control, which I think many, many people knew way before that, that this was happening.

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But once the Fed started making some action raising rates, they stopped buying mortgage backed securities. So remember what I said before, mortgage backed securities is what drive interest rates for houses, not the Fed rate. So the Fed raised their rates for sure, and they started taking them up every couple of months at a pretty quick clip, by the way, which is a little unusual in the history if you go back and look and see how the Fed raises rate, aside from like the 80s, but they moved them up pretty fast. And the problem with raising rates really quickly is that the impact that's felt from that rate hike takes time to cycle through the economy. So the impact of the rate that they raised a year ago, we really probably aren't feeling it until right around now.

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And so what they're doing subsequently until now and all the hikes that they've done, we're going to be feeling down the road. It's not something that's an immediate impact. It does take time. I was telling somebody the other day that in the age of social media, where we are right now with the Internet and having such quick access to information, I don't think anybody would argue that our attention spans are certainly less. When you're flipping through TikTok or you're flipping through Instagram reels or whatever and every video is a minute and a half.

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Or when news clip comes on and they talk in three minutes, everybody's kind of got this. If it's not interesting in the first 20 seconds, I'm out, right? I mean, my kids, for God's sakes, I can't sit down and watch a movie with them because if there's something doesn't happen amazing in the first ten minutes of the movie, then they don't want to watch it anymore, good or bad. It's got its positives negatives. But my point is that because as a society, it seems our attention spans have shortened so much, our expectations of time and our understanding of time, I think, has changed.

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And when we look in if you see on the news that the recession is coming or housing crash or whatever, if it doesn't happen within a couple of weeks of you seeing that story, then I think most people are just like, I guess we're okay. Everything's fine. And you'll see that in the news cycle because you'll see the Fed decided to raise rates and stock market falls, and everybody's like, oh, no, we're headed towards a recession. And then a couple of weeks go by and maybe some positive earnings come out. Nothing real big, but everybody kind of forgets.

00:19:23

And then some good news happens and all of a sudden everything's fixed and we're all better, right? I joke all the time. I wish I had the clip with me. But there was a commercial for Career Builder that they did years and years ago. It was a Super Bowl commercial, and it was a bunch of chimpanzees in a office, and they're all wearing their little suits and ties and stuff, and they're sitting in the conference room and they're just like going bananas because no pun intended, but they were going crazy.

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They're like losing their mind. And they showed the chart that was sitting on the wall, and the chart showed an arrow that was just going straight up. So the chimpanzees are going crazy, right? Well, then the one human in the room kind of walks over to the chart and turns it because it was upside down and it shows the arrow going down, right? And so all the chimpanzees are like, wait, what happened?

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What's this guy doing? Right? So then another one of the main chimps walks over and flips the chart back up. So it's going up again and then of course they're all going crazy again. They're all high five and doing backflips and whatever because their company is doing great.

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So the point of that is just that we have this very short term perception of what's happening around us. Sometimes I think the economy especially takes a long time and we want the good news to be true. We want everything. So when we get a little bit of good news, everybody gets excited and the markets go up, but the underlying fundamental problems are still kind of there, right? And that kind of stuff doesn't hash itself out for time without a long period of time.

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So then we get to a place now where rates have gone up to at one point in November we were at 8%. I think right now we're in the low sevens. As I'm recording this on August 31, I think the average Freddie Mac rate is like 7.125 or 7.25. You can get FHA loans and VA loans in the sixes right now, those government deals.

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But those interest rates should have caused, or at least the sentiment in the market was that there would be a cause for the home prices to come down. And here we are essentially twelve months into this with these rate hikes and home prices have gone up. They're higher than they were, they're not lower. So why is that? Well, we're back to we don't have enough houses, right?

00:21:44

It's supply and demand. Interest rates all day long impact people's decision to want to buy. But like I said in the very beginning, there's a certain segment of the population that has to buy and sell because they have a new job, they're changing schools, they're downsizing, they're doing whatever right. There's a certain part of the population, they don't have a choice, they have to sell. And so do we have enough demand built up for the new families forming that don't know anything better than 7% interest rate?

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So they're just trying to figure out how to buy a house and do we have something out there for the people that have to move. And that's where we're running into the issues. Because here's the thing about interest rates. They're going to go up and they're going to go down again. Recency bias.

00:22:27

The last ten years when we've been living in these three to 4% interest rates, everybody just kind of expects that's what it is. But you get a year or two down the road if we're still sitting at six and 7%, people will get comfortable with this too. This is just where rates are. So the rates obviously impact people's decision to buy, but they're not the real issue. Why home prices are so unaffordable.

00:22:49

The issue as to why home prices are unaffordable is because of the price of homes, because we don't have enough houses available for the demand. Okay? So one of my favorite things that I get from people from all walks, especially, I say the older generation, I got to raise my chair. This thing's caused me problems. I say the older generation, but I mean, I'm 45 years old, so I'm not like a spring chicken or anything.

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But for people that have been selling real estate and been in it for a long time, 2030 years, seeing the market in the 1980s, right? They always go back to the 80s. Well, back in my day, in the 80s, interest rates were in 1981. So I looked this up, did a little research here. The highest mortgage rate in history was 18.45%, and that was in 1981 on a 30 year fixed loan, okay?

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The median home price that year, in 1981, again, the same number I was using earlier to show the prices going up, the median home price was $68,900. That was the median. So you were borrowing at 18% interest, but on a $69,000 house, okay? So if you bought that house at that price with that rate, your mortgage payment on that home would be $1,010. Okay?

00:24:02

Let's just call it $1,000. I'm going to say ten every single time. So $1,000, that's your payment, okay? Now, that doesn't include taxes and insurance, all right? But just like everything else, taxes have gone up dramatically.

00:24:11

And insurance, anybody that's trying to shop for car insurance right now or trying to shop for home, know it's expensive. So especially if you're in states that are being affected, know natural disasters like California. And, you know, I'm sure soon enough here on the coast of Texas, because it seems like everybody's getting hit by a storm right now, but insurance rates are really high right now. But I'm not even talking about that. I'm just talking about your principal and interest, what it costs you to get that loan, right?

00:24:40

So then they say, well, if it was 18%, but nowadays okay, well, let's do the math on that. So today, July of 2023, the median home price, it's fluctuated a little bit, but it's about 400. And let's call it 440 from the data that I pulled to compare these, because the current one is like, at 460. But then that's like today. But then a lot of this data lag.

00:25:07

So you get it from last month, right? So this is how much things have gone up since then. But let's just say right now, back in July, it was about $440,000. So if you had a rate for a conventional loan right now, all this is conventional 5% down, whatever. If you had a conventional loan right now with a seven and a quarter interest rate on that 440 payment or 440 purchase price with 5% down, your principal and interest is going to be about $2,800.

00:25:32

Okay? So in 1981, when interest rates were 18.45% and you were buying a house for 70 grand, basically your payment was about $1,000. Okay? Today, in 2023, if. You're buying a house for 450 some OD thousand dollars, and you're paying 7.25% interest.

00:25:51

Your principal and interest is going to be about $2,800. Okay, that's 180% more. All right. So interest rates, yes, they matter, they affect things, they certainly move your payment. But our problem right now on the expense of housing is not interest rates.

00:26:09

It is the price of homes. Okay. It's the cost that it takes to buy a house. And that is being affected because we have a very short supply. When you don't have the supply and you can't meet the demand, the prices are going to go up just like they did before.

00:26:25

Now they're not going to go up at the same rate. Right back in during COVID when they brought the money down, the interest rates down and home prices shot through the roof. They went up 50% over three years. Well, that was because interest rates were really low. We basically juiced up the demand and said, hey, let's go, let's go.

00:26:44

And so you saw the prices go up. Well, now interest rates are high, so the demand has cooled off, but it hasn't cooled off to the point to where it's causing home prices to go down, okay? It's just cooled off enough to where home prices are starting to plateau a little bit and stay level and not just shoot up at the same rate that they were. So when you look at why we're in this affordability crisis, certainly the rates matter. But the problem is that when rates come down, all right, which again, they will, and I'll explain that in a second, or they should when that does happen, you're going to see home prices go through the roof again because builders are building homes.

00:27:23

They have housing starts that have gone up the last few months. They're down a little bit right now. But you do see housing start numbers go up. But what you're also going to see is you're going to see that that's going to take a while for those homes to get completed. There's a statistic that as realtors and lenders, we use to kind of get an idea of what's available on the market right now, and it's called months of supply.

00:27:48

So how many months of supply do we have available on the market currently? Well, right now, and this is a number I was really struggling to find a good source from, but let's just say it's around three to four months of supply on average in the country right now. All right, well, that sounds great. However, a healthy housing market really needs somewhere in the neighborhood of, I would say, five to seven months of supply in order to be healthy. Meaning it's a balanced buyers and sellers, market, seller have just as much say in the matter as buyers do.

00:28:18

And it makes it for a little bit easier negotiation or even negotiations. So when you look at that and you say, okay, if it's going to take twelve to 18 months for us to complete housing. Right, well, in that four month supply, there are homes in that number that aren't complete. All right, I would say I think the last thing I read it was something like 30% or something like that are homes that are available for sale. Meaning I can buy it today, but it's not going to be move in ready for another 6812 months.

00:28:53

Okay, so if no other house came available for sale today, and we had four months of supply, but let's say one month of that supply was houses that weren't available to move in yet, well, then we'd be out of homes for people to move into in three months. Even though the housing supply number has been increasing, there's a bigger and bigger portion of that number that are incomplete homes so people can't move into them. So that still continues to keep the supply of homes down. Right, which is also what's continuing to keep the home values up. So that's where we're running into the issue with even though we have high rates, we still have high home prices and it all goes back to supply.

00:29:37

Okay, so it's just, again, basic economics, supply and demand. So let's talk a little bit about interest rates. Okay, so I've already touched on it quite a bit. But just to recap, if you're coming in at this point, interest rates for mortgages are based off mortgage backed security performance. When mortgage backed securities are in high demand, interest rates go down.

00:29:59

When mortgage backed securities are in low demand, interest rates go up. All right, so when does this happen? When do mortgage backed securities get in high demand and when do they get in low demand? And why is everybody saying that if we go through a recession, more than likely interest rates are going to come down? Which I do believe that, which I think we're kind of already in a recession, but we might be headed that direction too, or at least headed into a deeper one.

00:30:24

We'll see. But what happens is that when the economy is doing well, okay, that means like we were doing in 2020 or 21, 22, when everything was really crazy because money was so cheap. Well, there's tons of money flowing into the market. Well, when all that money flows into the market, more often than not money goes into the stock market because that's where people are betting on companies to do well. That's where people are betting on, like the crypto market did well because kind of speculative new technologies, all that kind of stuff is being invested in because people feel pretty confident that the economy is doing well and so they want to take advantage of it.

00:30:59

So they tend to pull their money out of safer assets like bonds and move them into the stock market. This is generally speaking. So when they pull that money out of the bond market and move it into the stock market. That drives interest rates. It should drive interest rates up a little bit.

00:31:13

That's where you get kind of a balance or an equilibrium because when you start to see rates go up because people are moving their money out of safer instruments, you start to see lending tightening a little bit. Not a lot, but just a little bit. And that's why you're kind of looking for that equilibrium. And that's what the stock market and the bond market kind of do to each other is they help balance each other out. The problem is when you get artificial forces that come into play and start messing with that natural flow of capitalism, which is you have the Fed thanks, fed that shows up and says they want to start buying billions of dollars in mortgage backed securities.

00:31:45

Well the stock market's doing great and the Fed's buying all the mortgage backed securities. So mortgage rates are low. So now you've got two things that are just driving, driving, driving demand for all types of assets. So this is where you get to a place where we are right now where you have inflation issues. So with interest rates specifically for mortgages, as the Fed stopped buying those rates, the demand for mortgage backed securities went down and so therefore interest rates went up.

00:32:12

Well now we're sitting in a place where we don't have an artificial force that's pulling those rates down. Essentially it's just left to the natural devices of the market, right? Well when you start to see that, you start to see the impact of rates on people's desire to want to buy homes because when you're used to three and 4% it goes to seven or 8%. That's when people start going, well wait a minute, maybe I'm going to stay where I'm at. Maybe I'm not going to move because I like my 2% rate.

00:32:42

I don't want to go buy a home that's now 20% more expensive and pay 8%. Which again feeds to our supply issue. Right. But what I want everybody to understand is what the impact of interest rates actually are on a mortgage. Okay?

00:32:57

So one of the things that I tell people when I do their loan is I try to help them understand how interest rates impact their payment. Because at the end of the day everybody likes to talk about rates and everybody likes to talk about home prices. But at the end of the day it matters how much is my monthly payment? Like how much am I going to have to pay to have this loan and live in this house? Right?

00:33:18

Home prices affect it, interest rates affect it. But ultimately what we care about is what our monthly expenses, the other numbers, they impact the number but that's not really what we're thinking about. So when you look at your monthly mortgage payment on say a 7% interest rate or 7.25 or something along those lines. All right, let me find my example here. So when we look at an 8th of a point, and by the way, that's how interest rates move.

00:33:45

Interest rates move in eighths of a point, typically, I know there's 7.99 and 7.82, but these are APRs, and there's a couple of other things that go into that. But typically speaking, rates are moving in 7%, 7.125, 7.25. That's kind of the scale in which they slide up and down on a typical day, which days aren't typical these days, but on a standard day, you're not going to see rates move a bunch. They're not going to go from 7% to seven and a half percent in a day. They may go from 7% to 7.125.

00:34:17

And then there's a pricing aspect of it that banks work with to determine how much profit is built into that rate. Because believe it or not, bigger banks that buy these mortgages, there are certain coupons that they work off of that they prefer at a given time where the market is. So they may actually give you better pricing on a lower rate. In some cases. It's rare, but it does happen as lender.

00:34:38

And so that 8th of a point when you slide up and down the scale on a day to day basis is going to impact when you go to lock your loan to buy your house, that 8th of a point. Or that interest rate is going to obviously impact your payment. Well, so how much is that? What is that impact? Well, just to give you an idea on, let's say a $400,000 loan, okay, and let's just say that for every or not, let's just say the math bears out that on a $400,000 loan, for every 8th of a point that your interest rate changes, your payment is going to move about $30 a month, okay?

00:35:10

It's 31. 32 depends on the size of the loan because there's a lot of factors that go into getting it exact. But that's about what it is. It's about $30 a month. So if you were to move that interest rate from a whole percentage point from 6% to 7%, you'd be looking at about a $250 a month change on your payment, okay?

00:35:31

That's on a $400,000 loan. It's $250 a month. So when I talk to borrowers when they're buying homes and they say, okay, well, do you think it's a good idea to buy my rate down? Should I try to buy the rate down? And just like anything else, it always comes down to expense.

00:35:48

How much is it, what's it going to cost you and what's the benefit? Okay, that's how we determine it. There's not a certain percentage, or if you rule of thumb, there is to some extent, but at the end of the day, it's how much is it going to cost me and how much is it going to benefit me and that's how we determine if it makes sense. So give you another little scenario here. So on a $400,000 loan, all right, if you bought now, there's two types of buy downs.

00:36:12

You have a temporary buy down, and you have a permanent buy down. Okay? A temporary buy down is what you hear all over. If you're paying attention to social media and real estate, it's what you hear. Two, one buy down, one, one buy down, three, one buy down, whatever.

00:36:24

These are all temporary buy downs. What those are, typically, is you are paying interest in advance. And I'll tell you why. As a buyer, you shouldn't do that. If someone else is going to pay for it, great.

00:36:36

But as a buyer, you shouldn't, because all it is is you are just paying interest up front because your loan after the first year is going to reset to the new rate, and then after the third year is going to reset to the new rate. Now, this isn't like an Arm, right? Arms reset based on the market. This is going to reset based off of what you set it up in the beginning. So if you start with a 7.25 rate and you bought a three one buy down, for the first year, your rate is going to be 5.25.

00:37:04

For the second year, it's going to be 6.25. And on the third year, it's going to be 7.25. Okay? So you're going to get the benefit of lower payments, but they don't give it to you for free. It costs money.

00:37:14

So in order to do that, you have to buy the interest. I got to take a drink because I've been talking so much, my brain voice is going crazy here. By the way, topo chico, if you're watching, you know, help the brother out. All right, sorry about that. So then you're looking at, okay, does it make sense to buy my rate down?

00:37:35

Well, if I can get enough savings to offset the cost, then it can make sense, because on a temporary one sorry, I got off track there. On a temporary one, you are just paying the interest. There is no benefit to you other than your payment is lower, because the cash that you pay up front for that is just the interest. The math just works out where it's just the interest that you're not paying. So if the seller is going to pay that for you because they're going to give you seller concessions, or if you're going to a builder and they're going to buy your rate down for the temporary one, great.

00:38:04

Let them do that. You're not paying for it, awesome. But if you think it's a good idea for you to temporarily buy your rate down, it's not, because you're not saving any money, really. You're just paying interest up front. Now, a permanent buy down, that's a little different.

00:38:16

When you do a permanent buy down, you're paying the money to buy down the rate at the time that you buy the house so you can have, for the life of your loan, have a lower payment. Okay, so it's not temporary. It's permanent, at least until you get rid of the loan. So when you do that, all right, well then in that circumstance, you're paying more to buy the rate down than it would be for a temporary one. Right.

00:38:39

If you're buying a permanent rate, it's going to be more expensive than if you're going to buy a temporary rate. So on the permanent rate, buy down. Let's say that and I was just kind of pricing some stuff out the other day, but let's say to go from 7% to 6%, it's going to cost you three points. And a point is 100 basis points. It's basically 3%.

00:38:58

It's going to cost you 3% of your loan size. So if you have a $400,000 loan and you're paying three points on it, that's twelve grand 4000 times 312 thousand dollars. So that is what it's costing you to buy down that rate. Like I just told you a minute ago, on a $400,000 loan, if you buy it down a full point, you're saving $250 a month. Okay?

00:39:20

So if you take $12,000 and you divide it by $250 a month, that's 48 months. So in four years, you're going to start to see the benefits of buying down that rate. It's going to take you four years to do that. Okay. Is that good or is that bad?

00:39:36

Well, it depends. All right. At four years, I don't know what's going to happen. Are rates going to get better? Are they going to get worse?

00:39:44

Are you going to move? Are you going to get a new job? Is something going to occur? And everybody's got their own thing on this, but my personal opinion on when does it make sense is I use time as the kind of the deal, as the tiebreaker, essentially. Does this make sense?

00:39:59

Well, let's look at the time that it takes to break even. How long is it going to take you to recoup your money that you spent up front for it to make sense? Well, in my opinion and a lot of other people, generally speaking, if you can break even in less than three years and you know you're not moving, then it makes sense to buy that down. Okay? It can.

00:40:20

If you're going to break even in more than three years, then I would probably not do it. And the reason being is because I tell people all the time, if you go back and think what you were doing three years ago, four years ago, five years ago, could your four or five year younger self predict where you're at today? Right? Probably not. Maybe some be like, oh, I knew.

00:40:40

Okay, well, fine. But ultimately we don't know what life's going to bring us. You're going to get a new job your kid's going to relocate to a different school, you're going to have to downsize, who knows what's going to happen? So I don't like to spend money on things that I need to happen way in the future in order for it to make sense. I'd rather it for it to make sense for me today.

00:41:00

So generally speaking, my opinion is if it takes you longer than three years to break even on anything your cost, we'll get into this refinancing a little bit, then you shouldn't do it. You should hang off and keep the money. Now, what you'll hear a lot of times is, is sellers will offer to pay your closing costs these days because there are more homes that are sitting longer and you can negotiate pricing a little better. And part of the offer is we'll buy your rate down and they'll give you, let's say, $10,000 or $7,000 to buy your rate down. Well, that's awesome.

00:41:28

They're going to give you money to help you buy the house and you want to use it on your interest rate. But it's more often than not, maybe a temporary or maybe a permanent buy down. But what I would do in that circumstance if it were me, is I would keep the $7,000 and pay my closing costs because that seven grand helps me today. And I know that money is going to do me a benefit right now versus hoping that I don't have to move or that rates don't change dramatically enough to where it makes sense for me to refinance in less than three years. If rates go down to 5% or 4% because the economy crashes for some reason, then I'm going to refinance at that point.

00:42:01

Well, if I bought my rate down two years ago and I'm not getting the benefit of it yet, then that money is basically wasted. So I can use that seven grand today to pay my closing costs. And that tends to make more sense than it does to buy the rate down. So when you look at interest rates and how they impact your loan and what you should do on if you should buy it down, if you should take a higher rate and get more costs, whatever the case may be, it all just is a cost versus a benefit. And that's where as a plug for myself or any other mortgage loan officer out there, if you're thinking about buying a house, that's why you need someone that can walk you through what those situations could be and what makes the most sense.

00:42:43

And I don't want to begrudge some of the bigger banks out. You know, when you call somebody that's quick with your loan, or if you call somebody that has a bank in America, sometimes you're going to talk to somebody who doesn't nearly come close to understanding this stuff and they're just there to take your order and do what you say. And you may not realize that there are benefits or costs to other things because you've never done it before or you haven't done it enough to where you understand it fully. And that's why you should be able to reach out to somebody that's local, talk to your agent, see who they recommend. Because people like myself and other great lenders in this area and all over the country that do what we do, we know this stuff, we go through it, we understand it.

00:43:30

And so we can help you walk through the different options and figure out what's going to make the most sense for you and not just take your order because you saw something online that you thought made sense and nobody else was able to explain it to you. So again, it's just a little plug for all my folks out there. If you're thinking about buying a house, use that local lender because they're going to walk you through this stuff to help you understand it better. So that way you feel good about making your decision and you understand what impacts it and what doesn't. And that's really at the end of the day, that's what it comes down to is our job as mortgage professionals is to educate you on the process so you can understand and you can make your own decision.

00:44:06

It's not my job to make your decision for you. It's my job to give you the information so you understand it in a way that you can make your own decision and decide what's best for you and your family. Because I don't know, I don't live your life. I'm not there. And that's why it's so important to work with trusted partners, trusted realtors who have their trusted lenders because they're going to make sure that you're taken care of.

00:44:29

Most of the time when you hear horror stories of people whose mortgage payment shot up for whatever reason, or they got screwed on the new construction because the builder didn't do a good job of checking to make sure everything was handled correctly or whatever the case may be. More often than not, that comes from somebody deciding to go the route of just listening to somebody who doesn't know what they're saying and doing what they said. And maybe it's because they thought it was cheaper. Maybe it's because they thought they got this new shiny rate even though they didn't look into what the cost to getting that rate was. And their closing costs are so much more expensive now.

00:45:08

So just something to consider. If you're thinking about buying, talk to your agent, figure out who they use because they're going to put you in touch with people that are going to make sure that they look out for you. All right? So winter rate is going to come back down? Well, I don't know.

00:45:25

Number one, nobody knows. Even if the Fed starts lowering the Fed rate, it doesn't mean that mortgage rates are going to come back down. Here's what I do know. I do know that it seems, based on the way the economy is put together right now, that we are either already in some sort of recession or we are headed in that direction. How bad that will be is anybody's guess right now.

00:45:51

I have some thoughts on it, but ultimately, I don't know. I do know job numbers are starting to go down. A lot of job reports that we've gotten over the last few months have been revised lower, which not many people understand or realize. They don't see it in the news, it's not publicized in the news. So that is certainly happening.

00:46:13

You're starting to see just the other day, if you look at people who have the money, I always like to look at, okay, who are the wealthiest people on the planet and what are they doing? Because they have access to more stuff than I do. And Warren Buffett the other day, or last week, a couple of weeks ago, he sold out about 30% of his portfolio and moved it into cash. And usually they do that because they think that the market is going to go down. So if the stock market goes down, that's when you're going to start to see the talks of recession kick into play.

00:46:45

When is that going to happen? Is it going to happen tomorrow? Is it going to happen at the end of this year, next year? I don't know anybody's guess. I think as long as we don't get great data on what's actually happening, which is what's been the case, it seems like recently, then things we're kind of kicking the can down the road a little bit.

00:47:01

But all that to be said, I can't control any of that. So what do I think is going to happen? Well, I think that if nothing breaks and I'll explain what I mean by breaks in a minute, but if nothing breaks, then I think that we're probably in a place where by the end of next summer to early fall of next year, I think we'll start to see rates get to a place and they'll work their way down. But we might be in the let's call it the fours or the fives at that point. Maybe there's all kinds of big market banks that are predicting we'll be at the low sixes by the end of this year.

00:47:37

That will be into the fives and then into next year. Who knows? But that's my guess. Just because as we trending down and the recession starts to kind of take hold a little bit more, I think you're going to start to see rates come down. And I think that would happen sometimes towards the end of the year, next year.

00:47:54

Now, all that to be said, if something breaks in the meantime, then that could change drastically because right now the US. Government itself is in an incredible amount of debt. They don't want high rates. Right? The federal government does not want high interest rates because when they have high rates, they're having to pay interest on the debt that they have as well and they don't want to spend that money.

00:48:21

And just our debt alone has gone up trillions of dollars just in the last year. So they're not hoping for high rates either. So at some point, everybody wants rates to come down, which means that they will. It's just a matter of when. Well, if our debt load causes our bond prices to struggle and start to fall, then you could start to see the Fed decide to buy bonds again.

00:48:45

That could happen because of know, what we don't want to happen is we don't want people to not want to purchase US bonds because if they don't, then we can't borrow more money and therefore there's no more money to and you can have your opinions on if that's a good idea, not borrowing money. I agree with you, but I'm just saying that's the way this thing's set up. That's what they do. And if it stops, it's going to cause problems. So if the Fed decides to buy bonds, you can see rates go down.

00:49:15

If there's some underlying issues, maybe in commercial real estate right now, it's not necessarily that properties are like there's segments, warehouse properties are doing awesome, rental properties are doing pretty good, apartments multifamily, whatever. But then your office buildings are struggling right now because everybody knows work from home COVID, all that stuff. And the problem with that is that a lot of the regional banks own those loans. They own those office buildings and they hold those loans, I should say, on retail lending, those loans usually reset every five, seven years, three years, depending on what your term is set up as. So it's kind of like you have an arm on a commercial loan, essentially, and that loan is going to reset every three or four or five years and you have to refinance it.

00:49:59

Well, when that happens, you're held to whatever rate is currently in the market. So if you bought that retail office building two years ago and you paid 3% interest and now you have to refinance it in two years and it's going to be 8% interest or 9% interest, well then your cost is going to go up. And if you don't have renters or you don't have companies renting that space, then you're not going to be able to pay that note. And if you don't pay that note, then that bank loses that loan and then they lose liquidity. And that's where the snowball effect starts to occur on some of these smaller regional banks because they can only afford to take so many losses.

00:50:36

So if the Fed's got to come in and backstop these banks, or if they're going to let larger banks buy them up, which tends to happen, but. Is not a good thing because it's just more bank consolidation. If that happens, then you could see rates come down. Then student loans are about to be reset. So in October, October 1, the bills are going out.

00:50:55

Everybody's going to start paying their student loans. There are some plans in place to kind of defer it even further if you want to do that. But for the most part, there's something like it's 20 million Americans or something that are going to have to start paying $300 a month on average in their student loans. That's going to cost household spending to go down on. People are going to buy Starbucks less.

00:51:16

They're going to go to Target less. They're going to travel less. They're going to do all the things less because they have this new expenditure. And that's going to put a crunch on the economy as well. So all of these things could occur which would cause rates to go back, mortgage rates to go back down.

00:51:29

Because the Fed doesn't want the market to crash. They just want to slow it down. That's what they're trying to do. They're not trying to crash it, they're trying to slow it down. So I never want to root for a recession or root for a bad economy, but it that is what would cause mortgage rates to go down.

00:51:43

The flip side to that is if you are thinking about buying a house or you want to buy a house, maybe you're not thinking about it, but you know one day that you want to do that. What I will tell you is that when interest rates come back down, home prices are going to go back up. I should say go up even further because, and this all goes back to what I was talking about in the very beginning, is when you make money cheap again or cheaper sometimes it's just in perspective. If we're going from 7% to 5%, everybody's feeling great, right? Even though we had two and three, they forgot about that.

00:52:17

We're back into the fives, hey, let's go, let's go buy that house. Or let's do that cash out and let's get that money out of that or get that equity out of our house. You'll start to see that stuff pick up again. And when that happens, that's going to drive prices back up because you're going to have lower rates even though they're not in the twos and three. So if you're waiting to buy your house because you want rates to come down, that's great.

00:52:40

But like I explained it to you in the very beginning, with an 18% interest rate, if the house was 70 grand, you're only paying $1,000. But with a 7% interest rate and the house is 450, you're paying 2800. Okay, well, if that rate goes to five, that's awesome. But if that house, then that was at 450 jumps to 525, your payment just went up again too. So if you want to buy.

00:53:04

And if that's something that is a part of your plan in your future, then like I said at the very beginning of this thing, the best time to buy was yesterday. Chair keeps thinking I maybe need to stop eating Cheetos or hamburgers. I'm getting a little heavy here, but that's when it's going to make the most sense. Or excuse me. That's why it's so important if you're in a position where you can buy, that you try to get into a home as soon as you can.

00:53:32

And right now, you're in a good position as a buyer. You really are. Because the home prices are high and rates are high. So the demand is low. So there are houses sitting, so sellers are willing to pay closing costs.

00:53:44

Builders are willing to buy your rate down. There's all kinds of stuff. Lenders are even coming out with low down payment loans, 1% 0% down payment assistance with reasonable rates. I mean, all of this stuff is going through to help people stimulate with cash to be able to buy. So if you are in a place where you want to and you decide you want to wait because rates are coming down, well, when rates come back down, everybody else is going to buy too.

00:54:05

And that's when those are going to drive those prices up again, and you're going to see your payment go up. So just keep that in mind when you're looking and thinking about buying or not. Or tell this to your clients. Make sure that they understand how this works, too. So I got five minutes.

00:54:18

I'm going to do real quick on refinancing. And it's not too dissimilar what I was talking about rates a minute ago. When does it make sense to refinance? When should you think about refinancing your house? Well, same thing, cost benefit, okay?

00:54:31

When you look at where you're at for your interest rate. Now, let's just talk about what we call or what I would say is your rate and term refinance, okay? It's what we call rate and term. You're just doing a refinance to lower your payment. That's it.

00:54:45

You're trying to get a lower rate, lower your payment. If you're going to do that, when does it make sense? Well, it makes sense when you can get a low enough rate that your payment is adjusted to a point to where you're going to save enough money to offset the cost in a reasonable amount of time. Okay, so what's reasonable? Well, like I said earlier, if you can offset your cost in less than three years, generally that makes it a good idea, because, again, after three years, it's hard to determine where life's going to take you.

00:55:14

Okay? So if it's going to take you five years to break even on your cost, then that's not a good idea, right? So, quick scenario. If you lower your rate, say 1%, all this varies on loan size. This is why you to talk to your lender to find out, work through this math.

00:55:27

But just to give you an example, if you can lower your payment, say $150 a month, all right? And let's say that the refinance is going to cost you $5,000. Well, if I take 5000 and divide it by 150, that gives me 33 months. That's less than three years, just under three years. So if you can break even on the expense because you're saving $150 a month, but it cost you five grand, which by the way, you refinance, you can roll your costs into your loan.

00:55:51

You don't have to pay it out of pocket if you have enough equity, meaning your house is worth enough that you can add that balance to it, not have to pay it out of pocket. But side note on that, but if that money that you're expending or that money that you're rolling into your loan is enough to where you're going to break even with the savings in less than three years, then I would say go for it, do that refinance, but depends on the size of your loan. It depends on where the rate changes were sometimes. It depends on if you can get rid of mortgage insurance. There's a lot of people that have FHA loans.

00:56:20

One of the big upticks this year that we've seen is VA and FHA loans, what we call government loans, have held a big portion of the market because people that have conventional loans typically have better financial situations, better credit. So they probably owned a home, already, have a low rate, so they weren't looking to move, whereas people that were trying to break into the market because if you had an FHA loan or a conventional loan back in 2021, you were trying to buy a house, good luck. But nowadays you can get in there with an FHA or conventional. Well, with FHA you have this thing called mortgage insurance, which you have for conventional as well. But with FHA, if you do an FHA loan, you can't get rid of the mortgage insurance without either selling or refinancing the home.

00:57:00

There is a caveat to that. So any lenders I understand that if you put down 10%, it'll be gone in eleven years. Yes, I know, but not many people put down 10% on FHA loan. So when you do an FHA loan, if you have mortgage insurance and you want to get rid of it, you can't unless you sell the house or you refinance the loan. So it may make sense for you to refinance, even though maybe the rate isn't enough to save you that 150, but maybe the rate saves you 100 and then you get rid of $100 in mortgage insurance.

00:57:26

Okay, good, that makes sense because that's going to give you a benefit to offset the cost. So deciding on whether or not to refinance is always about cost and benefit. Are you going to save enough money on your payment to offset the cost that it's going to cost you to do the loan. And if you're going to do it in less than three years, then usually it makes good sense. If you're doing it in three to five years, I would say you need to really be pretty sure that you're going to stay in your house.

00:57:52

And if it takes you more than five years to break even, then I generally recommend you not do it. So then let's look at the other types of refinances that people do, which are generally what we call equity loans. Okay, so when would it make sense to do an equity loan? Well, the answer to that one, unfortunately, is that's completely up to you, because is it a place where you say, well, Mike, my interest rate on my house right now is 3% and I want to get 200,000 out of my house, but it's going to make my rate go up to 5% or 6%. We're projecting into the future.

00:58:21

Rates are lower. Should I do that? Well, it depends. It depends on you. What are you going to use the money for?

00:58:28

Are you going to use the money to improve the house and raise the value? Okay, that can make sense because then it could help your resale value down the road. Are you going to use that money to pay off high interest debt? Credit cards? I don't know when's the last time you looked at your credit card debt, but if you have a balance over ten grand and you're paying 25% interest, which is like the average rate right now, you're paying about $250 a month in interest on that.

00:58:51

So that's $250 as a bill. You may only be paying $50 a month on the credit card because you're trying to pay your minimums or whatever, but if you're running that $10,000 balance, it's costing you $250 a month. So could it make sense to get rid of that credit card debt and refinance it at 6% or 5% versus 25? Maybe? I mean, you're only refinancing ten versus the 300 you have on the house.

00:59:16

So that's the part you got to weigh and see if that makes sense. But it's all just math and cost and benefit. Is it going to be beneficial for you or not? And again, that goes back to finding someone that can walk through the numbers with you and explain it and explain it in a way that you understand it, so you can make the decision for yourself and not let someone else say, oh, yeah, this is a great deal. You absolutely should do this.

00:59:37

That's not my place to say that. My place is to say, here's how the math works. Here's what the impact will be, here's what it saves you, here's what it costs you, and here's what that can mean. What do you want to do? Right.

00:59:48

That's ultimately what the decision making is. So when you look at refinances, it just depends on what you're looking to do. Are you trying to get your payment lower? Are you trying to take equity out? One little side note, this is not something that happens today, but in the future, home wealth, I should say home ownership is the path to wealth for most Americans.

01:00:14

You buy your house for 200, you sell it in ten years for four. Okay? You've just picked up $200,000 in equity in that period of time. You don't make a ton in paying down your loan because you pay a lot of interest up front because of the way the loan is amortized over 30 years. But the growth comes in the equity.

01:00:31

It comes in the money that you're making on selling your home or the equity that you have. Well, you can use that equity to help grow your wealth more. I know many people that from time to time will take money out of their house 50, 60, 70, $80,000, $100,000, and they'll invest it in the stock market. And it could be a place where, let's say we get to the end of next year and you have $200,000 sitting in equity in your house. And now the rates have gone down to 5%.

01:01:00

Okay. Still high, higher than two to 3%, but not as bad as seven and eight. We're at the fives. All right. But you got 200 grand in equity sitting in your house.

01:01:10

Well, if you took that $200,000 and you cashed it out at 5% interest and you invested it in the market because remember, at that point, if rates have gone down ODS, are the stock market's down too? And that means when the stock market's down, you can get good value for things. You can get good value for stocks, you can get good value for other assets like other real estate. You can get good value for a lot of things. When the market's in a lower I don't want to call it I don't want to say when the market's depressed, because I don't think we're going to be in a depression.

01:01:44

But when the market's down, that's the opportunity for buying, right? So if you were to take that $200,000 and let's just say you invested it into an index fund, okay, index funds earn like an average of 4% interest. That's just how to index the stock market. And as the stock market goes up, the index fund goes up, you could be looking at a pretty substantial because this compounds right, this income compounds that could help you grow your wealth. So, yeah, you took the equity out of your home and your home payment went up.

01:02:12

Your interest rate may have even gone up some, but now you've taken money that you otherwise was just sitting there doing nothing other than sitting there, and you've put it in and started making it work for you. And now you're earning a rate of return on that money, and you're getting a payback on that money. Okay? So that's where when you want to get into the Jedi science of buying a house. It seems bad right now because rates are at 8%.

01:02:36

Nobody's interested in doing anything like that, and the market's at all time highs. But what I'm telling you is that in the future, if rates come back down, which they should, and if the market, stock market comes back down, which it should, then that's going to be a very good opportunity for you to be able to create generational wealth, the type of wealth that you can pass on to your kids because you've invested it wisely at a time and paid attention to what the market was doing. So if you guys have questions about any of that stuff, this was a long winded, me going for an know. I hope you enjoyed it. I would request if anybody watched this to go subscribe to my YouTube channel, check out Apple, Spotify, subscribe to my podcast on there.

01:03:17

It's actually been doing pretty well on Apple and Spotify lately, so I'm trying to keep growing this thing a little bit. So appreciate everyone that stuck around. If you all have any questions about the mortgage stuff, about interest rates, please feel free to reach out for me. My contact information is everywhere. Call me, email me, my cell phone that thinks on my website, so give me a shout.

01:03:34

I'm happy to help wherever I can. Hope everybody has a great weekend and we'll see you next week. We're going to get into some crypto stuff next week, so tune in and check it out. See you later. Bye.