Refinance Rate Trends and Timing: Should You Refinance Now or Hold Off?

Mike Mills
00:00:00

With all the rate fluctuations going on, is now the right time to refinance or should you hold off?

Mike Mills
00:00:05

Well, with rates starting to decline, refinancing is a hot topic, but it might not be the best move for everyone.

Mike Mills
00:00:11

We'll dive into how to assess the current rate environment and help figure out whether or not refinancing makes sense for you, or if waiting it out might be the smarter play.

Mike Mills
00:00:29

Greetings, all you noble keepers of the real estate realm.

Mike Mills
00:00:32

Did you miss me?

Mike Mills
00:00:32

I know, I know.

Mike Mills
00:00:33

It's been a hot minute since our last market update, but I promise I've got a good excuse.

Mike Mills
00:00:38

First, I got knocked out flat by a lovely little bug that apparently thought it was more important than our little podcast that could I was out of commission for over a week, laid up, kind of like a fixer upper waiting on a remodel.

Mike Mills
00:00:47

But now I have crawled back into the land of the living.

Mike Mills
00:00:50

But just as I was getting back on my feet, boom.

Mike Mills
00:00:53

The phone started blowing up.

Mike Mills
00:00:55

Why?

Mike Mills
00:00:56

Because thanks to the Fed and the media, everyone that bought a home in the last two years was hearing all about interest rates dropping, and they all wanted a piece of the action.

Mike Mills
00:01:04

And let me tell you, with only so many hours in the day, I've been using up all of them.

Mike Mills
00:01:08

But hey, I'm back, I'm upright, and I'm ready to roll with a lot to share today.

Mike Mills
00:01:12

So, speaking of those rumored lower rates, the main question that I'm hearing from everyone every day is now the time to refinance?

Mike Mills
00:01:19

Or should you wait it out in case rates dip even further?

Mike Mills
00:01:22

That is the million dollar question that we'll be tackling by the end of today's episode.

Mike Mills
00:01:26

So stick around for the answer that could save you some serious cash.

Mike Mills
00:01:29

This is the Texas Real estate and finance podcast market update for the week of October 8, and I am your smooth skulled Gen X host, Mike Mills, a North Texas mortgage banker with Geneva Financial.

Mike Mills
00:01:40

And almost every week, give or take the odd flu bug, I'm here bringing you the latest and greatest in all things real estate.

Mike Mills
00:01:45

We're talking interest rates, housing data, and those news stories that might have slipped past your radar but are way too important to miss.

Mike Mills
00:01:52

And trust me, this week is no different.

Mike Mills
00:01:54

So grab your headphones or maybe a cough drop if you're in my boat.

Mike Mills
00:01:57

And let's dive into all the real estate tea for the week.

Mike Mills
00:02:00

All right, as always, we're kicking things off with mortgage rates.

Mike Mills
00:02:03

Now, if you've been keeping an eye on the headlines, you've probably saw that the Fed recently made a move to cut rates.

Mike Mills
00:02:08

But here's the kicker.

Mike Mills
00:02:09

Since that announcement, the mortgage rates have actually gone up quite a bit.

Mike Mills
00:02:14

Yep, you heard that right.

Mike Mills
00:02:15

So what gives?

Mike Mills
00:02:16

Well, I'll tell you where rates are now and where they were and what's really going on behind the scenes of then.

Mike Mills
00:02:21

We've got some signs of life in the housing market.

Mike Mills
00:02:23

Actually, housing sales are picking up, pending sales have been rising, and purchase mortgage applications have gone up for five straight weeks.

Mike Mills
00:02:30

It's not a massive turnaround yet, but with mortgage rates hovering closer to 6%, we're finally starting to see a few transactions shake loose.

Mike Mills
00:02:37

We'll dive into the latest data and see if the market is finally turning a corner as we start the fourth quarter of 2024.

Mike Mills
00:02:42

Then I've got a real bombshell local story out of Dallas here.

Mike Mills
00:02:45

Invitation Homes, the country's largest single family landlord, is shelling out over 48 million over some pretty shady tactics against their renters.

Mike Mills
00:02:54

Hidden fees, neglected maintenance, unfair evictions, you name it.

Mike Mills
00:02:58

I'll break down the details of the FTC's case and what it means for renters moving forward.

Mike Mills
00:03:02

We've also got some eye popping data on real estate investors making some big moves in the market as well.

Mike Mills
00:03:08

Turns out they've scooped up one in four of the nation's most affordable homes last quarter, totaling a whopping $43 billion in purchases.

Mike Mills
00:03:16

While this is great for investors, it's leaving a lot of first time home buyers out in the cold.

Mike Mills
00:03:20

Dig into what's driving this investor surge and what it means for the market.

Mike Mills
00:03:23

And for the main event today.

Mike Mills
00:03:24

With all the rate fluctuations going on, is now the right time to refinance, or should you hold off?

Mike Mills
00:03:31

Well, with rates starting to decline, refinancing is a hot topic, but it might not be the best move for everyone.

Mike Mills
00:03:37

We'll dive into how to assess the current rate environment and help figure out whether or not refinancing makes sense for you or if waiting it out might be the smarter play.

Mike Mills
00:03:47

So stick around to the end for that.

Mike Mills
00:03:48

All right, but before we keep going, let me ask quick favor.

Mike Mills
00:03:51

If you're finding value into today's episode, whether it's a helpful tip, a fresh perspective, or even just a little chuckle, do me a solid and hit that subscribe button.

Mike Mills
00:03:58

Leave a review or pass this episode along to someone in your circle.

Mike Mills
00:04:02

I'm out here spreading the real estate gospel each week, but with your help, we can make sure our congregation continues to grow.

Mike Mills
00:04:08

And remember, if you or your clients need some guidance through that home buying process or thinking about refinancing that seven or 8% interest rate from last year, don't hesitate to reach out and give me a call whether you need help with a new mortgage or you just got some questions about this crazy mortgage process.

Mike Mills
00:04:23

Either way, give me a call.

Mike Mills
00:04:24

I'm here to help.

Mike Mills
00:04:25

But thanks again to everybody for tuning in.

Mike Mills
00:04:27

Y'all make this podcast what it is, and I'm grateful for each and every one.

Mike Mills
00:04:30

All right, let's get into the question that I get every single day of my life.

Mike Mills
00:04:34

Hey Mike, what are the rates?

Mike Mills
00:04:35

Well, according to Mortgage News Daily, as of October 8 of 2024, the average 30 year fixed conventional mortgage rate is 6.62.

Mike Mills
00:04:43

The average 15 year conventional rate is 6.15.

Mike Mills
00:04:46

The average FHA 30 year rate is 6.12.

Mike Mills
00:04:51

The average 30 year va rate is also 6.15, and the average jumbo rate is about 6.75%.

Mike Mills
00:04:58

Now, I want to be clear.

Mike Mills
00:05:00

These are average market rates provided by Mortgage News daily and may not reflect the specific rate that you qualify for.

Mike Mills
00:05:06

Mortgage rates can vary widely depending on factors like your credit score, loan type, and down payment, among others.

Mike Mills
00:05:12

For accurate information about your personal mortgage options, it's important to speak with a licensed mortgage professional like myself or your local lender.

Mike Mills
00:05:21

I just love that we're in this highly regulated industry.

Mike Mills
00:05:23

Got to say things like that.

Mike Mills
00:05:25

All right, moving on.

Mike Mills
00:05:26

So the Fed cut the Fed funds rate on September 18.

Mike Mills
00:05:30

That's just barely three weeks ago.

Mike Mills
00:05:31

And as of today, October 8, mortgage rates overall actually have gone up by almost half a point from their lowest points in early September.

Mike Mills
00:05:40

So what the hell is going on?

Mike Mills
00:05:42

Well, the Fed did choose to go hard in the paint here and cut rates back by half a point.

Mike Mills
00:05:46

Back in September, it could have gone for a smaller quarter of a point cut, but felt that a heavier hand was necessary at that time, likely because of concerns over the weakening job market.

Mike Mills
00:05:55

But then, just like that, only 30 days later, we get a sudden turnaround in the BLS jobs report for September.

Mike Mills
00:06:01

The labor market, which seemed shaky and on a steady trend downward for the last twelve months, all of a sudden looks to be coming back strong with job openings rising and unemployment falling, based on the most recent jobs report.

Mike Mills
00:06:13

So even though the Fed cut the Fed funds rate because of this big surprise in jobs data, but also a big surge in government debt, but more on that later.

Mike Mills
00:06:23

Because of all of this, mortgage rates have actually gone up.

Mike Mills
00:06:26

So what happens from here?

Mike Mills
00:06:27

Are rates going to continue to go up, or is it just a blip on a bigger trend downward overall.

Mike Mills
00:06:32

Well, if you've been listening to my show over the last several months, you will know that in my opinion, there are still too many factors showing that the economy is not quite as strong as some of this data would leave us to believe.

Mike Mills
00:06:44

And, oh, by the way, I'm not alone in this opinion.

Mike Mills
00:06:45

However, markets move on data, and the data we have right now at least, is telling us that the economy is booming.

Mike Mills
00:06:53

So until the data we get suggests otherwise, or until there's a major market moving event, then I would expect at this point for rates to stay above that 6% threshold, at least until the end of the year.

Mike Mills
00:07:03

Now, I do feel like we're living in the upside down here.

Mike Mills
00:07:06

What do I mean by that?

Mike Mills
00:07:07

Well, there is so much conflicting data out there right now that if you look at the jobs report that we got last week, there are a couple data points just within that that kind of show you what I mean.

Mike Mills
00:07:16

So we added 254,000 jobs in September, which was well above the 140,000 job estimate.

Mike Mills
00:07:23

The biggest gains came from restaurants and bars adding over 69,000 jobs.

Mike Mills
00:07:28

Healthcare added about 45,000 jobs, and federal, state and local governments added about 31,000 jobs.

Mike Mills
00:07:34

So hospitality, medical and government, same categories that have been adding to the job market pretty much since all this started.

Mike Mills
00:07:40

However, this jobs report had a massive seasonal adjustment, the biggest we've seen in quite a long time.

Mike Mills
00:07:46

In fact, if the seasonal adjustment had just been similar to what we had last September, we would have shown about 100,000 less jobs added to the economy from this report.

Mike Mills
00:07:55

Now, the household survey, which is where the unemployment rate is derived, reported 430,000 job gains, causing the unemployment rate to drop from 4.2 to 4.1.

Mike Mills
00:08:06

But small businesses actually saw a job loss of 128,000, which usually accounts for much of the gain.

Mike Mills
00:08:13

Also, average weekly hours worked declined slightly month to month, with an overall year over year decline of 3.5%.

Mike Mills
00:08:21

So that means jobs are up, but hours worked are down and wages are flat.

Mike Mills
00:08:25

And really the most peculiar part of the September jobs report, at least in my opinion.

Mike Mills
00:08:29

Of the 430,000 jobs gained in the household survey, 231,000 of those went to those aged 16 to 19 years old, and of that, 159,000 of those jobs went to those from 16 to 17.

Mike Mills
00:08:44

Which raises a lot of questions given the school year started in September.

Mike Mills
00:08:48

Because at what point do we ever see so many jobs created for americans that are in school and it not be in the summer?

Mike Mills
00:08:55

Again?

Mike Mills
00:08:55

Just an interesting little quirk about this report.

Mike Mills
00:08:57

But hey, we are headed into spooky season and that means that you're going to see those spirit Halloween stores popping up all over the place and all those empty retail shops that are all around you.

Mike Mills
00:09:07

So maybe the Halloween spirit store is single handedly propping up the us job market as we head into October.

Mike Mills
00:09:13

Just a guess.

Mike Mills
00:09:14

And just because I mentioned it earlier, another reason that's still kind of misunderstood that can cause mortgage rates to rise is us federal debt.

Mike Mills
00:09:22

So the us deficit has jumped 345 billion over just the last three days, hitting another record of $35.7 trillion.

Mike Mills
00:09:31

And since June of 2023, federal debt has surged by a massive 4 trillion, or 14%.

Mike Mills
00:09:38

And over that same time, US GDP is just about 1.5 trillion, or about 6%.

Mike Mills
00:09:44

In other words, the national debt has outpaced the economic growth two and a half times over the last 16 months.

Mike Mills
00:09:52

And outside of a pandemic crisis, the us federal debt has never grown so rapid.

Mike Mills
00:09:57

So why does rising us federal debt matter to mortgage rates?

Mike Mills
00:10:00

Well, it's pretty simple.

Mike Mills
00:10:02

When the government borrows more money, it sells treasury bonds to raise cash.

Mike Mills
00:10:06

The bigger the debt, the more the bonds they need to sell.

Mike Mills
00:10:09

And when debt grows fast, like it has recently, investors want higher interest rates on those bonds because lending to the government becomes riskier.

Mike Mills
00:10:18

Now here's where it connects to mortgage rates.

Mike Mills
00:10:21

Lenders look at those bond rates when setting mortgage rates.

Mike Mills
00:10:24

If bond rates go up, mortgage rates tend to go up as well.

Mike Mills
00:10:27

And even if the Fed cuts rates, rising debt can keep mortgage rates higher than we'd expect.

Mike Mills
00:10:32

Bottom line is our national debt is growing much faster than the economy.

Mike Mills
00:10:37

And that can push mortgage rates up, making borrowing more expensive.

Mike Mills
00:10:41

So even with the Federal Reserve forecasting more rate cuts this year, this sudden apparent shift in the job market and accelerating debt crisis makes it hard to see, at least right now, how mortgage rates get below 6% before the end of the year.

Mike Mills
00:10:57

But what do you think?

Mike Mills
00:10:58

All right, now let's dive into what's happening in the us housing market right now because there's quite a bit to unpack.

Mike Mills
00:11:04

We're seeing a lot of mixed signals, and it's creating an interesting landscape for both buyers and sellers.

Mike Mills
00:11:08

First, let's talk about home sales.

Mike Mills
00:11:10

So, according to Mike Simonson from Altos Research, we're seeing signs of life in the housing market.

Mike Mills
00:11:15

Small but meaningful.

Mike Mills
00:11:16

The number of homes under contract has risen slightly, climbing for the last few weeks.

Mike Mills
00:11:21

Purchase mortgage applications are also up for the fifth week in a row.

Mike Mills
00:11:24

In fact, purchase applications are up 9% compared to last year.

Mike Mills
00:11:28

So when you have mortgage rates hovering just above 6%, that rate could possibly shake a few transactions loose.

Mike Mills
00:11:34

But let's not get too excited just yet, because these are small moves.

Mike Mills
00:11:39

It's not like we're seeing a big rush of home sales, but it's still a sign of recovery.

Mike Mills
00:11:44

And in this market, we'll take any sign of life we can get.

Mike Mills
00:11:46

Simonson also points out that these pending home sales are up about 6% from last year, and right now there are about 362,000 single family homes under contract.

Mike Mills
00:11:57

But the bigger question is, will this momentum keep up?

Mike Mills
00:12:00

Because as we move into the fourth quarter, typically you start to see a slowdown in the housing market, and the market has been overall pretty weak this year.

Mike Mills
00:12:07

So are we going to head further into the hole as we head into the fourth quarter, or is this a sign that the market might start turning around?

Mike Mills
00:12:12

Inventory is another piece of this puzzle that's been climbing.

Mike Mills
00:12:15

We're seeing more homes come onto the market.

Mike Mills
00:12:17

In fact, 63,000 new listings this week alone.

Mike Mills
00:12:21

But it's still a relatively healthy pace compared to last year.

Mike Mills
00:12:24

In fact, inventory is up 6% compared to this time last year.

Mike Mills
00:12:29

But what's interesting is that some sellers who've been sitting on the sidelines for the last couple of years, especially in markets like central Florida and Texas, may now be motivated by slightly lower mortgage rates to list their homes.

Mike Mills
00:12:41

However, there are some headwinds on the horizon.

Mike Mills
00:12:43

For example, with Hurricane Helene having just hit a big chunk of the country and Hurricane Milton expected to hit land tomorrow next week, we could see a large decline in inventory, like in places like Florida, Tennessee, Georgia and North Carolina.

Mike Mills
00:12:58

Natural disasters always throw wrench in the market.

Mike Mills
00:13:00

And while we're praying for everyone in those areas that are affected as a result of this, we can expect to see overall inventory numbers decline.

Mike Mills
00:13:08

What about home prices now?

Mike Mills
00:13:09

Well, they're holding steady, which is somewhat surprising given how weak demand has been all this year.

Mike Mills
00:13:14

According to CoreLogic, home prices were only down by 0.1% in August, but year over year they're still up almost 4%.

Mike Mills
00:13:21

Corelogic is also forecasting only a modest increase of 0.1% for September and a 2.3% rise over the next twelve months.

Mike Mills
00:13:29

So that's pretty conservative, but it's still growth, and it just means that we're not seeing the big price corrections that a lot of homebuyers were hoping for.

Mike Mills
00:13:36

And interestingly enough, the median price of homes in pending contract has ticked up for the third week in a row.

Mike Mills
00:13:42

It's now just sitting under $390,000.

Mike Mills
00:13:45

That's a good sign for the overall market that buyers are still willing to pay competitive prices for the right property.

Mike Mills
00:13:50

But maybe not the best sign if you're hoping for prices to come down and become more affordable.

Mike Mills
00:13:54

So when we step back a little bit and look at some broader trends, right now, only 25 out of every thousand us homes has changed hands between January and August of this year.

Mike Mills
00:14:04

That's the lowest turnover rate that we've seen in at least 30 years.

Mike Mills
00:14:08

And it's a sign that the us housing market is essentially frozen.

Mike Mills
00:14:11

Elevated mortgage rates, record prices and a low supply of homes are the big culprits behind this.

Mike Mills
00:14:17

And in places like Los Angeles, the situation is even worse.

Mike Mills
00:14:19

Just 15 out of every thousand homes change hands for the first eight months of the year.

Mike Mills
00:14:24

That's the lowest turnover rate among major metro areas in the entire country.

Mike Mills
00:14:28

And on the flip side, the rate of homes being listed for sale is almost at its lowest point in twelve years.

Mike Mills
00:14:33

Just 32 out of every thousand homes is being listed.

Mike Mills
00:14:37

So while there is big movement in the market with more purchase applications, it's still very slow compared to historical standards.

Mike Mills
00:14:44

Right now, we're about 30% below pre pandemic levels in terms of home sales.

Mike Mills
00:14:49

Now, one area that has seen a lot of action is refinancing.

Mike Mills
00:14:52

Refinances are down 3% from last week, but are up a staggering 186% compared to this time last year.

Mike Mills
00:14:59

Right now, refinances are making up about 55% of total mortgage applications.

Mike Mills
00:15:03

And this is the highest level of refinance activity that we've seen since April of 2022 because rates have come down more than 1% over the past few months.

Mike Mills
00:15:10

And homeowners with higher rates are starting to take notice.

Mike Mills
00:15:13

But after rates ticked up again this week above six and a half percent, I would expect that we would see this trend start to fall off pretty heavy.

Mike Mills
00:15:20

But let's not forget, mortgage rates are still high by historical standards.

Mike Mills
00:15:24

So while rates have improved over the last year, they're still keeping some buyers on the sidelines.

Mike Mills
00:15:29

And it's taking time for these lower rates to translate into more purchase activity.

Mike Mills
00:15:33

Honestly, I would expect it to take rates getting down to the low fives to start really seeing people get off the sidelines and list their homes to buy again.

Mike Mills
00:15:40

So what does that leave us?

Mike Mills
00:15:41

Well, the housing market is thawing, but very slowly.

Mike Mills
00:15:45

It's still constrained by higher mortgage rates, limited supply and prices that remain stubbornly high.

Mike Mills
00:15:50

We're seeing a few signs of recovery, but don't expect a massive shift anytime soon.

Mike Mills
00:15:54

As we head into the end of this year, all eyes will be on whether or not momentum carries us into 2025.

Mike Mills
00:16:00

And remember, as Mike Simonson points out, the housing market can change fast, and smart decisions need to be made with the most up to date information.

Mike Mills
00:16:08

Keep an eye on rates and inventory levels, and have your clients prepared to make a move when the time's right.

Mike Mills
00:16:13

Okay, next up, we got some news stories in and around the world of real estate that you may not have heard about, but you and your clients definitely need to know.

Mike Mills
00:16:21

So think renting is cheaper?

Mike Mills
00:16:23

Safer option, perhaps?

Mike Mills
00:16:24

Think again.

Mike Mills
00:16:25

While it might save you money up front, companies like invitation homes are adding hidden fees and cutting corners, making renting far more expensive in the long run.

Mike Mills
00:16:34

Recently, the Dallas Morning News highlighted how the corporate landlords are quietly driving up costs for renters and what it means for your wallet.

Mike Mills
00:16:41

So Dallas based Invitation Homes, the largest landlord of single family homes in the country, has agreed to pay $48 million in a settlement.

Mike Mills
00:16:48

The Federal Trade Commission, or FTC, led the case, accusing the company of engaging in unlawful practices that affected thousands of renters.

Mike Mills
00:16:56

So what exactly are they accused of?

Mike Mills
00:16:59

Well, according to the FTC, invitation Homes was charging junk fees and the kind of fees that we're talking up to $1,700 a year in extra costs for things like smart home technology and utility management.

Mike Mills
00:17:10

And these fees were not disclosed upfront, and tenants had no way to opt out of them.

Mike Mills
00:17:15

So imagine you're signing a lease, thinking that you're paying one price, only to find out later that your monthly rent is significantly higher.

Mike Mills
00:17:21

And since 2019, the company reportedly collected over 18 million just in application fees alone.

Mike Mills
00:17:28

But that's not all.

Mike Mills
00:17:29

Invitation Homes also failed to inspect homes before tenants moved in.

Mike Mills
00:17:32

In fact, between 2018 and 2023, over 33,000 properties submitted work orders for things like mold, broken appliance and even unsafe wiring.

Mike Mills
00:17:41

And some tenants were left in dangerous conditions without emergency maintenance, which was supposed to be provided.

Mike Mills
00:17:47

Twenty four seven.

Mike Mills
00:17:48

And for a company managing such a large portfolio of rental properties, that is a serious failure.

Mike Mills
00:17:53

Another issue was the company's handling of upfront security deposits.

Mike Mills
00:17:57

You see, the FTC found that invitation homes only returned about 39.2 of these required upfront deposits between 2020 and 2022, and that compared to the national average of around 64%, that is a massive gap, and it shows just how widespread these unfair practices were.

Mike Mills
00:18:14

And one of the more troubling accusations relates to their eviction practices.

Mike Mills
00:18:18

During the pandemic instead of guiding tenants to file CDC eviction protection forms, which would have offered some relief, invitation homes allegedly directed them to complete a hardship affidavit, a form that didn't actually protect tenants from eviction.

Mike Mills
00:18:31

Even worse, the company sometimes pursued eviction proceedings after renters had already moved out.

Mike Mills
00:18:36

Those eviction records then appeared on tenant screening reports, making it harder for those individuals to rent in the future.

Mike Mills
00:18:42

Now, this $48 million settlement is a big deal, but it's worth noting that invitation Homes hasn't admitted to any wrongdoing.

Mike Mills
00:18:50

They said that this agreement will allow them to move forward and improve their practices, which of course, we certainly hope happens.

Mike Mills
00:18:55

And as part of the settlement, the company will need to clearly list all fees in advertise rental prices and stop withholding security deposits for normal wear and tear.

Mike Mills
00:19:05

So housing advocates do see this as a potential turning point for regulating large institutional landlords.

Mike Mills
00:19:10

Sharon Cornelius for the Consumer Federation of America pointed out that junk fees have no place in housing, especially as millions of renters are already struggling with rising rents.

Mike Mills
00:19:20

So what does this mean for renters?

Mike Mills
00:19:22

Well, it's just a reminder to always be aware of what's in your lease and to ask questions if something doesn't seem right.

Mike Mills
00:19:27

If you're seeing extra fees that weren't disclosed upfront, that's a red flag.

Mike Mills
00:19:32

And for those of us in the real estate world, this is just another example of how the mom and pop landlord is slowly being replaced with corporate overlords.

Mike Mills
00:19:40

And with home prices, interest rates and insurance and tax at all time highs, renting is becoming the best option for more and more americans.

Mike Mills
00:19:48

The problem is, is that once you get into that cycle and your housing costs are 100% controlled by an entity with no heart or compassion and whose only goal is to improve the bottom line for their shareholders, the more of this kind of stuff you're going to get.

Mike Mills
00:20:02

Okay, look, do corporate landlords own most of the single family properties for rent?

Mike Mills
00:20:06

No, they don't.

Mike Mills
00:20:07

It's still a very small fraction of the overall market.

Mike Mills
00:20:10

But remember, Netflix only had a small fraction of the movie rental market back in the nineties, back in the day days where the mom and pop movie rental place and blockbuster was working its way in.

Mike Mills
00:20:19

But today, Blockbuster is gone.

Mike Mills
00:20:22

All the mom and pops are gone.

Mike Mills
00:20:24

And your Netflix subscription that used to be $4.99 a month is now $6.99 a month if you're willing to watch commercials.

Mike Mills
00:20:30

And if you're not, then you're paying $22.99 a month with no commercials.

Mike Mills
00:20:34

So things happen and change, sometimes slowly, but they change.

Mike Mills
00:20:38

The point being, just because today big corporate interests don't own a large share of the market doesn't mean that in ten years they won't control the vast majority of single family rentals.

Mike Mills
00:20:46

And if you don't own a home, then you will be subject to their terms.

Mike Mills
00:20:50

So we'll keep an eye on how this settlement unfolds and whether it leads to better practices in the rental market.

Mike Mills
00:20:54

But for now, this $48 million fine is a win, at least for renters who've been dealing with all these unfair practices.

Mike Mills
00:21:00

I just hope it is in a short term.

Mike Mills
00:21:02

Okay, now, speaking of market dynamics shifting in the rental market, imagine this.

Mike Mills
00:21:07

You've been saving your money, building your credit and waiting for rates to get to the right place in time for you to make your move into buying a new home for you and your family.

Mike Mills
00:21:16

Meanwhile, in markets all over the country, investors big and small are buying one out of every four affordable homes in the United States.

Mike Mills
00:21:24

That's right.

Mike Mills
00:21:25

Affordable homes are being snapped up by big money, pushing the dream of homeownership even further out of reach for your average everyday american.

Mike Mills
00:21:33

So what's driving the surge, and how is it making housing even more expensive?

Mike Mills
00:21:37

Let me show you.

Mike Mills
00:21:38

So, according to a recent report by Redfin, one in four affordable homes sold in the second quarter of 2024 were snapped up by investors.

Mike Mills
00:21:45

That's up 3%, and it's the biggest surge in investor activity since 2022.

Mike Mills
00:21:49

So why are investors eager to get back in the game?

Mike Mills
00:21:52

Well, elevated home prices and rising mortgage rates have put homeownership out of reach for a lot of americans, especially first time homebuyers.

Mike Mills
00:21:58

Many people who would have been looking to buy now are turning to the rental market instead.

Mike Mills
00:22:03

And investors are taking full advantage of that shift.

Mike Mills
00:22:05

As a Redfin senior economist put it, investors, many of whom can pay in cash, are cashing in on the increased demand for rentals.

Mike Mills
00:22:12

And just to give you an idea what's going on with home prices, the national median home price for a single family home went up 4.9% compared to last year, hitting $422,000.

Mike Mills
00:22:22

That's making it even harder for everyday buyers to break into the market, which is great for investors, but tough for the middle class.

Mike Mills
00:22:28

We're also seeing significant regional trends.

Mike Mills
00:22:31

Cities like San Jose and Las Vegas saw the biggest jump in investor purchases, up 27% year over year.

Mike Mills
00:22:36

And other major California cities like Sacramento, Los Angeles, and San Francisco aren't that far behind.

Mike Mills
00:22:41

But here's the flip side.

Mike Mills
00:22:42

As investors grab more homes.

Mike Mills
00:22:44

California's homeless population is surged to 7.5% between 2022 and 2023, now accounting for nearly one third of the nation's homeless population.

Mike Mills
00:22:53

And here in Texas, we've led the nation in homes purchased by investors in 2021.

Mike Mills
00:22:58

According to the National association of Realtors, 20% of all homes sold that year went to an institutional investor.

Mike Mills
00:23:04

And that share was even greater in exceptionally high growth markets like where I live in Tarrant county, where investors accounted for some 52% of the home sales that year.

Mike Mills
00:23:13

Look, it's a tough situation because on one hand, investor activity can stabilize a volatile market, but on the other hand, it can drive up prices and make affordable housing even harder to come by.

Mike Mills
00:23:22

And the growing gap between home ownership and renting is creating long term challenges, especially as new construction starts to slow.

Mike Mills
00:23:28

With less new housing being built, rents are expected to rise in the coming months, making it even more difficult for those who were priced out of the market to buy.

Mike Mills
00:23:36

And there's also big money moving into the multifamily sector as well.

Mike Mills
00:23:39

Just this month, equity residential bought eleven apartment complexes for 964 million.

Mike Mills
00:23:44

And that's the largest multifamily acquisition by a public real estate investment trust in the last seven years.

Mike Mills
00:23:50

That is a clear signal that investors are betting on the rental market staying strong as homeownership becomes less accessible for the average american.

Mike Mills
00:23:57

So what's the takeaway?

Mike Mills
00:23:58

Well, the housing market is undergoing a major shift, and for many, the dream of home ownership is slipping further and further away.

Mike Mills
00:24:04

Investors are capitalizing on rising rents and limited inventory, which could lead to even higher costs down the road.

Mike Mills
00:24:10

Look, right now, nobody on the planet wants to hear about why they should go out and buy a home, especially from.

Mike Mills
00:24:15

From a mortgage guy like myself or their local realtor.

Mike Mills
00:24:18

But just like many other things in life, we are all so busy living our day to day and just trying to support our family that these big economic shifts that can take years to really start to show in the data and get people concerned is something most Americans just don't have time to pay attention to.

Mike Mills
00:24:35

That's why as a realtor, your job is to pay attention to this stuff and keep your clients aware of the opportunities and threats affecting their ability to own real estate.

Mike Mills
00:24:44

That's why I'm here each week making you aware of this stuff and why you need to be active in looking for these types of stories that will ultimately impact your client's ability to own a home.

Mike Mills
00:24:53

So I'll be here continuing to beat the drum for the american dream.

Mike Mills
00:24:57

Of homeownership.

Mike Mills
00:24:58

And with your help, hopefully we can get enough people to pay attention and finally do something about it.

Mike Mills
00:25:02

We're all in this together.

Mike Mills
00:25:03

All right, let's get into the heart of today's episode.

Mike Mills
00:25:06

So mortgage rates went down, then they went right back up.

Mike Mills
00:25:10

Did you miss the boat on refinancing your mortgage?

Mike Mills
00:25:12

And have you lost your chance to save thousands on your housing costs?

Mike Mills
00:25:16

Today we're going to talk about whether it's time to refinance now, or if there's another opportunity coming down the road.

Mike Mills
00:25:21

So if you're sitting on a higher rate from a home that you purchased in the last couple of years, or your debt load is drowning you in monthly payments, then this is for you.

Mike Mills
00:25:30

Alright, so let's start with the recent roller coaster that we've been on with mortgage rates this year.

Mike Mills
00:25:33

Back in September, we saw the Fed take its first action to cut rates in a very long time, hoping to give the economy a little boost because of rising unemployment and slowing inflation.

Mike Mills
00:25:42

The expectation of that move caused mortgage rates to drop significantly in the months leading up to that September Fed meeting, almost over 2% drop in rates.

Mike Mills
00:25:51

And for a while there, with rates hovering just above that 6% mark and the promise of the first rate cut on the horizon, it looked like the perfect opportunity for homeowners to refinance and lock in some serious savings.

Mike Mills
00:26:02

But then, as it always does, the market didn't do what everyone was expecting.

Mike Mills
00:26:07

And just when people thought they saw a window to jump in, rates have shot back up over six and a half percent.

Mike Mills
00:26:12

Look, the mortgage market can be unpredictable.

Mike Mills
00:26:14

And while rates most likely will dip again, there's really no guarantee that they'll stay low as we close out this year, because lately we've seen a lot of economic inconsistency in the data.

Mike Mills
00:26:24

And with 30 days until this year's election, nothing is for certain in the market right now.

Mike Mills
00:26:28

So for homeowners who locked into those higher rates over the last two or three years, it can be very, very frustrating.

Mike Mills
00:26:33

You see those lower rates and then before you can act, they just disappear into thin air.

Mike Mills
00:26:38

The big question is, what happens next?

Mike Mills
00:26:40

Could rates go up even more, or will there'll be another opportunity to refinance later this year?

Mike Mills
00:26:45

That's the dilemma that a lot of people are facing right now.

Mike Mills
00:26:47

The important thing here is to stay alert.

Mike Mills
00:26:49

We've seen how quickly rates can change, and if they drop again, you want to be ready to take advantage of it.

Mike Mills
00:26:54

Now, let's talk about who should be considering refinancing whether you're looking to lower your monthly payments, get a better rate, or tap into your home's equity, refinancing can be a smart move if the time is right.

Mike Mills
00:27:05

First off, if you're someone who's sitting on a lot of high interest debt, think credit cards, car loans, or personal loans.

Mike Mills
00:27:11

Tapping into that home equity through a refinance could be a game changer for you.

Mike Mills
00:27:14

You see, mortgage rates, even when we're in the 6% range, are still lower than interest rates on most credit cards, which can run anywhere between 15% to 25% right now.

Mike Mills
00:27:23

Imagine paying off all that high interest debt and rolling it into a single lower monthly mortgage payment.

Mike Mills
00:27:28

Not only does that free up some breathing room in your monthly budget, but you'll also be saving a lot of interest over the long run.

Mike Mills
00:27:35

Next up, there's a group of homeowners who bought a house in the last two or three years when rates were higher than they are right now.

Mike Mills
00:27:41

Many of you are locked into mortgages with rates above 7%.

Mike Mills
00:27:44

And even though rates have gone up again just recently, they dipped before and they will dip again.

Mike Mills
00:27:50

So when the opportunity presents itself, refinancing could mean big savings for you.

Mike Mills
00:27:55

Even with just a slight drop in rate, say between six and a half to 6%, that could translate into thousands of dollars saved over the life of your loan.

Mike Mills
00:28:02

Then we have folks out there that are getting very close to some major life events, retirement, sending kids off to college, or even planning for a big family expense.

Mike Mills
00:28:10

Refinancing now can give you access to that home equity when you need it the most.

Mike Mills
00:28:14

By tapping into your home's value, you can create a financial cushion for yourself during these uncertain times.

Mike Mills
00:28:20

And let's be honest, with so much unpredictability in the market, having a little bit of extra flexibility could make a huge difference in your household budget.

Mike Mills
00:28:28

But here is something important to remember.

Mike Mills
00:28:30

Timing the bottom of the market isn't everything.

Mike Mills
00:28:32

A lot of people hold off on refinancing because they were waiting for that perfect rate.

Mike Mills
00:28:36

But here's the reality.

Mike Mills
00:28:37

If you wait too long, you might miss the boat entirely.

Mike Mills
00:28:41

Even if rates aren't at rock bottom, refinancing at a slightly higher rate can still make sense, especially if you're carrying high interest debt or need to lower your monthly payments.

Mike Mills
00:28:50

It's all about what's best for your situation right now.

Mike Mills
00:28:53

The key takeaway on here is this.

Mike Mills
00:28:55

Don't focus on hitting the absolute lowest rate if refinancing can save you money today, help you consolidate debt or give you the flexibility to handle life changes.

Mike Mills
00:29:04

It could be the right move, even if rates aren't at their lowest now.

Mike Mills
00:29:08

Let's assume you find yourself in a place where you think refinancing might be the good move now or in the very near future.

Mike Mills
00:29:13

Before you jump in, though, there are a few important components that you need to consider.

Mike Mills
00:29:17

Let's talk about the costs involved, the timing, and the key questions that you should ask your lender to make sure refinancing works in your favor.

Mike Mills
00:29:24

First, one of the big factors to pay attention to is timing.

Mike Mills
00:29:27

As we've already discussed, mortgage rates have been on a bit of a roller coaster this year.

Mike Mills
00:29:30

Rates dropped earlier in 2024, but they've recently shot back up again.

Mike Mills
00:29:33

So if you're looking to refinance, it's essential to stay informed about interest rate trends.

Mike Mills
00:29:38

Keep an eye on any decisions by the Federal Reserve or major economic indicators like inflation, war, and job numbers, because these things could push rates up or down in the coming months.

Mike Mills
00:29:49

And if you really want to try and nerd out, watch the ten year treasury bill.

Mike Mills
00:29:52

If it goes up, rates are going up.

Mike Mills
00:29:54

And if it goes down, often mortgage rates are going to follow.

Mike Mills
00:29:58

Timing is everything.

Mike Mills
00:29:59

Refinancing at the right moment could save you thousands over the life of your loan.

Mike Mills
00:30:02

Now, let's consider the costs.

Mike Mills
00:30:04

One of the most important questions to ask your lender is, what are the costs involved?

Mike Mills
00:30:07

Closing costs on a refinance can range anywhere between two to 5% of the loan amount, so it's crucial to understand what exactly it is that you're paying for.

Mike Mills
00:30:15

These costs typically include appraisal fees, title insurance, origination fees, basically anything that the lender has to pay on your behalf to do the loan.

Mike Mills
00:30:23

And once you know these costs, the next question to ask is, how long will it take me to break even on these costs?

Mike Mills
00:30:29

This is key because refinancing only makes sense if you'll stay in the home long enough to recoup those costs through the savings from your lower rate or your credit card monthly savings.

Mike Mills
00:30:40

So, to calculate your break even point, you divide the total amount of your closing costs by your monthly savings after the refinance.

Mike Mills
00:30:48

For example, if you save $200 a month and your closing costs are $4,000, it will take you 20 months to break even.

Mike Mills
00:30:54

And as an industry, we say if it takes you less than three years to break even on your costs, then it's a good move.

Mike Mills
00:31:00

If it takes you three to five years to break even on your costs, then it might be something that you consider a little bit, depending on if you plan on staying in that house or not.

Mike Mills
00:31:07

And if it takes more than five years for you to break even on your cost, then it's probably something you need to hold off on.

Mike Mills
00:31:12

And here's something that a lot of homeowners don't fully realize, you may be able to roll some or even all of the costs into your new loan.

Mike Mills
00:31:19

This is especially helpful if you don't have the cash upfront to cover the closing costs, but you'll need to ask your lender if that's an option for you.

Mike Mills
00:31:26

Often these options come down to how much your home is worth and what your current equity position is.

Mike Mills
00:31:32

Just keep in mind that rolling costs into the loan means that you'll be paying interest on those fees over time, so make sure it still makes financial sense.

Mike Mills
00:31:41

Another important question to ask your lender is can I lock in?

Mike Mills
00:31:44

Today's rates can fluctuate from the time you start your application to the day that your loan closes, so locking in your rate early can protect you if rates go up.

Mike Mills
00:31:52

And many lenders like myself, offer what's called a float down option, which means that we can lock your rate.

Mike Mills
00:31:58

But if the rate falls before you close your refinance, you might have the option to get the lower rate even after you've locked.

Mike Mills
00:32:04

But also ask what happens if rates drop again after I refinance?

Mike Mills
00:32:08

It's a good idea to get some input from your lender on rate on where rates would have to fall from where you are now in order for a refinance to make sense again if rates keep dropping.

Mike Mills
00:32:17

And lastly, timing really does matter.

Mike Mills
00:32:19

Don't forget to ask your lender about their perspective on upcoming rate trends.

Mike Mills
00:32:23

Are rates expected to rise, or could we see another dip in the near future?

Mike Mills
00:32:27

Staying informed about the market can help you better decide on whether to refinance now or wait for a better opportunity.

Mike Mills
00:32:33

Okay, just to wrap things up, a couple of reminders.

Mike Mills
00:32:36

We've seen rates go up and down this year, and while they're back up right now, that doesn't mean the opportunity to refinance is gone.

Mike Mills
00:32:42

Whether you're carrying high interest credit card debt, stuck with a higher mortgage rate from the last few years, or preparing for major life event like retirement or college, refinancing could be a smart financial move if the time's right.

Mike Mills
00:32:52

Secondly, timing matters.

Mike Mills
00:32:54

You'll want to keep an eye on upcoming fed decisions and market shifts, but just important are the costs.

Mike Mills
00:33:00

Make sure that you understand the closing costs involved calculate how long itll take you to break even and talk to your lender about rolling costs into the loan if needed.

Mike Mills
00:33:08

And dont forget to ask about rate locks and what happens if rates drop after you refinance.

Mike Mills
00:33:12

The key is staying informed and working with a lender who can guide you through the process.

Mike Mills
00:33:17

Now, if youre not sure where to start, reach out to a mortgage professional to get personalized advice.

Mike Mills
00:33:22

And if you need a trusted referral, ask your local realtor.

Mike Mills
00:33:25

They can connect you with a lender who will help you explore your options without all the pressure.

Mike Mills
00:33:30

Or you could just give this old bald podcaster a call as well.

Mike Mills
00:33:34

I make these videos to help people understand how crazy the mortgage stuff works, and I know because I do them every day.

Mike Mills
00:33:40

So if you want some expert insight on if now is the right time to refinance, give me a call.

Mike Mills
00:33:44

I'd be happy to walk you through it.

Mike Mills
00:33:46

The bottom line is this.

Mike Mills
00:33:46

Don't wait until it's too late.

Mike Mills
00:33:48

Refinancing could save you money today, help consolidate debt, or give you flexibility to handle what life throws your way.

Mike Mills
00:33:55

So take the next step.

Mike Mills
00:33:56

Talk to a lender, review your mortgage, and see if now is the time to refinance.

Mike Mills
00:34:01

All right, guys, that is a wrap for today's episode.

Mike Mills
00:34:03

I hope you found our discussion on rising mortgage rates, refinancing, and the big moves institutional investors are making the housing market insightful.

Mike Mills
00:34:10

Whether you're a homeowner thinking about refinancing or someone worried about the future of affordable housing, there is a lot happening in today's real estate world.

Mike Mills
00:34:18

And remember, the market may be shifting, but that just means that there's opportunities if you stay informed and act intelligently.

Mike Mills
00:34:25

Join me this Thursday as I welcome back a good friend and regular the show.

Mike Mills
00:34:29

Back to the podcast, Mister Conrad Jackson.

Mike Mills
00:34:31

Conrad's a realtor, builder, investor, YouTube star, and my good friend.

Mike Mills
00:34:35

We'll be diving into ways you can uncover opportunities for income in this slow market.

Mike Mills
00:34:39

So if you like money, you don't want to miss this one.

Mike Mills
00:34:42

As always, I appreciate each and every one of you guys out there for being a part of this community and for tuning.

Mike Mills
00:34:46

So until next time, be good.

Mike Mills
00:34:48

Humans.

Mike Mills
00:34:49

Just keep grinding.

Mike Mills
00:34:50

Life is what you make it, so make it great.

Mike Mills
00:34:52

See you.