February 24th, Market Update and Mindset Call with Nikki, Cari and Angie

Everything is looking positive in today’s mortgage landscape! We dive deep into recent trends in interest rates, providing insights on how buyers can strategically navigate the current market conditions. 

Watch for the housing number to come out later this week or tune in next week for all you need to know!

• Recent improvements in interest rates make home-buying more accessible 
• Upcoming inflation data and its expected impact on mortgage rates 
• How small changes in rates can significantly affect monthly payments 
• Emphasizing the importance of a tailored home-buying strategy - 60 is the magic - number + or -
 

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Chapters

• 0:00 Welcome and Good News on Interest Rates
• 16:35 Understanding Inflation Data and Its Impact
• 36:35 Homebuyer Strategies and Tips for Current Market

Transcript

Speaker 1: 0:44

Thanks so much, everyone for joining us today, and yeah, I'll let Nikki get right to it.

Speaker 2: 0:50

Well, good morning everyone. I'm so happy to hop on these calls now because I am seeing some consistent good news come out of interest rates, so I'm super happy to be able to come on these calls and report some really good news for a change. So the big thing last week is that we had a huge, quite a huge improvement in interest rates on Thursday going into Friday, which is good news. We are now solidly in the mid sixes, which is a really good opportunity for a lot of clients who were looking at interest rates of the low sevens, you know, in early last week and now they're into the mid sixes for 30 year conventional loans Great news and we're hoping to see that continue to move in the right direction. This week. What we're going to be getting is inflation data, so this will come in with your core PCE and your consumer price index. So those two factors as they go up and down. That's kind of what the Fed uses as a reading for inflation. What we're expecting is that the headline inflation goes from 2.6 to 2.5 and that the core reading goes from 2.8 to either 2.7 or 2.6. This means a decrease in inflation, which is wonderful for mortgage interest rates and wonderful for the bond market. So that's what we're expecting. Those readings come in on Friday. We're also going to get some home sales numbers this week. We're getting housing pricing index and all the different data that we use on a month-to-month basis to really help determine where that bond market is going to sit. If we can get some good, favorable news on Friday from an inflation standpoint, we should see some good improvement on interest rates as well, simply because if we see that inflation come down in those in that bond market can come down past what we call the 100 day level, which is like what we call a Fibonacci level. That means that we have a lot of room to go even further, even down even further, without the market being too much of a of an effect to it. So that's what we're hopeful for this week. So we'll kind of wait and see what's going on there.

Speaker 2: 2:40

I was kind of thinking about what to talk about, as far as you know, in the streets and from a mortgage specific perspective. So I wanted to give a little relativity to, as I talk about these interest rates going up and down, what does that mean from a cost to your borrower? Like, if interest rates go down a quarter. What does that mean? How does that improve their were Like? If interest rates go down a quarter? What does that mean? How does that improve their monthly payment and what does this actually mean for them?

Speaker 2: 3:04

So a couple of rules that I tend to live by, especially right now in the rate market, is, from a down payment perspective, for every $1,000 that the client puts down on the home, that reduces their payment about $6. So for every $10,000, that's a $60 a month reduction in payment. Now, of course, these are just roundabout numbers that we use from an average's standpoint, but it is a good general rule of thumb and usually works out to about that way within a couple dollars. So that's always good to know. So when your client is deciding, you know, is this home too high for me from a price point? If they're looking at $450 and the home is priced at $460, that's $60 a month. Do they think that they can do that? Does that work within their budget?

Speaker 2: 3:48

The other important rule of thumb that I'd like to talk about is interest rate. So with interest rates as they're going up and down, a quarter percent improvement in interest rate generally on about a 350 to $400,000 loan, a quarter percent improvement is about $60 as well 60 to $64 depending on loan amount. So a good rule of thumb is quarter percent and every thousand dollars, or a quarter percent and $10,000 is a $60 difference in payment as a general rule of thumb. So you're going to have obviously dollar differences here and there based on loan amount and such, but it's always good to have that as a rule of thumb. So you're gonna have obviously dollar differences here and there based on loan amount and such, but it's always good to have that as a rule of thumb.

Speaker 2: 4:24

As you're kind of meeting and you're deciding on price point and budget comfort and things of that nature, the other option you can do is reach out to me. I can always run numbers and say, okay, if we purchase this home at 460, 470, 480, 490, what does that look like? So they can see the actual, real numbers based on their situation. So just some things to keep in mind as you're talking about. Oh, what are interest rates doing? Are they going up or down? How is that payment affecting them from a monthly standpoint? Because at the end of the day, that's really what's most important to clients is what's my monthly payment going to be and how much is this home going to cost me every month?

Speaker 1: 4:58

Yeah, I think it's important. So then you have that idea and, even again, it's a baseline to talk to and talk from. Always give that caveat that they'll want to talk to Nikki. Just to run the numbers because it is variable, but it definitely is something. Again, I talk about it.

Speaker 1: 5:15

Nikki does such a great job, show up and educate. So anyone that's on this call or listening to this recording, take that information that you just heard and go to social media with it and educate your sphere, your past clients, people that know you, like you, trust you. It might not be them right now, but I imagine, of the 250 to 600 people on average that they know, we all know that many people maybe one of them's thinking so, be the educator for sure. And I just want to open it up to anyone on here that has a question for Nikki or myself. I know that there's eight live here, so I just want to check in with you all.

Speaker 1: 6:01

Unmute yourself. Feel free to. If you have anything that you want to go over, all right. If not, nikki, what I was thinking about as you were talking, that I would love for you to just touch base on, and I know a few months back I brought it up a couple times, but it goes along with the conversation today. So can you go back and talk about, when the rate does adjust a quarter, what happens with buyers that enter the market, or what does that look like as we're going into the spring market and people are still waiting?

Speaker 2: 6:36

I'd love to have that conversation again you mean about, like when interest rates start to below, and really what it does is it creates more competition in the market. So it creates more competition from a price standpoint, from the number of buyers that can enter into your price point. And I want to say I remember the statistic for every quarter percent drop in interest rate or no, I'm sorry, for every 1% drop in interest rate, there's 5 million new buyers that are eligible to purchase in the same price point as you. So it's really kind of a number that you can go whoa, that's a lot of competition that enters into the market as these interest rates go down.

Speaker 2: 7:12

I also saw something very interesting that was talking about like in 1973, mortgage interest rates were about seven and a half, 7.75% on 30 year fixed and if those people in 1973 waited for interest rates to drop before they bought a home, they would have been waiting till 1993. And so you sit there and you go okay, so they would have had 20 years of paying on this mortgage that they could have had at the seven point, whatever interest rate, until mortgage interest rates drop. So waiting until mortgage interest rates drop isn't always the answer. Yes, we feel like it's going to be 12 to 18 months, but we felt like it was going to be 12 to 18 months 12 to 18 months ago. And, yes, it has improved since that time. I would say probably about half a percent to three quarters, depending on what month you look at, et cetera, but we haven't seen the improvement of two or three percent points like people were expecting.

Speaker 2: 8:04

And so, as we continue to move into this year and continue on with this year, it's one of those things where, yes, are we seeing some improvement, absolutely, but are we going to see the significant improvement that we want to see in 12 to 18 months? We're, you know, entirely expecting it but not incredibly sure of it, you know. I mean many things could happen and with you know, a lot of things changing from an economic standpoint. Right now we're in uncharted waters and uncharted territories in a lot of ways because a lot of these different economic structures and things like that haven't put pressure on mortgage interest rates in the past like they are, like they are going to be here in the future. So, if there are buyers that are on the fence, my biggest piece of encouragement lock in the interest rate. Worst things, worst case scenario things get better and you refinance into a lower interest rate. I mean that's the worst thing that could happen, but otherwise you're locked in and your housing payment is stable.

Speaker 1: 8:58

That's what I was just going to bring up too is how, just bringing it back to the conversation of rates and not necessarily waiting and moving now. Is there any conversations or any direction you can give us on the call or those listening to the recording about how to have those conversations? I know for a while the tagline was marry the home date, the rate we can refinance, and I know even with you, nikki, you had some different tools and programs and different ways to plan for that happening. Is that still the case, or can you educate some of the people that are new to this call?

Speaker 2: 9:35

Yeah. So what a lot of times we talk about with clients is yes, we talk about interest rate, but we don't talk about it as the whole story. Yes, we talk about monthly budget, but we don't talk about that as the whole story either. What we really focus on is the strategy of buying, and what I mean by that is everybody's situation is different, right? So you have clients who are first-time homebuyers that are putting their life savings into down payments and closing costs. That's one situation that needs to be strategized completely differently than a third-time homebuyer buying a new construction home with 20% down.

Speaker 2: 10:09

So we really have to concentrate on what is the strategy behind buying, because when we think about monthly payment, for an example, what are those things that are going to happen over the next five years that can affect monthly payment, your tax cost and your insurance cost? What are the significant life events that you have that you know of coming up in the next five years kids graduating college, someone's getting married, you're potentially having children or grandchildren. You know things that are going to affect your outside life budget, that are going to influence how and why you would buy a property. And, yes, feeling the home, loving it, falling in love with it, making it a home, are all important things. Those things also cost money as well.

Speaker 2: 10:49

So, knowing that we have to kind of take all of those tidbits and strategize on how to buy a home financially smart from a financial perspective and also have it fit into your life events, your daily life, your furniture, your home, your you know use and enjoyment of the property, use and enjoyment of travel time, you know things of that nature that are important to each person, and that's where getting that personal information from them is going to be extremely important, because the house can be a completely business transaction from a financial perspective only. But that relationship is what's going to make it feel like a strategy, a holistic strategy in a home and feel like you're bringing value to them. And so really what that strategy is is what we focus on when we're talking to clients about what is their budget and how do they want to buy.

Speaker 1: 11:42

Oh my gosh, I love that. So we're strategists.

Speaker 3: 11:45

So what would that?

Speaker 1: 11:46

look like to you if you went to market or went to your social media let's strategize, I'll come alongside you. Consultants, strategists, I mean, it's true, and everyone's story is different. And if you take out just buying a home, I will help you buy, sell or invest in real estate. Buy, sell or invest in real estate. What would it look like if you open that up and you were, you were like oh well, what is, what are your goals? Not only real estate goals, but your goals, dreams, desires, lifestyle, like. What do you want this to look like? What are they today? What are they going to be in a year, in five years? And then you can take that holistic approach and really show up. That's I love. That's kind of what came to mind as you were talking, Nikki. I love it.

Speaker 2: 12:29

Yeah, and it could be something that you know. Keep in mind that that strategy could center around the purely the idea of something super simple I want a pool, so super simple request. They want a pool? Okay, great, awesome. What does that look like from a monthly cost standpoint? What does that look like for maintenance? Do you want a heated pool? You know that's going to affect your electricity bill, all these different things that you can talk about from a financial perspective and saying, okay, what they desire, a pool, but what do they really desire? Private area, you know, family over entertaining, you know, and really getting to the core of how they feel about that pool versus what's the financial aspect. And if you can meld those two together, that's where that value is going to come in. And that's just one example, of course.

Speaker 1: 13:16

Yeah, absolutely. So great, so great. Anyone have any questions? We're at the 15 minute point. We're at the 15-minute point so I promise to keep it to the point and short, so you guys continue to get value and show up, but open it up.

Speaker 3: 13:37

We're here for questions, so based on the hello.

Speaker 1: 13:40

Yes, go ahead, Amanata.

Speaker 3: 13:42

Hi everybody.

Speaker 2: 13:57

Based on the strategy you just gave. I want a pool. How about if I want a garage? What are your tips on that? I want three garage, say.

Speaker 2: 14:04

Someone says, well, I want a third stall garage because I want to have a garage space or a man cave or whatever they want to call it. Well, are there options for a two car or an extended two car garage? Or are there options for a tandem garage? Or are there options for a you know, she shed or something else that could be part of a property or part of a different style of property, depending on what that need is? For that third stall, you know?

Speaker 2: 14:27

So we were actually just talking about this beautiful property that we had seen over the weekend, because we're obsessed with real estate and love going looking at houses.

Speaker 2: 14:35

But we had seen this beautiful home but it had a two car garage and we're like gosh, you know, that home would be so cool if it had a third stall. And what we figured out is that the reason that that home would be so cool with the third style is because the community that it was in was a community that uses golf carts to go around the entire community, all those things. And it's like you really, you know, as a buyer of that home, it would make sense that you would really want some sort of place to put that golf court, golf cart. So that's just one way of talking about a third car garage and say, okay, what's that going to be used for? And if it has to be a third car garage, great, awesome, because you need it for a physical car, that's one thing. Or could it be a concrete pad? Could it be something that you could do after the fact that you don't necessarily that doesn't jump your price point entirely. Does that make sense?

Speaker 3: 15:19

Yeah, it makes sense and I already know the why. Okay, it's just challenging to find something at that price range.

Speaker 1: 15:41

Yeah, bids are what this looks like or on this average size. You know home or lot or adding a stall will run x amount of dollars so that you can kind of give that value and show or connect them with. You know two or three local people that could have that, contractors that can have that conversation at a really high level and again help them. Maybe it's outside of purchasing the home. They purchase the home and then they go over here and they figure out different avenues, financing options on adding that third stall or she shed or man cave or whatever it looks like is thank you so much.

Speaker 3: 16:22

Is it okay if I clarify this quick? So I've been a little bit confused. Okay, so this, this person for the garage. They have a townhome with two garage and they want three because it's three adults their wife and husband and wife and a son. But Michael, okay, so when you're selling a house and you want to buy another house, do you still need a lender? I thought you need a lender, but I'm not sure now.

Speaker 2: 16:52

Yes, you still need a lender for the new home purchase. Okay okay thank you, unless they're paying cash for the new home okay, thanks, yep okay, anyone else have any questions before we wrap up today?

Speaker 1: 17:12

All right, everyone. Well as usual. Thank you so much for joining. If you want to watch the replay and catch the beginning of the call, if you didn't catch it, go to my YouTube channel or podcasts or social media. I'll put it all three places. It's a great call, as usual. So thank you, nikki, thank you everyone and, as you know, nikki and I are here in between calls for help in any way.