Mary Beth: Hi, this is Mary Beth Harrison with Dallas Native Voice, and I’m once again sitting with Jason Browning with Academy Mortgage and I’m wanting to get kind of an update of the state of the financial market for the fall of 2018. We’ve seen already so many changes in interest rates. I don’t think it’s a matter of if but when, and so you’ll have to give me an update on that. We’ve already seen it go up, gosh, a full what? Point a half since this time last year.
Jason: That is correct. So, the Fed chairman said that our economy is basically firing on all cylinders right now, and he also stated earlier in the year that they were going to have three rate increases this year.
Mary Beth: Okay.
Jason: So we’ve basically had two of those already, that’s what you’re seeing. And the bond market, which is what traded, mortgage bonds is what’s traded to kind of dictate what interest rates are going to be is battling what’s going on in the stock market. Like, this morning the stock market opened up quite a bit higher than it did yesterday and rates are already going up. Just like a see saw. Stock market’s up, bonds are down, rates are going to up.
Mary Beth: Basically, rates change every day don’t they?
Jason: They change every minute of every day.
Mary Beth: Okay.
Jason: They really do.
Mary Beth: So I could be starting with you this morning, and by this afternoon that rates changed?
Jason: Yes. Down. It’s gone down.
Mary Beth: Wow. Wow. Okay. All right. I assumed it was a one time a day change.
Jason: Yeah, usually we get an update throughout the day, or maybe a couple times a day, but usually … I have alerts set up that if something moves drastically either way, I can reach out to my clients and say, “It’s a good time to lock, or maybe not.” So you really want to keep a pulse on what’s going on there, for sure.
Mary Beth: All right. Good to know.
Jason: But, they say it’s going to continue rise throughout the rest of this year. There’s going to be one more hike on the interest rates, they say, and again it’s really just about what’s going on with the economy and if it looks like we’re doing well and we’re able to spend the money, then the rates should go up. But again, maybe not dramatically, but maybe anywhere between an eighth to a quarter of a point, give or take. I’d hate to try to pin that down.
Mary Beth: I don’t know if you can answer this just off the top of your head, so I don’t want to throw you on this one, but I’m curious. For a point, from, say, a 4% to a 5% which we saw happen this year, how much more earnings does someone have to have, or qualification or is there a benchmark for each half a point of what it knocks someone out of the market? I’m …
Jason: Yeah, usually what knocks them out of the market, per se, and again a lot of that’s going to depend on the size of the home that they’re wanting to purchase and how much they’re going to finance. So if they’re going to finance quite a bit, then that half a point could necessarily not disqualify them but take them out of what they want to spend. So that’s why it’s very important for us to find out what your budget is. Not just the size of the home, but what are you wanting to spend, because then we can get creative and get there to that dollar amount as opposed to buying a $300 thousand house.
Mary Beth: So I could come to you and say, “Jason, I want my payments to not be more than $2 thousand a month.”
Jason: That’s correct.
Mary Beth: And you can then work backwards for me.
Jason: Yes ma’am.
Mary Beth: Okay. Let’s go back to state of the … I’ve got you completely off topic there, but you know I’ll do that to you all the time.
Jason: That’s okay. That’s okay. That’s what I’m here for. But you know, it’s really, like you mentioned earlier, it moves not only day to day but minute to minute, and it’s just very important to keep a pulse on that and to make sure that you’re having these strategy calls of if what happens here, what do we do?
Mary Beth: Right.
Jason: And you just really want to make sure that you have a focus on that and make sure that knowing that rates are important but really irrelevant until you have a property to purchase.
Mary Beth: Right.
Jason: So just kind of keep along with it, make sure that it fits your budget as they do change, because you don’t want to think you’re going to spend $2 thousand and now that $2 thousand is now $23 hundred.
Mary Beth: Right.
Jason: They may say, “Well, I’m not buying that home. I have to go down to a lesser purchase price” or something like that.
Mary Beth: Right. So it’s, you know, you think finding a lender is a simple matter of let’s find someone that’s going to loan me money, period, end of story. But that’s such a small beginning. If you don’t have a lender that keeps an eye on those kind of things and can help counsel you through this whole process, it’s not a simple matter of, “I want to buy a house and I need advice, and I need some money.” It doesn’t stop there. It’s kind of like finding a realtor who’s going to help you understand why this neighborhood or why that neighborhood or the nuances of a market is so important and if you don’t have someone to both advise as well as loan you the money, you’re going to be out there kind of on your own trying to navigate this process and it’s a difficult process.
Jason: Absolutely.
Mary Beth: This is not for the faint of heart, to give a loan anymore.
Jason: You’re really doing yourself a disservice if you’re not dealing with a quality individual like yourself on the real estate side and as a lender as well.
Mary Beth: Yeah, yeah. No, I see that all the time, and I really try to counsel my clients. It’s so important who you associate with on getting this loan. It’s not all, it’s not an easy thing to do anymore, and there’s a lot of little things that go into it that we just don’t even think about.
Jason: That is correct.
Mary Beth: I know, off topic again, I’m really good at this.
Jason: No, no, I mean-
Mary Beth: So now tell me what else am I missing here?
Jason: Yeah, I mean, I think that’s really going to narrow it down. I mean, kind of the big movers from a week to week standpoint are the jobless claims, things like that.
Mary Beth: Well, and that’ll go up because it’s seasonal, so we’re going to see jobs go up exponentially.
Jason: Right.
Mary Beth: It’s always so weird to me that people are shocked in January when the job market dropped. I’m like, “All those seasonal people that got hired in October to get prepared for Christmas, especially in retail, all go away.” It’s just, it’s like why should that be shocking to anybody?
Jason: Exactly. It’s par for the course.
Mary Beth: It is.
Jason: You know, a couple other things to pay attention to, what’s happening globally, and that usually has an indication on what’s going to happen in our markets as well, and that’s usually where we’ll see something happening before the market even opens, you know. You’ll see that, hey, we went to bed last night, everything was fine. Something happens overseas and we wake up to some volatility. So, it’s just making sure that you’re navigating that and then having a plan, a plan of attack or a preemptive plan.
Mary Beth: Right. I don’t think people realize globally our imports and exports are what’s a huge portion of that, and when that gets stopped or slowed down for any reason it kind of trickles down to, again, the jobless, the manufacturing and everything else. It’s kind of one throw, stone’s throw makes this big ripple that we don’t even think about as we go to sleep at night and the market’s open.
Jason: That’s very true. And again, I would say rates are still, even though they have gone up in the last year and a half, two years, they’re so relative. If you start looking at our grandparents when they were buying their first home, the rates were 13, 14, 18%, things of that nature.
Mary Beth: I started a business and rates were 19% when I became a realtor and so it was nothing for me to go, “Okay, 19%. It is what it is.”
Jason: And just pay it.
Mary Beth: Exactly.
Jason: People are still going to go after the American dream of owning a home, and again, just making sure that you have the planning in place to meet your budget, have that plan and then execute on it.
Mary Beth: I think the main thing for people, and I saw it last year when the market got so difficult for our buyers to find a house. They just got frustrated and got out of the market. But the reality is, rates have gone up a whole point now and prices have gone up and it’s really priced some of them completely out of the market.
Jason: Absolutely.
Mary Beth: So the cost of waiting is really pretty significant.
Jason: It absolutely is. It absolutely is.
Mary Beth: You know, we know rates are not going to go back down.
Jason: Right.
Mary Beth: They’re not, and so they’re only going to go one way, and just sooner rather than later is kind of the point here if you’re thinking about home ownership.
Jason: Well, and now the inventory’s back, right?
Mary Beth: Absolutely.
Jason: We’re sitting at a good inventory place, and now with rates being, again they’re not jumping dramatically daily. So, strike while the iron’s hot, in my opinion.
Mary Beth: Exactly. All right. Well, thanks so much for all this information. And thanks for listening. You know you can find us on all the social medias and at our dallasnative.com site.