“ I heard the market was red hot and homes are selling for more than the asking price” this is what we are hearing daily from our clients. Is this true anymore or is something else going on now? All you hear on the TV and Radio is that the Real Estate Market is red hot, but is this really true? In my 37 years in the Real Estate and Mortgage business, I have never seen a market quite like this one we are experiencing. I also hold a degree in economics and have not seen anything like this in history. So what’s going on, one minute things are going crazy with low interest rates and more buyers than sellers. The next minute everything slows down.
This is happening across the board, interest rates are still at historic lows, but it appears everyone that has had the opportunity to refinance and take advantage of the low rates has done sone so. Or is it that, like COVID, we are about to experience a second wave of people refinancing and buying homes. We have never seen such a market in the past so there is no real model to judge this on. But we have seen a dramatic slow down in home buying and refinancing over the last 3 months. In California, they lifted the mask mandate, and it appears those that have been locked down decided to all go on vacation at the same time.
We generally see a summer lull in Real Estate, however, this one is far more pronounced than ever before. It has me and others asking if this lull is just that or is it something else? I do see this as the market seeking an equilibrium point, not an all-out bust. I have seen big news in the markets before and the way the markets tend to react to this is by over-correcting on both sides. I would liken this to stretching a rubber band and letting it go, it will spring up then back down then reach an equilibrium point. Right now, in the real estate market, we are seeing a bounce down or a slowdown after it was super-heated.
Another factor that we have not seen before is that California was shut down for 15 months and people were told to stay inside and not travel. In a normal year, people would travel all time of the year but the last year and a half have been far from normal. What we saw during the pandemic was people staying home not traveling, so when they were told they could now go out and about they did and they are still are taking vacations and traveling not thinking about Real Estate or their mortgages. Couple that with their kids being out of school they are taking full advantage of the time they have out of their houses seeing family they have not seen in months and enjoying the outdoors while the weather is good.
Understanding how humans think is a big part of economics. So as schools reopen in August and kids head back to the classrooms that will leave the parents back home and working with the time to think about their living situation and their financial situation. Coupled with low-interest rates that the Federal Reserve says they are keeping low until 2023 I believe that the Real Estate market will pick up again by the end of August and into September, but it will not be at the pace we saw during the height of the pandemic thus the bounce. Another interesting phenomenon that will be discontinued in September is the extra $300 a week in unemployment benefits. This will send people back to the workforce, but will the economy be able to accept all of these long-term unemployed folks that took advantage of the system? As an employer, I would not hire an able-bodied person who chose to stay on government assistance rather than work as that shows me laziness and I think this will be a big issue in the high-end job market. Entry-level jobs like Walmart, retail jobs, and restaurant workers will be happy to take these folks back into the workforce as those workers can easily be replaced if they don’t work out. But I digress, those entry-level workers will not be homebuyers in the immediate future but having them back in the workforce will allow management and owners to realize a better income level so those folks will be the benefactor of the ability to purchase real estate. So my crystal ball says that by September we should start to see Real Estate pick back up for all the reasons that are not the standard reasons for Real Estate to boom or bust. To get started today and beat the rest of the crowd call one of our Real Estate Professionals to get pre-approved for a home loan and start your search as new listings hit the market you will be there first. If you have been waiting for your credit score to improve before refinancing start now ahead of the crowd Interest Rates are still in the 2’s and 3’s. Call MAE Capital Real Estate and Loan to get started at 916-672-6130.
Well, here in California we are one of the last states set to re-open on June 15th, politics aside. What will this mean for the red-hot Real Estate market? We are currently still experiencing a shortage of home listings on the market, and we have demand still exceeding the supply of listings. What will loosen up the market and get Real Estate back to a normal where the average person can get into the market? What effects are inflation having on the market? In this blog, we will be exploring the possible scenarios that could happen with a re-opening and what those consequences are.
First, we need to ask why are people not willing to sell their homes and will it change? In my opinion, I think the main reason, from what I am hearing from our clients, is that there is nothing to move up to. Simply put, if they do sell their home where will they go if there are no homes for sale in the area they want to move to. People have a fear of being homeless or paying more than they can afford and with no other homes to move to this is a major problem when it comes to freeing up inventory. This is what is called an inventory shortage where demand for homes exceeds the supply of homes for sale. Builders are trying to meet the demand, but the rising costs of materials are making the cost of building homes more expensive thus home buyers are getting less home for more money. So, for a potential home seller moving up becomes a lateral move, not an improvement so they hunker down in their current homes waiting for the market to change. Another phenomenon we are seeing is that older homeowners who would have sold and moved down are not doing so and staying put in their family home as it is cheaper to stay in a bigger home with low property taxes than it would be to move to a smaller home and have to pay more in property taxes, especially in California. Those that have decided to move from the family home, we are seeing, move out of state where taxes are lower and property prices are cheaper, again not so good for the California economy.
Another economic factor that we are dealing with is inflation. This will keep people in their homes as well when they realize that the new home, they would qualify for is on the same level as the house they are selling making it foolish to sell and move. In addition, inflation makes the cost of goods and services more expensive, so for potential move-up buyers inflation makes their income go far less and the costs of living is more expensive in their current home. If you are paying more for food, gas, and consumer goods, and your income is not going up as fast, it makes the money you have, get eaten up quicker, so saving money becomes more difficult. Inflation also makes building costs go up and the prices of new builds go up as well as we talked about earlier. People want to feel comfortable before they make a move up to a higher mortgage payment and this is another factor why people are not putting their homes on the market. We are in a territory never seen before, so as the government enacts monetary policy and new taxes and spending we will not see the end to this volatility for a long time.
Looking to the future when California is fully open what will we see? The first major problem we will see is the fact that California is keeping the extra unemployment benefits ($300 extra per week) until September 11, 2021. What this is doing, and will continue to do, is to keep workers from going back to work where they would be making less money working than staying on unemployment. To analyze this phenomenon, we must first look at the jobs people are not going back to work at. These jobs are generally restaurant workers and retail workers and entry-level workers. The workers that have not been working and receiving unemployment and the extra $300 a week have been taking their extra money and investing in the stock market and Cryptocurrency; thus, we have seen record highs in the stock market and crypto’s, this will go away when the money goes away, and they have to go back to work and begin paying bills with their earnings. So come October, when this will be felt, we might see a stock market correction. If we get a correction in the stock and equity markets people feel less secure as their investments will be considerably less than they expected forcing people to look to the equity in their homes for the extra money other than the stock market. This may force some to sell their homes or it will hunker them down even more and possibly refinance their home again. Then looking to those millennials that have been living at home for the last year and a half will have even less opportunity to move out as there will still be no homes to move into and this will keep demand strong for homes even at higher prices.
Not knowing what will happen in the immediate future as things re-open, we do know that over time Real Estate is one of the best investments you can have. So, what will pop the Real Estate Bubble this time? We are looking at economic times we have never seen before coming out of a worldwide pandemic. We are currently experiencing inflation, and, in the past, the Federal Reserve (the Fed) has raised interest rates to combat this, however, the Fed has said that they will not raise interest rates until possibly sometime in 2022 keeping rates low to keep the economy moving forward. The fear is that we will have “Stagflation” which is inflation with a stagnant economy. I am also taking into consideration that in October of this year the interest rate markets and the stock markets look 90 days ahead, so if inflation is still out of control in October in 90 days it will be 2022 and that could cause or help a stock market correction and higher interest rates. To get people to sell their home they need to feel comfortable with their current financial situation and until that happens, we will see people hunkering down in their current home until they feel comfortable enough with their personal finances to sell and move up. Hopefully, the re-opening will do that with people going back to their offices and business and can enjoy profits again and the supply chain of goods and services can catch up and inflation cools off.
This is all a guess based on what people will do. The thing is we do not know how the re-opening will affect Real Estate yet, but we know the demand, as it stands today, will be there until prices or interest rates rise to a point where the demand goes away. We do know that low-interest rates always help real estate sales but that is not what we are looking for as we have enough demand, we just do not have enough inventory for the demand, and it will take a while to catch up and for builders to build and for sellers to feel comfortable selling and moving up or down. What I do know is that the more money the government puts into the economy the higher inflation will go. We have seen this already and sadly the dollar has gone down against every major currency in the world. Although it is nice to receive money from the government it has become more harmful than helpful to the overall economy. If this government spending trend continues, we will continue to see inflation and if the Fed doesn’t raise interest rates inflation will continue unchecked and everything will cost more. As we see monetary policy and spending come from the Federal Government, we will see the overall direction of the housing market evolve. The market watch will be month-to-month as we watch the economy and government policies. If you have been on the fence about refinancing this is the time, without a doubt, as interest rates will go up and that you can bank on, and my best guess is this will happen around October of 2021 so get in now if you need money or think you will need money as the price of money has never been cheaper. In conclusion, what we know for sure is that interest rates will be heading up, Real Estate demand will remain high until prices go too high and income can’t keep up with inflation and we know that Real Estate is a proven investment over time so good luck and let the team here at MAE Capital Real Estate and Loan walk you through the Real Estate and the Loan process.
Post-Script June 21, 2021: The Fed has announced that they will keep interest rates low until 2023. This seems really unrealistic unless inflation slows down dramatically in the next several months. If this is actually the case we have seen this before in the early 2000s when the government kept credit flowing by allowing the subprime markets to flourish for years after they should have and that led to the "Great Recession" starting in 2008. I am not saying that will happen but it sure points to that. The longer the Fed holds the market in an overheated nature the longer the correction will be in the future.
Make Your House a Standout With Creative Curb Appeal Photo by Pixabay
When it comes to selling your home — and selling it quickly, fabulous curb appeal ranks right up there with location, location, location. Not only does a little cosmetic work make the home look inviting and well-cared-for, but it also helps it stand out in the neighborhood — an especially important feature in areas where it’s hard to differentiate one house from another. Of course, knowledgeable real estate help can also make a difference in how fast you sell and how much money you make from the sale.
What Is Curb Appeal?
In short, curb appeal is a term used to describe the first impression a property makes on prospective buyers. Standing on the curb in front of the house, what do buyers see? What do they feel? If a place is run down with patchy grass, peeling paint, dead foliage, and broken toys scattered about, the first thing they think is: The owners didn’t care much about the outside — is the inside in ill repair? What about systems we can’t see — did they take care of maintaining those? Good curb appeal also makes buyers more confident about a potential purchase — if everything looks great, there’s no reason to worry about putting extra money into fixing it up.
What Adds to Curb Appeal?
There are a number of quick and affordable fixes that can give your property a facelift. For example, according to Better Homes and Gardens, consider drought-tolerant plants and get your landscaping into shape by planting new flowers and pruning shrubs and trees. A fresh coat of paint inside and out can also make a house look and smell “new.” This is an especially good idea if you have unusual colors in your home — most buyers look for a neutral color palette. If you have siding or brickwork, power-washing is a good idea. When it comes to peeling exterior paint, a touch-up or full repaint can make the place look extra fresh. Resurfacing of driveways and patios can also give the curb appeal a boost.
What Can I Do Myself?
There are a lot of things you can do on your own if you have the time, the know-how, and the tools. You can also find skilled handy people on online job boards. For example, a freelance landscape designer can help you create a custom plan for the fraction of the price of a large company. Curb appeal also extends to inside spaces, so a deep cleaning, including window washing and attention to cabinets, baseboards, and crown molding, are good bets. According to Green Clean Restoration, steam cleaning can make carpets look and feel new. Updating fixtures, steaming tile, replacing toilet seats, and acid-washing swimming pools are other inexpensive, easy fixes.
What Else Can I Do?
If you really want to take your home prep to a new level, you can “stage” your house like a model home. Pack up personal non-essentials, knick-knacks, and items you usually store on your kitchen or bathroom counters. The idea is to make space clean, open, and airy. Buy a nice set of towels to display in bathrooms and some oversized throw pillows for the couch. Strategically place extra lighting and real or silk plants. A fresh doormat and area rugs can also add a touch of color and “hominess” to the house, as can a mildly scented candle or wax melting lamp.
Seasoned and knowledgeable real estate professionals like MAE Capital can be helpful in many ways, from helping you price your home to making suggestions about improvements that will help the sale but not break the bank. Unless you have an area of your home in complete disrepair or an issue that would negate a successful home inspection, major structural overhauls are unnecessary and are likely to cost you more time and money than you’d realize.
If you’re in the Rocklin, CA area and are looking to buy, sell, or refinance a property, MAE Capital Real Estate and Loan can help! Download the free app or call (916) 672-6130 today.
Written by Suzie Wilson thank you for your support
When it comes to creature comforts, little ranks higher than feeling safe. There are many ways we work toward creating a living environment that promotes security, and improved security often means higher home values and lower home insurance premiums. From MAE Capital Mortgage Inc., here are some of the key security solutions for homeowners and what you need to consider when listing a home.
We all use doors and locks to secure our homes, but your choices can impact how truly safe your household is. As Safewise explains, most burglars enter homes right through the front door, so selecting a secure door is paramount. Steel doors are the most economical, and there are hardwood choices that are very attractive. Avoid sidelight windows for optimal security, or consider installing security film to add peace of mind.
When it comes to locks, certain kinds of deadbolts tend to be more resistant to break-ins than others, and you can reinforce entryway doors and locks to bolster security. Lighting can also play a key role in home security. Think in terms of exterior lights that can reduce hiding spots for criminals, motion-activated versions, and interior lights on timers.
Rethink Your Landscaping
When viewing your home from the exterior, try to do so in the mindset of a burglar. Look for nooks and crannies that would shield people from being viewed by passersby. Overgrown landscaping close to your house provides cover for would-be thieves, so SFGate points out that you should take steps to shear shrubbery back to no more than two feet tall. At the same time, a tall, protective barrier around the perimeter of your property can effectively keep scoundrels out, especially if you choose greenery sporting spikes and thorns. Installing a shrub barrier can be a significant undertaking, so consider hiring a pro to do it for you. With the right tools and equipment in hand, they can knock it out quickly and save you the backbreaking work.
Smart Home Locks, Doorbells, and Cameras
If variety is the spice in life, smart locks and doorbells -- all part of smart home security -- offer ample seasoning to pick from. As opposed to conventional security systems that require you to turn it on or off every time to enter or exit your house, a smart system is on 24/7, negating the need to remember to arm it every time you leave home. What’s more, some smart systems have motion sensors that trigger emergency notifications if something seems suspicious.
Smart home security has come a long way since conventional security. It’s all now very intuitive; in addition to tracking main entry points into the home, a smart system can track behaviors and alert you via text. One example is if a thief cuts your phone line (a typical first task before breaking in), your smart system can send you an alert if it ever loses the connection.
Smart locks alone offer options ranging from notifying you when someone arrives at your home to special codes for each user, voice activation, temporary codes for guests — and everything in between. You can often make changes to settings from your smartphone, and some offer keyless touchpads in case you lock your keys or your phone. Smart doorbells offer a live feed straight to your phone so you can see in real-time who is at your door. Some record the activity for your review, while others offer interaction with the visitor. Smart home security cameras offer a number of interesting features as well, such as voice activation, facial recognition, cloud storage, and emergency services monitoring.
Selling Your Property
With the advent of technological security systems, selling a well-reinforced property is slightly more complicated, but it’s a worthwhile investment. Security systems can catch a prospective buyer’s eye, and at the same time, being recorded can be off-putting to some house hunters. One suggestion is to hang a notification at your entryway indicating that a system is installed and whether it’s in use at the time of a showing. When your property does sell, you should ensure all smart home devices are returned to factory settings and notify technical support there is a change of ownership. If you intend to remove the devices when you move out, you should discuss the situation in detail with the homebuyer in case they intend to replace some or all of the gadgets. Be forewarned, however, that it may be up to you to install adequate replacements for certain items, so you should investigate your responsibilities.
Security means peace of mind for you and your loved ones, and it can also influence the sale of your home. Think about what will be attractive to house hunters and what will put your mind at ease while boosting your home value. With a well-thought-out plan, you can rest easy.
Are you ready to buy a home? Contact MAE Capital today at 916-672-6130.
The article was written by Natalie Jones
Have you been trying to enter the Real Estate market but just cannot save the money required for a down payment and closing costs? Then you have come to the right place. We have a new program that will give first-time buyers or homebuyers in general up to 5% of the purchase price for a down payment and closing costs. This program is great as you are not required to be a first-time homebuyer to qualify for this. We have partnered with a company that has a program called Chenoa. This is a pool of funds that are designated to assist home buyers with the costs of getting a home.
The Chenoa program is paired with an FHA Loan and this works great as FHA only requires a 3.5% Down payment and that would leave you with 2% left for closing costs. It is conceivable for a home buyer to get into a home with no money out of pocket. In this crazy Real Estate Market, I would advise my clients to have at least 1% of the sales price as a minimum. This would be for additional items such as inspections to make sure the house you are buying is in good condition. Although the market is crazy, and sellers are calling the shots you still have the ability to negotiate work to be done on a house prior to closing.
Since the Real Estate market is so competitive this program will allow for a buyer to still be “in the game” as a buyer you will not need to ask the seller for any concessions towards the purchase because you as a home buyer do not have enough money. In a regular Real Estate market, sellers will generally help pay closing costs if the price of the home can absorb those fees. In this market asking the seller to pay for anything is tough as there will be a line of people trying to buy the same house with more money down or no concessions from the seller. This is where this program makes good sense for a buyer as they will not have to ask the seller for any money towards closing costs.
The documentation for this program is the same as a regular FHA loan. You will need to provide 30 days of pay stubs, 2 months of bank statements, W2s for the last 2 years, and a 620 Credit score. There are income limitations that are you cannot make more than 130% of the median household income for your area in Califonia. It can also go fast as there is no more additional underwriting that some other Down Payment Assistance programs require such as CalhFA. This will also help to get your offer accepted as you can close this in 30 days or less. At MAE Capital Mortgage we are here to walk you through this loan and all the loans in our arsenal. It doesn’t cost anything to see if you qualify for this we are just a phone call or a click away. We look forward to assisting you with this product in California. Call us at 916-672-6130 to talk with a licensed Loan Officer or Click Here to provide your information confidentially.
We are coming out a year-long pandemic that has shut down certain sectors of our economy and now with the vaccine people are feeling better about going out in the world. The Government has infused $1.9 Trillion dollars into our economy and other countries. People are getting their stimulus checks whether they need it or not. The stock market is at all-time highs and the Real Estate market is so hot it is prohibiting first-time homebuyers from entering the competitive market. This all sounds like great news right, but is it? This remains to be seen but if we follow the logic and basic economic principles this short-term run of euphoria will run out of gas over the next several years and here is why I say this.
Assuming the worst of the pandemic is behind us and those stores and restaurants that have been closed or limited in capacity will soon be up to 100%. What will consumers do? That is the question, will consumers go to Shopping Malls or stay to ordering online? I do believe that people will go to restaurants again as that is social and people are social animals. The landscape will look different as people’s habits have changed and adapted. Travel will also begin to get back to normal as people will want to finally go on a vacation and after they are vaccinated, they will feel confident in traveling again. So as far as the obvious things people desire those will come roaring back but what about the price of those goods and services will they be able to afford the new higher prices?
Higher prices of goods and services are inevitable with higher gas prices and inflation and the devaluation of the dollar. Although the Federal Reserve has said they will not touch interest rates until 2023 the market will have other aspirations. We are already seeing higher interest rates in the mortgage market as a result of the economy opening and stimulus. Higher gas prices are due to the current administration’s killing of the Keystone Pipeline and moving to more oil dependency from foreign providers. That dependency on importing oil makes the cost go up as opposed to relying on domestic oil production. Thus, higher prices for goods and services that are imported, shipped, trucked, or driven to the marketplace. We are also seeing increased prices in commodities (steel, copper, gold, silver, lithium, etc.) as the price to produce them has increased. This makes automobiles and other items that depend on the price of steel or commodities more expensive to produce thus more expensive for consumers. This is what we call inflation.
Inflation, left unchecked, can cause more problems than just higher prices of goods and services. Inflation will cut potential buyers of goods and services out of the market thus causing businesses that sell those goods and services to slow production and lay off workers. For example, automobiles, if the price of a new car is so high that the average or middle-class person can’t afford one they will not buy new cars, they will be relegated to buying used cars until their income catches up with inflation. This will cause the automakers to slow and have to lay off workers. This affects all goods produced thus causing other industries to have to lay off workers as well. So, inflation is one of the most toxic things to occur in any economy. Traditionally, the Federal Reserve would raise interest rates to slow inflation by making the cost of money more prohibitive for expansion. Inflation is caused by 2 things; one the demand for goods and services are higher than the supply and; two the dollar is devalued to other currencies. Currently, we are seeing both in action.
The demand for housing currently is a good example of where the demand exceeds the supply and that is why you are seeing skyrocketing housing prices. You are also seeing the cost of the materials rising at a higher rate than normal to build a new house so new house prices are going up in response to demand and costs to produce. In the short run, in the next 1-2 years, you will see this trend continue, and coupled with low-interest rates to buy a home the demand will stay strong. The housing market will slow only when interest rates go up and the demand slows until then you will see increases in housing prices to the point that the average person can no longer afford a home. The worry is that supply suddenly increases as people realize their homes are worth far more than they thought so they decide to sell all at the same time. This would only be bad if the supply of homes for sale exceeds the demand for the houses. When that happens, it would mean that all the demand has slowed due to higher interest rates or higher prices or high unemployment, or all three. This is what we would call a perfect storm and we saw this occur in 2008 when the housing bubble burst.
So, for the short term in the economy, we see higher inflation with industries opening up again and with the stimulus checks going out to Americans and to other countries. The inflation we see will keep going as people get back to work and people feel better about their personal finances. As people spend their stimulus checks or invest them this will keep the short euphoria going. In the long-run, if inflation is left unchecked, the worry is that we will start to see normal economic moves such as higher interest rates to fight inflation which will cut people’s ability to buy higher-priced homes. This will cause a slowing in demand for homes and eventually we will see supply exceed demand thus prices will have to go down to adjust for that. How bad will this adjustment be is yet to be seen and will hinge on what monetary and fiscal policy the government adopts. If the government raises corporate taxes to a point where corporations can no longer expand or hire, we could see an increase in unemployment which will hurt the economy. The Government has also talked about raising taxes on individuals as well to pay for all this stimulus. There is also talk about raising the capital gains tax to 43-48% from the current rates of 15-20%, if that happens people that have investments in Real Estate and Stocks or commodities will be impacted by either not selling or if they do having less from the sale to reinvest in the economy. In addition, if gas prices rise too high we could see a phenomenon that we have not seen since the late 1970s when we had “Stagflation” where we had a stagnant economy with inflation and super-high interest rates. I do understand the human aspect of the government wanting to help people, but my worry is that what might be nice today will hurt tomorrow. The $1.9 trillion dollars the government just spent is a worry that every American should have as that will have to be paid back and with the national debt over $35 Trillion dollars that’s over $80,000 per American that is owed. When will it end, will the debt be called due at some point, do we just ignore it? I am not sure the average American understands what this means to our country and to every American. Now there is talk about another $2 Trillion Dollars be allocated for infrastructure, the fixing of roads bridges.
In the end, every dollar, the government spends it is money that we all owe back as Americans. The way our economic system works is for every action there is an equal and opposite reaction. So, If the government keeps spending our money every American will have to pay for it in higher taxes and inflation. When the dollar falls from the world currency then America becomes like Europe that has had all kinds of problems with their monetary system since they went to the Eurodollar in the beginning of this century. Every American has to pay for what our elected officials do. This is not a political statement it is fact, and it is the way our country was founded. What can be said about our economy is that we are in store for inflation and higher interest rates which will slow the economy and the slowing will cause higher unemployment. We have the ability to stop all of this but the average American will not understand these basic principles as all they will see is the short-term benefits not the long-term harm. We all need to learn basic economics so when we go to vote we are not harming our children and their children. Rates are still great so if you have been thinking about refinancing or buying, now would be the time and everyone needs to look toward the future and hold their elected officials accountable.
We are now hearing that COVID-19 infections have slowed to levels where the leaders of our country are beginning the opening process of the economy. This is great for the rest of the world but in the Real Estate and Mortgage business, we have been enjoying low-interest rates and a booming Real Estate market. I know this is odd when so many people have been out of work or working reduced hours. What we have seen is that those in the entertainment business and restaurant business have been hit the hardest. The technology sector of the economy has exploded during the lock-down with Zoom and video conferencing leading the charge. We have seen a significant increase in online ordering with consumers realizing the ease of ordering their goods and services online from the safety of their own homes. But now that the economy is opening again what do we expect to see from here, are we going to see changes in consumer habits with regards to how they get their goods and services, are they going to go back to restaurants, malls, are they going to be distracted from buying Real Estate?
These questions are what we will be exploring here. Why has Residential Real Estate boomed when we had high unemployment? I believe the answer is that interest rates have been at historic lows with consumers able to lock in rates in the 1’s 2’s and 3’s. With interest rates, so low people have been able to qualify for larger homes and been able to refinance their existing mortgage to a low rate even if there has only been one person working in the household. People that have been confined to a small home have seen the walls start to close in quickly and they have realized that they need a bigger space. Add kids to the picture and people have found that moving from cities, where housing is generally confined to smaller spaces, to the suburbs where they could afford a larger home with a yard has been one of the Pandemic phenomenon’s we have seen. Will this trend continue? This remains to be seen, as Cities when they are thriving, have fine dining, close shopping, and entertainment venues, and a variety of social activities that the suburbs don’t. Will people go back to cities or has the idea of being close to other people become a bad idea for health reasons, will people stay away from large crowds? These are questions I can’t answer but time will tell. One thing I have learned about this pandemic time is that nothing has gone as you might expect with regards to the American way of life so as people invent a new way of life we will have to pay close attention to new trends.
While Residential Real Estate has boomed during the pandemic commercial Real Estate has died off almost completely. With giant office space where people, prior to the pandemic, worked in full capacity now have gotten used to working from home. Companies that have traditionally been driven to office collaboration have migrated to meeting over video platforms and staying productive without the need for expensive office space. As leases expire, I am not sure if companies will re-up them or reduce the space that they require. This tells me that commercial Real Estate will be on a long road to recovery. As for retail space and malls, I believe it will be a long road if it ever comes back as it looked like prior to the pandemic as consumers of all ages have embraced online commerce where they don’t have to leave the comfort of their home to get what they want. This leaves existing retail and office space vacant which is terrible for the owners of these properties as they are not receiving the income they did prior to the pandemic. This also remains to been seen how the demand for this existing space will expand into the future.
With the economy opening up and as the government spends “COVD Relief” money like it grows on trees, we will be seeing inflation as the US dollar will be devalued against other countries' currencies. With inflation, we will see rising interest rates to slow down inflation by making the cost of money more prohibitive. The rising interest rates will cut more people from the Real Estate buying frenzy as with higher interest rates people can’t qualify for as much of a home as they did with the low-interest rates. This should slow demand for housing probably in the late summer of 2021. In addition, the higher interest rates will slow the refinancing boom as well with most of America has taken advantage of the low rates in 2020 and the beginning part of 2021 will not have the need to refinance again. There will be some folks that could not refinance for various reasons, such as loss of a job, or decreases in pay, or self-employed, and for those reasons, we will see demand being slowed but still steady. Another factor is the Federal Reserve has said that they will not raise the rates they control until there is a 2% or the greater inflation rate, which they are not seeing happening until late 2021 at the earliest. So, the Federal Reserve will keep rates low until the time they see inflation higher than they believe is healthy.
For the better part of 2021, the Residential Real Estate market will continue to thrive until the demand has been fulfilled. This, of course, will vary depending on the Real Estate market you are in. If you are in a large City it may take a while for all sectors, Residential and Commercial to recover. If you are in small cities and towns where people have been moving to from large cities, I believe the demand will continue to be high until big cities have fully opened and all their services are back up and running. People will still be hesitant to move to cities out of fear of the Government shutting things down with another pandemic or something else the Government thinks they need to protect us from. That said interest rates will in 2021 will stay in the 2’s all the up to the low 4’s depending on inflation. Residential Real Estate in the suburbs will stay strong commercial Real Estate, I fear, will be on a long road to recovery. If you are looking to refinance or buy a home this year remember that MAE Capital Real Estate and Loan is your go-to for the lowest interest rates and fast service.
This post is written to help people understand the disclosure process when applying for a home loan. We know that you do not apply for a home loan every day, however, you do need knowledge of the basic process, so you are not overly confused. It is a common occurrence when we originate a home loan whether it be an FHA, VA, or Conventional loan for a purchase of a house or a Refinance that our borrowers have questions on the disclosures that are mandatory that we send out on every home loan. The biggest question lately has been the way we have to show our clients how much money is being made on their transactions. You will see this only occur on loans that Mortgage Brokers originate as the laws are as such that makes a Mortgage Broker disclose more thoroughly than Banks and Mortgage Bankers. This came out of the Mortgage crisis of 2008-11.
The disclosures I am referring to are the Loan Estimate specifically as this is the document that outlines the fees you the borrower will be paying. This document is not entirely accurate, however, which makes explaining it even more difficult as there are actually more fees disclosed on the Loan Estimate than you will actually have to pay. As a borrower, you will be given a Loan Estimate many times throughout the process of the home loan. Current law makes loan originators provide the loan estimate to their clients every time a material fact of the transaction changes. The initial Loan Estimate is sent out within 3 days of an originator receiving a complete loan application. As a Mortgage Broker, we send ours to our clients from our processing system (webcaster) and the client can electronically sign those. Then when we submit the file to a lender that lender must send out a Loan Estimate and disclosures too. This can be confusing to our clients as to why they are getting multiple sets of disclosures that are relatively the same. The answer is that it is the law, more specifically the Dodd-Frank lending Act of 2008 set by the Obama administration, makes all lenders and Broker abide by or lose our licenses.
The Loan Estimate was designed to give a consumer the ability to “shop” around for the best mortgage terms. What it really did is take an old form we provided before, the Good Faith Estimate of Costs, that was one page and turn it into a 10-page form detailing all the cost that could be possible in the loan transaction and make it so Mortgage Companies have to give it to all applicants. This changed the playing field for Mortgage Companies and Banks in that the new law was more stringent upon Mortgage Brokers than Mortgage Bankers and Big Banks in that a Mortgage Broker must show in big bold print how much money is being generated to the Brokerage from the Loan being requested whereas Banks and Mortgage Bankers do not have to provide that information. This confuses customers when the only costs that matter to a consumer are what the actual monthly payment is and what the costs to close are. For example, a refinance client may go to their bank and ask the banker about refinancing their home and the banker gives them a Loan Estimate and nowhere on their estimate do you see how much money the Bank is making from your home loan. Then you come to a Mortgage Broker and they offer you a better interest rate and a lower payment with fewer costs, but they show that they are making $10,000 for originating your loan and that is all the client can now see not the actual savings they are getting by going to the Mortgage Broker. The reality to a client should only be what is the monthly payment and how much is it costing me to get that, and 9 out of 10 times the Mortgage Broker will win that on both fronts.
This is a daily occurrence for Mortgage Brokers across the country even though they are offering a lower payment and lower costs, clients are fixated on the money on the line that shows how much money is going to the Brokerage. All the other institutions make the same amount of money and, in most cases, significantly more. The reality is that Mortgage Brokers make less per transaction than Mortgage Bankers or Banks they are just must show you how much money is made on a loan transaction where the others don’t. In comparison to Realtors who will sell your home for a 5-6% commission getting a loan becomes significantly less, in the 2-2.5% range, and most of the time you are not paying the fee as the lender is paying the fee to the Mortgage Broker.
This brings me to the 2 additional ways a Mortgage Broker must give you a Loan Estimate. A Mortgage Broker is either paid by the Lender or paid by the Borrower or as we say in the industry Lender paid or Borrower Paid compensation. The reality is that if a Mortgage Broker is offering you a loan with Borrower paid commission that Broker is probably lowering the actual negotiated “Lender Paid Compensation they have set up with the lender they are selling the loan to. In other words, if you are seeing on the front page of the Loan Estimate “X” amount in commissions to the Broker you are actually paying less than it would have been if the Funding Lender was paying the Broker directly (Lender Paid). You see a Mortgage Broker cannot charge more than what they have negotiated as “Lender Paid” compensation with the Funding Lender, but they can charge less and by charging less it automatically, by law becomes, “Borrower Paid” Compensation and is disclosed differently. The disclosure law is actually counterintuitive meaning it was designed to help consumers “shop” for a mortgage and in actuality, it hinders their ability to shop for a home loan.
In addition to the different ways, a Mortgage Broker has to disclose their compensation (Lender Paid or Borrower Paid) these disclosures will be sent out a minimum of 4 times in every loan transaction. Why, you ask? Like I said before the Loan Estimate must be sent out upon the initial loan application and most of the time the loan is not “locked” yet with a lender so to stay in compliance the Mortgage Broker must send out the initial disclosures within 3 days of the loan application, so the first set of disclosures are generally going to change as the Borrower figures out exactly what interest rate and cost scenario best fits their needs. Once they do figure this out with their Loan Officer, then they will lock the loan with a Funding Lender. The part most borrowers don’t fully understand is that although we sent out disclosures “initially” and the loan was not actually determined by the borrower, yet the Mortgage Broker can’t proceed to process the loan or order an appraisal until the “initial” set of disclosures are signed (whether they look right to the borrower or not). This confuses more borrowers as there are so many documents within the “initial” disclosure package that must be signed they are confused as to why they must continue to sign the same documents over and over. Note that when I say “sign” it is all done digitally with electronic signatures. Most lenders we submit our loans to, will have a Borrower Portal or a website that our clients will have access to “sign” disclosures electronically.
The 3rd time a Borrower will sign or acknowledge disclosures will be 3 days prior to signing the final set of disclosures in front of a Notary. This 3rd set is referred to as the Closing Disclosures or “CD”. The CD is now becoming more accurate as we are closer to the actual closing date. Up unit now we called the disclosures estimates to this point as we have no way of knowing the funding date when we start a home loan transaction. Once the closing date is finalized then the last and final set (number 4) of disclosures will be sent to the settlement agent (escrow officer) and they will prepare the final estimate of costs. This final estimate will be what the borrower will be paying or getting back from the loan whether it is a refinance or a loan to purchase a home. Until this point, everything has been the best guess with a tolerance of .125% up or down in the cost of the loan. Generally, the cost and payment will not change dramatically from the initial Loan Estimate to the final numbers unless there are changes in the contract if you are buying a home or if you are refinancing and the payoff is higher than expected, or if the borrower needs more money to pay more bills or needs more money for home improvement. We have had many borrowers over the years that are confused by this process and feel that if they sign anything they will have to go through with the loan when this is just not true, the Borrower is the boss and can change anything at any time, just know if you do change anything you will be getting a new set of disclosures. I hope this has helped with some of the loan maze or gauntlet you must go through when trying to get a home loan. Here at MAE Capital Mortgage, we are here to hold your hand through the maze and help you get to the other side with the lowest payment and costs available in the market today.
We made it to 2021 and what a start it has been. I am not going to talk politics here as money and Real Estate have no politics. What I will cover is where Real Estate prices and Interest Rates are headed and why. Now that we know who will be running the show in Washington, we know what the economic goals and aspirations will be. So, knowing where the economy is headed, we can pretty easily predict where Interest Rates and Real Estate Prices will be going.
To follow the logic here, we must first start with the Federal Reserve and its current stance on interest rates. The Federal Reserve (The Fed) has stated clearly that they will leave interest rates unchanged until inflation hits 2%. Then we must ask the question as to when we will see this magical number of 2% when current inflation numbers, measured by the Consumer Price Index, are .2% as of November 2020 reported by the US Bureau of Labor Statistics. Initially, we are looking pretty good with low numbers, but what drives these numbers up? One factor that could cause Inflation is if the value of the dollar decreases against foreign currency making imported goods more expensive. Another factor is when the demand for goods and services exceeds supply. Yet another factor for inflation is the increased cost of labor in the production of goods and services. Knowing these basic principles and applying them to an economic trend or monetary policy set forth by the Government can give us insight into where interest rates are headed.
Now we need to look at what we know about the new administration’s economic plan. It has been widely publicized that there will be more stimulus money coming from the government in the coming months. What does this do exactly other than provide Americans with the extra money? It is great to get this money in such trying times, however, there are economic costs of doing this. Costs relating to inflation include the devaluation of the dollar and increasing the National Debt. As we have read earlier, we know that the devaluing of the US Dollar can cause inflation. As far as the increases in the National Debt, I will not get into this as that has not been proven to cause inflation, we just know it must be paid back, maybe, as we have never seen it go down in modern times. Moving on to other known statements coming from the new administration it has been said that they want to raise the minimum wage nationally to $15.00 an hour. This would obviously raise the cost of labor and that would raise the cost of goods and services causing an increase in inflation. Raising taxes has been brought up on corporations and high wage-earning Americans and that makes the costs of consumer goods and services go up as corporations will have to raise prices to compensate for higher taxes. All these factors will have to be watched carefully as they happen to prepare for an increase in inflation and what you as a consumer to do.
Why am I so concerned about inflation? Going back to earlier in this article we know that The Fed will raise interest rates to combat inflation. They have even gone so far as to say when (at 2%), so we have to be on the watch for any signs of inflation as the stock and bond markets will react way ahead of anything actually being passed. For example, if it were announced today there was going to be another stimulus the markets would react to this news even though it has not formally passed the legal process and we know that there will not be any resistance now with all 2 of 3 branches of government being occupied by one party and we know that the Supreme court will not rule on economic issues only rules of law. Thus interest rates we can say pretty clearly, unless something changes from The Fed, will be more volatile these coming months and years.
Why did I spend so much time on interest rates you ask? Well, the answer is that the current state of Real Estate hangs in the balance of interest rates. Interest rates drive real estate investment as the lower the rates are the more of a home people can afford and when interest rates go up fewer people can qualify for it. If interest rates rise, fewer people will be able to afford homes, especially in California. This would effectively increase the inventory of higher and medium-priced homes and with this increase in supply and fewer demand prices will have to adjust to compensate. A good example of this would be if you can income qualify for a $450,000 home loan today with interest rates at 2.5% and if interest rates increase to 3.5% you can only qualify for $400,000 with the same income. What this will do is increase the supply of homes for sale as fewer people will be able to qualify for homes and eventually prices will have to come down to compensate for the higher interest rates. The good thing is that the FED said last year that they would keep interest rates low during the pandemic, so we still have time to prepare.
Are you looking to buy or sell a home in 2021? If you are looking to sell this year my advice would be to do it sooner than later as prices have settled a bit and will continue to do so. Interest rates have started to slip upward now that the election has been decided and I am not sure if anyone knows if they will go back to the lows we saw at the end of 2020. If you are a buyer and you have time to wait a bit you might benefit from the increased inventory in the Spring, as seasonally more homes come on the market after the Holidays. As a buyer, you also must pay close attention to interest rates and look for any news that might affect interest rates negatively as I believe we have seen the lows in the interest rate world, but rates will still be volatile in 2021, and you will have to pick the lows to lock in your rate. I see this year having a healthy Real Estate market with no real crazy ups or downs. If you are an investor in Real Estate, there will be better deals from mid to the end of the year as currently, we are at the top of the market for prices and low-interest rates. Also, if you are an investor and you are looking to sell this year you might want to pay close attention to any increases in the capital gains taxes as those were also on the new administration’s list to change. All in all, we know we are at the top of the market for Real Estate and low-interest rates, so buyers and sellers of Real Estate need to be savvy and pay attention to economic news that could impact their ability to buy and sell. Here at MAE Capital Real Estate and Loan, we can help you with all your Real Estate and Home Loan needs as well as be able to advise and walk you through the process of buying, selling, or refinancing Real Estate.
If you have been in the market to buy a home in the last 5-8 months you have seen competition for homes to likes we have not seen since the sub-prime era of the early 2000s. If you currently own a home and have been looking to take advantage of historically low-interest rates, but have found it has been taking far longer than you would have expected, you may be asking; what is going on? Americans have been under the crushing fear of a virus that most know nothing about and the Government has been closing businesses and making people work from home for the last 8 months, so you would expect that things would be slow right? Actually, quite the opposite. With the Federal Reserve lowering and keeping long-term interest rates at historic lows those that have “essential jobs” are thriving and are looking to better their financial situation by refinancing to lower their payments or take cash out to do home improvements or sell and move up. The combination of a hot Real Estate Market and low-interest rates are creating a strain on a system that is already overloaded. So what’s going on?
Real Estate has been booming as people have been forced to work from home and are looking for those properties that better fit their family’s needs. This is a dynamic that we have not really seen before as most of the time people prefer to live closer to where they work. Now that work is from their living room, or spare bedroom, or even the kitchen table people are realizing that the space that has fit them before the Health Crisis no longer fits their needs. Add children who have too distant learning to the equation and people have quickly found out that their existing living conditions could be better. So we are finding people selling homes that they have outgrown and people buying homes that need more space for their family, this includes first time home buyers. As renters are also experiencing the same restrictions, they see that buying a home becomes a better option and are now in the market as well.
That said, how do you get in the game, so to speak, to buy a home? Most of all homes on the market today are being sold in the first few days of the listing being offered to the public with multiple offers. How do you win your offer when there are so many others to compete with and homes selling well over the asking price? My recommendation would be to make sure your offer looks clean, what I mean by that is to do your homework upfront and be prepared to not get the deal of the century but to accept that you will be offering over the asking price. So, if you maximum price you qualify for is a certain number be prepared to factor in about a 3-7% upward margin. Simply put if you are looking for a home listed for $400,000 be prepared to go as high as $420,000. Hint: don’t start your search at the top of your price range go down 10% so you know you can compete. Next make sure you are with a Mortgage Broker that can offer you the lowest rate possible, like MAE Capital Mortgage where we have negotiated lower rates with the lenders, we do business with. If your rate is .25-.5% lower that can afford you up to $20,000- $50,000 more in buying power, so if you have been prequalified by a lender let MAE Capital check to see if we can do better and win your business and your new home for you. Another tip to look at is the type of loan has a major part in the negotiating process as well. A loan that offers the least amount of costs to a seller the better your chances are to get your offer accepted. An example would be a conventional loan versus a VA loan. Although we really want to help our Veterans out, sellers just care about the bottom line and with a VA loan the seller would have to pay some of your closing costs by the design of the loan and the seller would have to be able to provide a clear termite report where a conventional or FHA loan does not have those restrictions to the seller. The less you have to ask the seller to pay for in this market the better your offer will look to the seller.
Anyway, back to the conditions causing this manic moving trend and the plugs in the system and how to overcome them. With the COVID ruling the land currently and the potential for the government to enforce another round of “stay at home orders”, “Home”, has become the magic word as we do not know how long this will be going on. Combine this with a record volume of folks seeking low-interest rate home loans and it is a combination for frustration. The volume of home loans in the system and the work from home orders are putting an additional strain on the lending industry as well. Some of our major lenders located in states that have strict lockdown or social distance directives are forcing them to work from home as well. The problem with this is the fact that so much of lending is done face-to-face within companies it is making timeframes take longer. When an internal worker has to email their superior or underwriter or any one of the people that comprise the process flow of a lender it will take longer than simply standing up and walking down the hall to get an answer. When we want the process to work as it has always worked and have expectations of consistency and don’t get it we become very frustrated, at MAE Capital Mortgage we have always strived for top-notch customer service and when we don’t get it from our partners we depend it becomes frustrating not only for us but our clients as well. We all have to be patient during these trying times and the good news is that interest rates remain low and the Federal Reserve has vowed to keep them low for the coming year.
Where does this leave you if you are entering the process of buying a house or refinancing an existing home? First and foremost, you have to be patient with the process then you have to be educated on the process and how you can best manipulate it into your favor. The best way is to be prepared and has all your documents ready to provide your lender when getting pre-approved for a home loan or starting a refinance. The items you will need to have to get approved for a home loan to purchase a home are; current paystubs for the last 30 days, 2019 Tax returns, 2019 and 2018 W2’s, last 2 months of bank statements, copy of your Identification cards (Driver’s license), if you are refinancing you will need to provide you current mortgage statement and a copy of your home owner’s insurance declaration page. By having your documents ready to go you will go to the top of the heap to be looked at and get a much faster turn. If you are purchasing a home be prepared to make an offer over the listed price of the home as discussed earlier. Having the best partner to help you through the intricate maze will help considerably and here at MAE Capital Real Estate and Loan, we have special low-interest rates that we have negotiated with our lender sources, and with Realtors on staff, you can bundle your home loan and your Realtor to save you thousands of dollars. We look forward to further helping you with your Real Estate and financial needs.
Have you checked the price of Gold lately? If you do you will see that it is bumping up against $2,000 an ounce. This is about a $700 an ounce gain since March. It is fantastic if you own gold, but what is this signaling? Traditionally gold prices rise as an offset to inflation, but we don’t have any nor do we see any inflation in the future with more people out of work due to the COVID-19 scare. So why the sudden increase? So many questions as to what is going on in the world these days that things of late seem to be backward. The stock market hitting new highs during a pandemic with so many out of work. Interest Rates are at all-time lows. And the government is handing out money like it is nothing.
Unfortunately, the ladder is probably what the reason is for the increase in gold and silver prices. The reason is simple and yet complex. When the government puts so much stimulus (money) into the economy eventually that money will make it back into the economy, which is good right? Not always, as people view the government stimulus checks as “free money” so they spend it on other items than food and necessities. This effect has not been quantified yet in the economic world as we have never seen this in the history of the U.S. People that didn’t need the money to survive simply put it in their savings or invested it in the stock market. The government is considering another round of stimulus checks as I write this and there are a significant amount of people that really need the money yet there are significantly more that don’t need it. There is no real way for the government to determine who needs the money and who does not. Tax returns can show what people make but they are not accurate as most people write off as much as they can. So, the Government sends the checks out to all Americans to keep people spending and since we are in uncharted territory with all this stimulus gold and silver (precious metals) see this as a potential for future inflation.
The Government has also implemented the Paycheck Protection Loan (PPL) Program for small businesses. This program provided small businesses (businesses with less than 500 employees) with loans that can be forgivable under certain circumstances. Some of these “small businesses” received millions of dollars with no oversight. We are seeing news now of people buying expensive cars and other things with the PPL money. We have no idea who received the money, how much, and how they are spending it. I myself was offered $150,000 for MAE Capital Mortgage Inc. which I declined as we remain busy even though I had to lay off our receptionist and my wife. I might be too conservative in not taking the money given to me, but I was raised to borrower money only under dire circumstances or to leverage Real Estate. In addition, we don’t know what the payback terms will be as the government has not done its due diligence and could end up hurting more than helping, we just don’t know yet. This could lead to even more bankruptcies when these loans become due. Precious metals are taking this into consideration in a belief that there will be inflation due to this uncontrolled government spending.
Then there are the unemployment benefits that were pegged at an additional $600 a week and that was in addition to the state unemployment money that was, at it’s maximum, $400 a week. So, people have been getting $4,100 a month, and for most people that was a raise without work. This has created a disincentive for employees to go back to work and employers that have seen a slow down will not feel a responsibility to hire back the laid-off employees in the short term knowing they are getting paid by the government. This has created people with more money then they had before when they were working full time and time to spend it. This has contributed to more investment in the stock market in hopes of making even more money from “free money”.
These effects are why precious metals have been rallying. We are also seeing an extraordinarily strong Real Estate Market. These are assets that will grow if there is inflation or the devaluing of the dollar. The devaluing of the dollar to other currencies worldwide will cause an immediate increase in cost for goods that are imported to the U. S., and you guessed it, China will be the big winner of the U.S. Stimulus packages. It appears, as I write this blog post, that the U.S. government is negotiating for yet another stimulus package. This is a huge reason for the increase in precious metals prices as people are looking to the future to see the inflation coming. People will also ask the question; “is this political”? I won’t go there in this post as I believe there is definitely politics involved on both sides, but if and when the next stimulus package is released it will pump even more money into, what some believe an already bloated economy. We have all been hearing how people are really hurting with this pandemic, I would argue that sure there are some hit hard, but the majority of folks are doing just fine and more money will mean more spending which will put more inflationary pressure on our economy. As we are starting to see shortages of some products since a good portion of the U.S. labor force in manufacturing was laid off for a month or two or more. This shortage of supply of goods will drive prices higher thus creating inflation in areas where there would not have normally been. All these factors are scaring the economically minded person, and if you study basic economics you will read that holding assets during inflation is the best thing to do other than holding on to cash. The reason is that assets will increase in value and cash will decrease in value and precious metals are the original assets to go to during inflation. These are the reasons for looking at precious metals and why they are increasing at an alarming rate. On the Real Estate end of this discussion, we are seeing a rising real estate market outside of big cities. I will be following this discussion as the world evolves and posting more updates as we move further into stimulus and the pandemic. www.maecapital.com
We are now 4 months into this COVID-19 crisis and people are getting very restless. People that reside in US Cities are feeling a bit confined with their current living conditions. If you live in a city you know what I am talking about. From having to wear a mask literally everywhere even outside gets old after a while. Not to mention if you are one who lives in a high-rise Condo or Apartment complex you must wait for an empty elevator or take the stairs with your groceries. When sheltering in place in your space you are breathing other people’s recycled air in those high-rise complexes and people are worried for their health and the health of their family. Not to mention most big cities, especially in California, have large homeless populations and the city streets are dirty and unsafe. As more big cities move towards the idea of defunding the police this is also getting people extremely nervous as most big cities don’t have enough resources currently to keep their citizens safe. In addition, in California, the Governor is releasing dangerous prisoners into our cities at an alarming rate under the guise of protecting the prison population. At MAE Capital Mortgage Inc. for these reasons, we are seeing what we are calling "The Great Migration Out of Cities".
That said people are heading to rural Northern California in droves. MAE Capital Mortgage Inc. has offices in Rocklin and Roseville and since we do both Real Estate Sales and Mortgage Lending, we are seeing this very interesting dynamic with people able to work from home and embracing the fact that they can now live anywhere. There are more people with the desire to move out to the country where there is room to move about freely and can have outdoor space for there kids to play. My wife (Margie Mower) who is one of Rocklin’s top Agents is remarkably busy with buyers wanting the rural properties. She specializes in rural properties in Rocklin, Roseville, Loomis, Penryn, Newcastle, and the foothills. When she lists a property in a rural setting the price of these homes are between $650,000 and $1,500,000 and she is getting multiple offers as soon as they hit the market from people seeking shelter away from cities. She is hearing that the restrictions and the unrest in the cities are driving people away from the cities. With Politics running rampant in cities where large concentrations of people reside the average citizen has become scared of the movements to defund police and the encouraging of violent protests so much so that they are seeking a slower and easier way of life away from the unrest in the cities. The Governor of California is even moving out from Sacramento to El Dorado Hills which resides in the foothills of California about 40 miles from Sacramento. He is buying a $5.4 million on a Governor's salary during a time where his assets are allegedly all in a Blind Trust not for his use. Whatever your politics are I will bet you too would rather live in a safe environment without homeless, violent protest, filth in streets, and closed businesses. Schools in rural areas have been allowed to open as the Health Crisis is less concentrated in rural areas which is appealing to city dwellers with families.
If you are wondering where the people in the rural areas are moving to, it might surprise you to know that the majority are headed out of state. Yes, with the turmoil, and over-taxation, and an environment where businesses’ small and large are being looked at as part of the problem and not the solution it is no wonder people are leaving. California has another misleading ballot measure that, if passed, would repeal Proposition 13 (The Howard Jarvis Bill) and property taxes could rise to an amount that will push down real estate values. The Ballot measure is disguised as an education measure, but if this passes it would give the State an open opportunity to raise all property taxes on both residential homes and commercial property. This could be disastrous and push Cities like San Francisco and Los Angeles into further decline and more people leaving to seek cheaper housing. California is in a bad state currently with more people leaving than coming into California and it is all due to the current state of politics in the state that is running it's cities and businesses into bankruptcy and decline. It is obvious to us the trend and the attitude of buyers and sellers as to what their motivations are with what is going on in the world.
The world is an ever-changing place and with the health crisis that continues to give juice to the mainstream media and their fear machine, it is no wonder people want out of confined unsafe spaces like big cities. RV sales are also hitting all-time highs as people look to escape the mismanaged cities in California. Education and the thought of continuing to home school your kids is also playing a part in moving to rural areas in California where they are more apt to open schools first with smaller population sizes. As rural Home specialists, we are here to help if you are looking to remove yourself from a City and move to the quiet rural areas of California. We are also here for those that have been living rural and have found it time to leave the Golden State, we can help sell you home quickly. If you are seeking to buy or sell a property with a well and septic system (common on rural homes) we know who to call to inspect these properties and how to educate you with the new country lifestyle. We have many people that are making long-distance moves so if you or someone that you know needs our expertise give us a call. www.maecapitalcom 916-672-6130.
The first thing everyone needs to know is that we at MAE Capital Real Estate and Loan want all of our clients to be safe and healthy. Whatever your view is on the COVID outbreak is you will have to follow some rules when looking at homes during this time. People are still listing homes for sale, although things have changed dramatically in how your Agent can show a home to potential home buyers. The Listing Agents must also follow strict rules in order to list your home for sale and showing it to potential home buyers.
When a potential home buyer wants to see a particular home, he or she must sign a “Coronavirus Property Entry Advisory and Declaration Form” or PEAD-S for short. Everyone who is going to look at the house must sign this form prior to entry. This form must be presented to the listing Agent of every home you want to see. So, my advice would be to do some reconnaissance before asking to see a particular property. What that would be is to get in your car and go look at the outside of the homes and the neighborhoods before asking to go inside. What this will do is eliminate those houses that are not in a good location or have bad or dirty neighbors. Once you have done your recon trips on houses that interested you online then you can narrow down the ones you want to see inside. This is very important as not to waste your time and your Agent’s time at looking at homes that you would never want to buy anyway.
Once you have your list of homes you want to see the inside on present it to your agent so he or she can send you the PEAD-S for you to sign on each house you want to see. Note this form is sent to you from Docusign which is an electronic signature application. To help your Agent narrow down the amenities you wish to have in a house you should complete a Home Shopping Checklist and you can find this on our site by clicking here or on the link, there are many helpful tools to help you organize your finances as well as your wants and needs in a home. When it is time to go look at the homes on your list you will have to have signed each PEAD-S form for each property and your Agent has to have sent it to the listing Agents on each house you want to see and they have to have received it. Sometimes it can take a while for a Listing Agent to see the actual form as they may be busy when it is sent over. Patience will be your mandate for this process and all other process during this COVID crazy times.
Once your Agent has set the times and the Listing Agents have been given the PEAD-S forms then you can enter a house. Entering a house comes with another set of rules we must all follow. Every person entering a property MUST wear a mask and gloves we also provide booties to cover your shoes when entering a home. Although it should be a given but when looking at homes you should not touch anything other than door handles to open doors to inspect the house. Be sure to bring your checklists with you so you can see if the house offers all the items you want to have in a house.
For the Agent that listed the houses you are seeing you should be aware that the rules also state that the homes that are being actively shown must be cleaned between each showing. This is important for you to know as we in the Real Estate Industry need our client to be safe in the process of looking for homes. Also, we want to make sure that the seller’s of homes are also protected, so although it is a little extra work it is our responsibility to our Home Buyers and Sellers out there to be safe. We are all inconvenienced right now with the all that is going on but at least we can still show and sell homes during this crisis, but if we don’t follow the rules we may lose this privilege.
Patience is going to be your theme during the process of buying and selling a home in these trying times. Viewing homes is not the only area where you will need patience, also know that with interest rates at historic lows and lenders are backed up with refinances during this time and some lenders are still working from home in different parts the country so the loan process has also been painfully slow. So weather you agree with what is going on in the world or not, in order to buy a home or sell a home you will be burdened with additional requirements all due to the Novel Coronavirus narrative. We are here to help you with both your Real Estate needs and your home loan needs, remember bundle and save. www.maecapital.com.
If you have been looking to refinance your home loan now might not be the time to do it. Ok, I know this is contrary to the mainstream narrative when it comes to refinancing. Most people are hearing that now is the time to act as rates are at historic lows, if you have heard this you are hearing the narrative. It is true that interest rates are low, however, rates still should be lower. There are many reasons why I say this, and I will get into it in this blog. The biggest problem with lending today is not interest rates it is turn times and bottle necks in the industry.
It is true that interest rates are low, however, there are still parts of the rates that are not figured into the price of the interest rate. What I am telling you is that for most all Government loans, FHA and VA loans, there is a piece of the puzzle missing in the price of the rate. The price in the rate refers to the discount points. Before it was announced that you could take a pause or defer your mortgage payments during the pandemic the pricing on Government loans was considerably better. The best way to explain why is to show you behind the mortgage curtain, if you will. You see when lenders sell a mortgage in the secondary mortgage market to Fannie Mae, Freddie Mac, or Ginnie Mae (the Agencies) lenders will retain the servicing of the loan. What that means is that a lender will need to re-capitalize their money reserves by securing the mortgage with one of the above agencies by selling a portion of the yield to one of the Agencies. In other words let’s say you have a 3.5% interest rate on a loan (to make it simple) the lender may sell the loan to one of the agencies guaranteeing them a 3% yield. They then will keep the .5% to collect the payments from the borrowers and send the 3% to the agency they sold the loan to. What happens when borrowers stop making their payments? Well the lender still has to make those payments to the agency they sold the loan to. Thus, lenders will lose money on servicing loans during the pandemic. So, to offset this a lender will have to raise their rates to offset the losses in their servicing departments. It is more complicated than that but for simplicity that’s what’s going on with rates and pricing.
Thus, when people start making their payments again, on a regular basis, lenders will then be able to adjust their pricing on their interest rates back down. Interest rates are still artificially high although they are still low, if that makes sense. I am not saying when the pandemic is over that rates will automatically go down, however, in a normal world they should. Lenders might like the increased profits they are receiving from the higher upfront interest rates and fees. This is all new territory for everyone so to say this is the “new normal” and that it will be this way is confusing as I have done pricing before with a Mortgage Banker so I know how it was done. It may never go back to they way it was but competition is the key to lower rates and without it lenders could set interest rates and profit margins like OPEC with oil prices. This activity is illegal in the United States, however, everything has changed and that too might be a “New Normal”.
To add insult to injury, turn times on loans have slowed to a nauseating pace. If you are in the middle of trying to get a home loan whether it is a purchase loan or a refinance you are experiencing this. I have talked about this before in prior blogs but is has gotten worse with the increases in loan volume. You see the large lenders have not been able to get back to their work spaces yet and some are working from home and others from the office, so we are seeing that the right hand often doesn’t know what the left hand is doing so the time to do simple tasks like sign off conditions are taking 2-3 times longer than before the shutdown. This has impacted refinances and purchase transactions by adding an additional week or two or more, in some cases, to the process. We have also seen signing agents (Title companies and Escrow companies and Lawyers on the East Coast) taking longer to do their jobs as their offices have not opened to full capacity yet either. All this change has hampered the whole process of getting a home loan. It is frustrating to clients but to us that have always strived to hit our target closing dates on time it has been a real challenge. This will change in time; I can’t tell when as we seem to all be at the mercy of our local and state governments as to what can open and when and more importantly how they can open. Until the world figures out how to fight this pandemic and how to govern during this time we will continue to see change in the Home Loan industry. We are always here to assist you and give you the honest truth to what is going on in the industry. Please call us at 916-672-6130 we are here to help.
Ok we are a little over 2 months now since California shut down (March 16) so what is going on with interest rates? Interest rates are great let’s just start there. Interest rates are in the low 3’s and high 2’s currently. So what is driving interest rates, you would think the answer would be easy, however it is far from easy. There are many different factors that will determine what your interest rate will be and it will vary from person to person based on there credit scores, down payment or equity, cash back verse no cash back, loan size, loan program, fees waivers, and list goes on. If you hear an advertised interest rate that is really low it probably does not pertain to you or what you would want from your home loan. Interest Rates are also geographical meaning that depending where you live in the United States will determine your base interest rate. So how are rates calculated and how do they vary from lender to lender.
First lenders across the nation give California a little higher interest rate than the rest of the nation to begin with. This is due to the fact that California home loans tend to pay off faster than other parts of the nation. This affects interest rates in that the longer a borrower will hold on to their current mortgage the more interest a lender can accumulate over time. In California people tend to move more often that other parts of the country making the amount a lender can make on interest over time less so in order to compensate they raise the initial interest rate a bit. So if you are hearing, on the news, that interest rates across the nation have come down and they give you an average rate you can rest assured that California will be on the high side of the curve.
The next determining factor or factors that determine the interest rate you will get is your credit score(s). When a lender is pricing your loan, they have to use the low mid-score of a married couple and the mid credit score if you are single. When your Loan Officer (MAE Capital Mortgage) prices your loan with lenders across the country we will have to have your credit score and the amount you are putting down and other factors in order to get the rate that fits you specifically then we will shop for the best loan scenario. It also makes a difference if you are choosing a mortgage that will pay off bills in other words if you take cash out of the equity of your home on a refinance it will also increase the interest rate a bit. When you hear a lender advertising that they will pay off all your bills with a refinance know that is costing you a little bit more to do that. I would not discourage this just be aware of the increased costs even if you have 800+ credit scores the interest rate will be a bit higher.
If you are one of those who love to shop around to find the best interest rate you had better be prepared to give your exact credit score, down payment or equity position that is accurate as a bare minimum. Here at MAE Capital that is exactly what we do on every one of our loans as we are Mortgage Brokers that hold both a California Department of Real Estate License as well as the National Mortgage Licensing System (NMLS) license in order to be able to offer rates from lenders across the nation. Not all lenders are created equal so be aware that rates will vary from mortgage company to mortgage company and that has to do with their overhead requirements. The more people a lender has to employ the higher the cost for that lender to originate a home loan. A Mortgage Broker will have less overhead, in most cases, than a Mortgage Banker or a Bank who will underwrite and fund their own originated loans. The reason why a Mortgage Broker will have lower rates is the fact that they can shop the entire nation for lenders with the best rates and programs where Banks and Mortgage Bankers will only have their own set programs offered by there company. Mortgage Brokers also get what is called a wholesale rate verses a retail rate and that low rate is pushed to their/our customers.
The type of loan you choose will have a different rate than other loan types. A loan type is a FHA Loan, Conventional Loan, VA Loan, Jumbo Loan, Non-traditional loan, Private Money Loan, USDA Loan, CALHFA Loan, and more. All of these loans will have different rates associated with the risk they carry the higher risk loans, such as Private Money or Hard Money Loans carry the highest rates. Again, if you hear an advertisement for an interest rate or program know that what you hear is not what you will actually get, in most cases. For example; we have a lender that we sell loans to that has a program out now that has interest rates in the 2’s, but you have to have the perfect scenario in order to qualify for that program such as 750 mid credit score down payment or equity greater than 20% of the value or purchase price of that home, if you fit the parameters you win and get the rate. But if you are trying to take cash out of your home to pay bills off then suddenly you don’t and most people only hear what they want to and when they hear rates are in the 2’s they tend to pick up the phone and call around. Another factor that is currently changing the interest rates is the fact that many people have listened to the media and have stopped making their mortgage payment during the pandemic this not only hurts them but it hurts those with good credit and never being late on a mortgage. With people not making their payments during this pandemic it is hurting those that are, and are making higher interest rates. You see lenders have priced in the profit from collecting mortgage payments for the origination of a new loan before the pandemic and now they simply are not so we are experiencing higher rates because of this. One phone call to MAE Capital Mortgage Inc. and we will be able to run your credit while we have you on the phone and will be able to give you an accurate interest rate. I hope this blog helps people to navigate through all this and we are here to help. Give u a call to get your pricing today at 916-672-6130.