“ 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.
When shopping for a home loan even your Realtor may not know the differences between a Broker and Banker, so even if they recommend a Loan Officer to you, because they have used them in the past, you should do your research as you might be able to save yourself thousands of dollars. Your Agent may think a direct lender is a better deal for you as they underwrite their own loans “in house”, but the fact is it might be in the Realtor’s best interests not yours. “In House Underwriting” sounds sexy, however, in today’s automated world every Loan Officer be it from a Banker/Direct lender or a Mortgage Broker has the same automated underwriting systems available to every underwriter. So when you apply for a loan with either a Big Banker or a Small independent Mortgage Broker they all have the same access to an underwriter or underwriting systems. So the myth of having your own underwriter as a selling point is just that a myth and what happens when their underwriters have a bad day, you pay the price. A Mortgage Broker can deliver your loan file to several different underwriters that will have different rules and guidelines to get your loan approved. Technology has improved so much that all of the paperwork necessary to process a loan can be uploaded and transmitted to an underwriter instantly and that underwriter can make a decision quickly and if a Banker’s Underwriter declines your file you are done with them. If a Mortgage Broker submits your file to an underwriter and they decline it a Broker can take your file to another underwriter without you having to gather all your information again and again. Most underwriters today use either the Federal National Mortgage Association’s or the Federal Home Loan Mortgage Corporation (Fannie Mae or Freddie Mac) automated underwriting systems to underwrite traditional home loans and those same systems are available to all Loan Officers either from a Large Banker/Direct Lender or a Small Mortgage Broker.
You may say that all of that is good but all I care about is getting the lowest monthly payment and the lowest costs. Although both a Banker and a Broker inevitably get their interest rates from the same sources it is how much that is charged by the company that makes the difference in interest rates and fees that are quoted to you from lender to lender. We have already discussed earlier that Bankers have bigger and shinier offices than that of Brokers and with that comes a larger overhead and more expenses than that of a smaller Mortgage Broker. That all has to be paid for and they do that in the form of higher interest rate and fees. The smaller firms like MAE Capital Real Estate and Loan can keep that overhead low thus being able to offer a lower interest rate and lower fees and can save you thousands of dollars upfront and monthly.
In addition, the regulator in California for Bankers is the Department of Business Oversight (DBO) and they have different laws then that of the Department of Real Estate (DRE) who regulate Mortgage Brokers. We talked earlier about Bankers having a larger overhead and expenses than that of a Mortgage Broker and thus the need to make more profit per loan closed for the company than that of a Mortgage Broker but what exactly does that mean? The Direct lender has to pay more staff, more rent, more insurances making their costs much higher than that of a Mortgage Broker and their Regulator, the DBO, knows this so the Banker has no limit on the amount they can add to the interest rates and fees to maintain their profitability . A Mortgage Broker, on the other hand, is limited to a maximum of 3% of the loan amount they can make on any one loan from the DRE. A Direct lender does not have that limitation and they can charge what they want to be profitable costing you money. The Mortgage Broker has to keep their overhead as low as possible being limited by law on how much they can charge is your benefit with lower interest rates and fees.
Having been on both sides of the fence I understand completely how this process works and will tell you that you will save thousands by working with a company like MAE Capital Real Estate and Loan. Every Loan we close is a testimony to this as the client’s rates and fees are significantly lower than that of a Banker on every loan transaction. As a Mortgage Broker we can also offer other loan products that a Banker can’t such as Private Money Loans for investors, Certain Bank Statement only loans to qualify borrowers that can’t show enough income to qualify traditionally. Overall we as a small Mortgage Broker can find the best loan for your needs with he lowest interest rates and fees. An example of this is; MAE Capital closed a VA loan that came to us from a Veteran who works for the VA and he received a quote from one of the Veteran’s Administration’s “Approved Lenders” that is a Banker/Direct Lender and we beat them by .5 in interest Rate and $13,000 fees. We closed the loan a 3.875% and the veteran paid $0 down and $0 closing costs, saving him $13,000 in costs and has a lower monthly payment. We have many stories like this and most of our clients don’t even realize the savings they are receiving as most clients don’t shop for a loan. So if your Agent is recommending a Loan Officer Check the rates and fees and then check with MAE Capital Real estate and Loan and you will be shocked at what you will save. If you are buying in the Greater Sacramento Area (El Dorado, Placer and Sacramento Counties) ask about our Bundling of Services where we represent you as the Realtor and the Loan. This has saved our clients even more money as we can bundle our commissions and get you a home warranty and even lower interest rates and fees. MAE Capital Real Estate and Loan is one of California’s best kept secrets when it comes to saving people money on their home financing. Trying to change this secret into mainstream facts by educating our clients and future clients. Call us today to find out more or have us compare your Direct Lender’s Loan Estimate with ours and see how we can save you thousands of dollars. We can Lend all up and down the State of California. Our phone number 916-672-6130 or go directly to our site at www.maecapital.com.