Real Estate has been an honorable profession for over 120 years and has been evolving since the first house was sold. Agents that assist in this process today are trained to deal with both home buyers and home sellers and all the laws and disclosure rules that accompany this. As you can imagine, over the years, the profession has become increasingly more complex due to the implementation of laws and rules. When I started in the business in 1985, the purchase contract was only one page, and now the purchase contract is 17 pages. The reason it has grown to such a large document is all of the laws associated with selling real estate, not to mention how litigious the real estate profession has become. Which is why Real Estate Agents have become a necessity to many people wanting to buy or sell real estate. In 1985, when I started, a Real Estate Agent who wanted to show houses to his or her clients needed to have a “Listing Book,” a book that was published every month that had all the information on houses for sale. Today, we use the Multiple Listing Service (the MLS). Real Estate back in the day was word of mouth between Agents until the book was published monthly.
The old way that real estate agents had to work required a lot of time and energy, and the commissions that were charged to do this work were typically at roughly 6%. When I say 6%, that was meant to be paid by the seller to sell the house, and was normally split between the Listing Broker and the Broker representing the buyer’s broker. The work that was required before the internet was tremendous for agents to get the word out that a house was for sale, and the commission reflected this. The internet has changed the way the real estate business is done and has made it a whole lot easier. We also have to remember that sales prices have escalated as well over the years. In 1985, the average sales price of a home in California was only $84,300, so with a 6% fee, it would cost a seller $5,058 to sell a house. That same house today would be worth about $750,000, depending on where the house is located. It would cost a seller today $45,000 to sell the same house with less work.
If this seems crazy, then you are right. Although the liability to sell a house has risen, it has not risen as fast as fees have; the cost to sell your home should not be a prohibitive factor when contemplating the sale. Most Agents in today’s world have the perfect script for potential sellers when they want to list their house to sale. They will tell you that they are marketing geniuses, or they will say they have connections with potential home buyers, or they will tell you that they can get a higher price for your home than the next Realtor. All of this is the sales schtick of a Realtor. The reality is that all they need to do to market your home is put it in the Multiple Listing Service (MLS), and all the other services feed off the MLS. An example would be that when I list your house and put it in the MLS, Zillow, and all the other Real Estate search sites, including MAE Capital’s website, pull all the data from the MLS. So, when your Realtor tells you they are marketing experts, know that this is all they are really doing to market your listing.
The computer has changed everything over the years in the Real Estate game. For this reason, I can’t see the reason for charging my clients a 4-6% commission to sell their home. In addition, the rules have changed for Agents who represent potential home buyers. If a home buyer wants to work with an Agent to show them homes, they now have to sign an agreement with the Realtor that if the seller does not pay their Broker, then they (the home buyer) must pay the commission. You will see when you talk with an agent that you want to show you homes that they will have you sign a Buyer Broker Compensation Agreement, which is a contract that states if the seller will not pay the buyer’s agent, then the buyer must pay that agent out of his or her own pocket. This is new as of the first of the year 2025. The Agent’s schtick on this form will go something like this: I will get the seller to me you won’t have to worry. Although this is mostly true, a buyer will end up paying for the Agent’s fees in the sales price of that home as the seller will have to raise the price to get your agent paid in most cases. This is a new situation in Real Estate that Realtors are having to deal with, explaining to their clients how this works, and in most cases, it is very uncomfortable to talk about as they have not had to in the past.
I have not even talked about the coming of AI in the Real Estate game that stands to change everything. This will change how real estate is marketed and how potential home buyers search for property. In the not-so-distant future, the contracts, marketing, regulation, and many other aspects of the real estate process will be automated in a way that there will be little need for human interaction. Until then, we still need to input the listing into the computer so it can be uploaded into the MLS and we need a buyer’s agent to show the property and let customers look at the property. This is why I have instituted an advanced way of selling real estate on behalf of my clients. First, I will list your house for only 1%, and then when you want to buy your next home or your first home, I will only charge 1% on the Buyer Broker Compensation Agreement. I will also be able to take the savings I negotiate on your behalf and apply it to your new home loan, which I will arrange for you as well.
This is a simple process, and when you understand the philosophy behind the process, the light bulb will go off, and you will wonder how other Agents can charge so much for the same service. I have made it simple for you, as I have a clear understanding of how this process works after doing it for 40 years now. I will do exactly what all the other Agents do to market and sell your house, but with more knowledge and experience to protect you. I will bundle your services to save you even more money. Before I even list your house to sell, I will get you a mortgage approved for your next home. Then I will list your house for 1% and explain to you that we can negotiate how much you (the seller) will have to pay the buyer’s broker. We will adjust the sales price to reflect the highest amount back to you for your next home. Then, when we are looking for your next home, I will only negotiate 1% for myself, and if the seller has already agreed to pay 2-3% for my side fees I will give you the difference to buy down your interest rate on your new mortgage or lower the cost or both. This works even if I only represent you as a first-time buyer, and I do your home loan. This is the way efficient Real Estate is going to be in the future. By being able to arrange your home loan and find your house for you, I know intimately what your situation is and can negotiate appropriately. You will only have to call me versus, under the traditional real estate way, you would have to call your Agent and Your Loan Officer. You will get 40 years of mortgage experience and real estate experience. This will benefit you as I have rehabilitated many homes and understand how to inspect homes for potential problems now and into the future. I know how to negotiate and will get you the best deal that can be negotiated. This is the new way real estate will be done until AI changes things yet again. I am here for you, so take advantage of a guy who has trained underwriters in the past and has mentored and trained many top-producing Loan Officers and Real Estate Agents. Work with the best so you don’t have to deal with the rest. Call Gregg Mower @ 916-849-7170
It has almost been 2 months since the new administration has been in office and I have never seen administration move so quickly toward changing just about everything. Many people are freaking out over the changes, mostly the politicians who have had non-profit organizations set up to funnel money back to them become unfunded. The amount of fraud that is being uncovered is astronomical and the savings for average Americans will end up being tremendous. Some of the economic changes that are happening are being overshadowed by the DOGE and other geopolitical goings on in the world. This article is not to give praise for the changes but to recognize them and see how it is going to impact the Real Estate and Mortgage markets moving into the future.
Tariffs and the impact on the Real Estate markets are going to be minimal in the short term. Tariffs are a way to encourage investment in the United States and bring back manufacturing and jobs to the US. This is a long-term game where the positive impacts will not be for several years. A Tariff is basically a tax on goods that are being imported into the US. This may sound like it will be inflationary as those goods being imported will be delivered at a higher price. In the short run, it will be, but in the long run, you will see companies coming back into the US and the supply of those goods will increase, and when supply increases prices go down. The other effects of tariffs in the long could be that the US will not need to tax its citizens as much to keep a viable government and the possibility of doing away with income tax could be a real possibility along with other factors in the economy. With more jobs in the US, as a result of tariffs, people will feel more financially secure and will buy more homes.
The re-adjusting of government by making it significantly smaller more manageable and more accountable will also help with lowering taxation on its citizens which will mean more disposable income for every American. With more income people will be able to qualify more easily to buy a home. In addition to smaller government regulations will be lifted on tapping America’s own resources such as oil, natural gas, and rare earth minerals. This will bring down the cost of fuel that delivers goods to the markets thus making food prices more affordable. The government has also put into place a Cryptocurrency reserve which will give the government its assets and can begin to build the net worth of the federal government so our currency will have more value. In addition to the adoption by the governments of the use of Cryptocurrency will close the loophole that is being exploited as seen in the waste and fraud that DOGE is uncovering under a strict ledger system all monies could be easily tracked on the blockchain.
This Blockchain technology has far-reaching implications that will eventually change the way just about everything in the financial world is done. Couple Blockchain technology with Artificial Intelligence (AI) and we are going to see astronomical changes in the financial world. This will mean a faster underwriting system for the mortgage business and could take the loan officer out of the equation as a consumer will be able to give access to a Bank or a financial institution to check personal information. AI could then get all the necessary information on a borrower in a matter of seconds and have the borrower’s risk underwritten in seconds making the process of getting a mortgage almost instant. Coupled with Blockchain the entire transaction is permanently recorded forever and can be analyzed far into the future. AI and Blockchain are also poised to take over the banking system as well as Wall Street and all financial functions.
These changes are coming, it is only a matter of time before we start to see big changes. People that have a problem with change had better buckle up it is going to happen at a faster speed than we have ever seen. All the changes that the new administration is making will take time for all of us to feel, but we will feel it. I do see the economy having to go through an adjustment period, or correction, or recession whatever you want to call it, but it will be better to go through sooner than later. The positives that come from a recession are lower interest rates, lower cost of money, and a correction in housing prices, it will give the administration an opportunity to change the entire financial system, which I have heard. Although I can’t predict the future what I can tell you is that the changes will be coming at a faster pace than we have ever seen. As the changes happen, they will hurt and heal so be patient you can’t change major things in a few weeks it is going to take years.
The house-flipping business isn't just for young investors with boundless energy—seniors bring a wealth of experience, patience, and financial wisdom that can give them a competitive edge. Whether you're looking to supplement retirement income, stay active, or finally pursue a long-held passion for real estate, flipping homes can be a rewarding and profitable venture. With the right strategy, careful planning, and a smart approach, seniors can successfully break into the market and turn properties into profit. This article explores key strategies, common pitfalls, and tips to ensure success while minimizing risk.
Leverage Your Life Experience to Make Smarter Decisions One of the biggest advantages seniors have in house flipping is the ability to make informed, measured decisions. Unlike younger investors who may act on impulse, you can draw on decades of financial management, negotiation skills, and practical problem-solving to choose the right properties. Your patience and experience in handling major purchases will help you assess market trends, compare deals, and avoid costly mistakes.
Start Small to Reduce Risk and Build Confidence If you’re new to flipping, it’s wise to start with a manageable project rather than diving into a major renovation. A small, low-cost property that requires cosmetic updates—such as fresh paint, new flooring, or updated fixtures—can help you gain experience without overextending yourself financially or physically. Taking on a simpler project allows you to learn the ins and outs of the flipping process while keeping your stress levels low. Once you feel comfortable, you can gradually take on more ambitious properties with higher potential returns.
Partner with Trusted Contractors Many aspects of house flipping require physical labor, but that doesn’t mean you have to handle everything yourself. Hiring expert contractors, electricians, plumbers, and handymen can help you manage renovations and ensure quality work. Establishing a trusted network of professionals will ensure that work is completed efficiently and up to code, saving you from potential headaches down the road.
Tap Into Financing Options That Fit Your Retirement Goals Seniors often have financial advantages that younger investors lack, such as home equity, retirement savings, or access to specialized loans. If you own your home outright or have built significant equity, a home equity line of credit (HELOC) could provide the funds needed to start flipping. Carefully evaluating your financial situation and choosing the right funding strategy will help you invest wisely while protecting your retirement assets.
Focus on Senior-Friendly Properties for a Niche Advantage A great way to carve out a niche in the house flipping market is by focusing on senior-friendly homes. With an aging population, demand for single-story homes, accessible layouts, and age-in-place features is growing. By renovating properties with wider doorways, walk-in showers, and non-slip flooring, you can target a market often overlooked by younger investors. This strategy makes your flips more appealing to a specific demographic and ensures long-term demand for your properties.
Take Business Courses
Expanding your knowledge through business courses can give you a competitive edge in the house-flipping industry, helping you make smarter financial and operational decisions. Take a look at this: Coursework in accounting, business, communications, and management can equip you with the skills needed to help your business thrive, from budgeting renovation costs to negotiating better deals. Online programs make it easy to manage your real estate work while balancing your studies, allowing you to apply new strategies in real time.
Network with Real Estate Professionals for Ongoing Support Flipping houses isn’t a solo endeavor—it requires working with a real estate agents who understand the lay of the land. Seniors entering the industry should build strong relationships with these professionals for valuable insights and guidance. Attending local real estate investment meetings and joining online forums can help you navigate challenges and stay informed about market trends. The more you immerse yourself in the industry, the more confident and prepared you’ll be with each project.
Prioritize Time and Energy Management to Avoid Burnout Unlike traditional jobs, house flipping gives you the flexibility to set your own pace, which is an advantage for seniors who want to stay active without overexerting themselves. It’s important to plan renovations strategically and allow time for breaks, rather than taking on high-pressure timelines that can lead to stress. Outsourcing tasks, hiring project managers, or even partnering with younger investors can help balance workload and energy levels.
Flipping houses as a senior can be both a profitable and fulfilling endeavor, provided you take a strategic approach. Your experience, financial stability, and ability to make well-informed decisions are major assets in this business. By starting small, working with trusted professionals, choosing the right financing, and targeting the right market, you can create a steady stream of income while enjoying the process. Real estate investing isn’t just about turning a profit—it’s about finding a purpose, staying engaged, and making meaningful contributions to the housing market on your own terms.
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By now we all know who the next President will be so what does this mean for interest rates and Real Estate? The first thing we all need to remember is that our government does not control interest rates it controls the information the Federal Reserve uses to determine the direction of the interest rate that the Federal Reserve (the Fed) controls and that is the overnight lending rate for Banks to borrow from the Fed. When the bank’s cost of money decreases it usually means that the banks will lower lending rates to the public. The Fed bases its decision on the direction of the overnight lending rate based on how the economy is performing. The President can’t control the interest rates, but he can control the economy so any changes that we might see happen will not happen until at least the 2 quarter of 2025.
The reason I say we won’t see any significant changes to the interest rates like we see in the Stock Markets immediately is simply that it takes time for an economy to go through changes. The Interest rates are set by the economy, not by policy. Policy can change the interest rates, but it will take time to show up. The Stock Markets rallied after the election as the Stock Markets are speculative in nature and the Stock Markets see the new administration to be more business-friendly and see that money will eventually open back up and flow more freely in a lower tax environment. We have to remember that the new President is not sworn in until January and it will take time to transfer power and get new people and policies in place. Then we probably won’t see the effects of the policy changes for months afterward. We are still in the same business cycle which means we must go through some pain before it gets better.
This current business cycle is one where we still have inflation and a contraction of the job market. This will not change overnight, so we need to be patient. Business cycles are generally not controlled by the government, but the government can have significant effects on it. The policies of the current administration will remain in effect until the new administration takes power. Once the new policies of the new administration take effect it could take months for them to show up in economic numbers that the Fed uses to control the rates. The wild card is that there are still 2 months of the current administration, and they still have the power to make changes to the economy in the short term that could last months into the new administration.
I do see economic hope on the horizon; however, we have to go through the business cycle we are in currently to get to the new one. This will probably be a bit painful as interest rates will still be in the 6’s and 7’s until we start to get to a place where they can go down. This place is where inflation is under control. We also must remember that Interest rates go down with negative economic news such as a recession. The Fed will lower interest rates if they think the economy needs to be stimulated, we are not there yet. This is why the Fed only lowered their overnight lending rate by .25% as was expected by the other interest rate markets. The Federal Reserve’s next meeting to determine if they will lower their interest rate will be in December. The time between now and then we will get to watch the data they will be using unfold in front of us and that is how economists make their predictions on what the Fed will do at their next meeting.
All this means that we will be in the business cycle for at least the next 6 months. In that time, we will be in this current cycle before any new policies from the government can take effect on the economy. So, I see employment softening still and I see inflation coming down as people don’t have extra money to spend on things to drive inflation up. I also see a softening of the Real Estate Market where it is changing from a seller’s market to a buyer’s market with the Real Estate prices slipping a bit in order for sellers to sell their homes. I do not predict a crash like 2008, but I do see a correction. I see mortgage rates dipping to the 5’s in the late 1st quarter of next year and that should bolster the economy. We will not see rates in the 2’s and 3’s again, in the near future, unless something drastic happens that is outside of the current business cycle. I hope this helps you with how this system works and you can plan for your financial future.
The Federal Reserve has lowered their prime lending rate down 50 basis points or a half of a percent aiming for a target rate of 4.75-5.00 from 5.50. Initial reactions in the interest rate markets are neutral which indicates that the mortgage interest rate markets have factored this half percent move down in already. Mortgage rates are now in the low 6’s and high 5’s currently. The Federal Reserve also talked about the labor market, and this was the single biggest reason for moving rates down .5% rather than .25%
The labor market is probably the most under-reported and misreported number out of all of them. Jay Powell (the Chairman of the Federal Reserve) said this in his comment today. He made mention of the job creation rate of being wildly wrong (overrated) and this is why they didn’t move rates on their last meeting as they had the wrong data. Jobs are important numbers to look at as more people working means more people buying stuff and with fewer people working the less stuff people buy. This is directly proportional to inflation, which is what they are trying to control. I have echoed this for months now as a mortgage professional we have been the slowest in history due to high interest rates, so our industry has laid off hundreds and thousands of workers. In addition, without money flowing in the economy employers don’t need employees in a slow consumer market so layoffs have been happening across America for the last year or so and this has not made any news as we are in an election year.
With the lower interest rates, you will see a gradual lowering of mortgage rates as the Fed continues to talk about future rate cuts. What people don’t understand is that mortgage rates will continue to go down in anticipation of further rate cuts in the future. If you are ready to buy a home now would be the time to get started before mortgage lenders get bogged down in refinances. If you have an interest rate in the 7’s you should start the process now to lower your payments. If you have equity in your home and you have high credit card debt you might want to consider a refinance of your home to consolidate those payments and lower your overall monthly expenditures. You can refinance your home every 210 days with any repercussions so start enjoying lower payments today and then possibly even more in the future.
If you are reading this, you have a desire to out from a 40-year season Mortgage man what is going on with interest and the economy. We need to explore what the mortgage rates and the stock market are going to do when the Federal Reserve Bank lowers its Fed Funds rate. The Federal Reserve or the “FED” does not control mortgage rates, they control the rates that independent banks can borrow from the Fed and this in turn is the underlying cost of money. When the Fed lowers interest rates, they lower the interest rates that banks borrow from the Fed overnight or commonly called the overnight lending rate or the Federal Funds rate. This is not directly connected to mortgage rates it does lower the cost of money to the banks so the lower the cost of money to the banks the lower the costs can be pushed out to consumers in the form of Mortgage rates and other loans banks make.
That said, all indications from the Fed are that they are going to lower the Fed funds rate from a target range of 5.25-5.50% to a possible target range of 5.00-5.25%. This means that the rates banks borrow from the Fed will go down. The hope is that this will translate to lower mortgage rates. The Fed is expected to lower interest rates by .25%-.50%, and if this happens the mortgage market has already factored that into the current rates, so when they announce they are lowering interest rates and they lower them by .25%-.50% we will not see a major move downward in long=term Mortgage rates as the markets have already anticipated this move. If the Fed lowers the rate by .25%, we may see mortgage rates go up a bit and if it is .50% we may see a slight lowering of mortgage rates but no major moves downward. The most important part of the announcement won’t be the announcement of actually lowering the interest rates, it will be what they intend to do in the future and that will move the markets more than the actual move downward in September.
If the Federal Reserve sees strength in the economy, from the numbers given to them by the Federal Government’s Bureau of Labor and Statistics (BLS) they will probably only lower the rate by .25% if the BLS number indicates a weakening economy the initial move downward will more likely be as high as .50%. If the numbers look worse than they anticipated, they may lower the rates by a larger number and that would move mortgage rates lower significantly. I and others who have been watching the Fed for decades know that they are far quicker to raise interest rates than to lower them. This is why we anticipate a max movement of .50% which has been, for the most part, factored into the current mortgage rates.
Current conventional mortgage rates have lowered into the 6’s with the anticipation of the Fed moving to lower interest rates. FHA and VA home loans are in the low 6’s to high 5’s. I am not anticipating the Fed to lower their rate lower than .50% and the markets have factored that in as well so anything different from the Fed or an announcement that the trend will be to lower rates throughout the year will have an immediate lowering of mortgage rates anything less will immediately raise mortgage rates.
It’s Monday, August 5, 2024, and the Stock Markets worldwide have endured a significant sell-off. Why is this happening and what is driving this? How will this help Real Estate and how will this hurt Real Estate? What are the global ramifications here and how will it affect you and your finances? Those are just some of the questions I will be exploring.
The markets started the correction last week due to bad economic numbers. Those numbers were weak consumer goods orders and higher-than-expected unemployment numbers. These numbers are what the Federal Reserve looks to when they make up their minds on the direction of interest rates. Interest rates drive the flow of money for growth in an economy and they have been high for several years now. Higher interest rates have slowed the real estate market to crawl over the last several years. Fewer people have been able to afford a house with higher interest rates. So with less home ownership people are not spending money on goods and services for homes such as washers and dryers, home improvement items, and major remodeling projects. All the people who work for those support companies have been slowing down and now are laying off people due to a lack of demand for goods and services. The reporting numbers are severely lagged or even manipulated and when the markets finally woke up to the fact that things are not as great as the reporting numbers have said, then you have a correction and that is what we are seeing.
This correction is just beginning, unfortunately, as the stock markets have been held up artificially by certain big investment brokerages or bad government reporting numbers or both. The philosophy of the Stock markets of late has been to simply look to the government’s Bureau of Labor and Statistics that pump out unemployment numbers, Job Growth, GDP, and unemployment to name a few. When you don’t look out the window to see what’s really going on you can be manipulated. People and the markets are now realizing the truth and reacting to the truth. I fear that the monetary system is not far behind.
Traditionally, when the economy has little or no growth the Federal Reserve will lower interest rates to stimulate the economy by getting money flowing again. I firmly believe that the Federal Reserve will have to lower interest rates sooner than later. Although the next Fed meeting isn’t until September 18th I believe the Fed will take an emergency action by lowering interest rates before their next meeting. How much I can only guess l but I would guess by .25%-.50% to get money flowing again. The problem is that as stock markets crash and big companies have less money to work with they will have to start laying off people, which we have already seen in the large-cap companies and small-cap companies. As people lose their jobs, they will have less money to spend in an economy that has already been ravaged by inflation. Things will have to get a whole lot worse before it can get better.
The good news is that interest rates will start to come down again. This will allow people who have good jobs to refinance themselves to a lower payment. It will also allow businesses to borrow at cheaper rates to expand. This will not be immediate as Rates will not go down as rapidly as they probably should. In the meantime, we will all have to endure a correction that could be very painful for those who are retired or close to retirement. It will also affect those in the tech business with the invention of Artificial intelligence (AI) that will be cutting coding jobs for large tech companies. It will also trickle over to the monetary system affecting the dollar.
For now, sit back and enjoy the show, and don’t panic. If you are young, this will be a big deal for a short period of your life but over time everything will come back as history has shown. So, If you have a good job and stay employed through all of this you will have some of the best investment opportunities in Real Estate that we have seen in a long time. You probably will not see these opportunities until early 2025 so if you can save do so now you will need it. We are in for some very interesting times through this correction and the coming election cycle and the events unfolding in the world. Pray that our government doesn’t decide that War is the way out of this problem as that has been what our government has done for the last 100 years.
By the time you read this, I am sure you have read about what is happening worldwide with pending war. It appears that our own Government is provoking conflicts all over the world and at home for no reason affecting all aspects of business including the Real Estate Industry. At home, the Department of Justice now taking up a side against the Real Estate Industry. In addition, our own government, specifically the Department of Labor and Statistics is feeding us information on inflation and employment that is clearly wrong or manipulated. If you are not asking these questions you should be, as something is going on that is out of our control and is seriously harmful to all of us no matter which side of the fence you stand on politically.
Looking at the state of the world we must ask why is the United States provoking all of these conflicts all over the world? Our media has been telling Americans that it is Russia and China and that is just propaganda so why? The only conclusion I have for this is the US Dollar. The US dollar has been the world’s reserve currency since 1944 and is now being threatened by Russia and China as they are creating alliances with nations all over the globe to start a new reserve currency. You may have heard of the BRICS nations by now, which comprise of Brazil, Russia, India, China, and South Africa and many more nations have joined this movement over the last several years. Why would our government be concerned with this you may ask, it is simple, power and dominance is the answer. As it stands today, and it is changing rapidly, if you want to buy goods globally, specifically oil, you would have to convert whatever currency you have to dollars in order buy these goods. Those countries that have to convert are at an automatic disadvantage to the US Dollar. What Russia and China are creating is a system that would require the US to convert the dollar to another currency thus devaluing the dollar and creating a threat to the Central Banking system. This possibly is an explanation that makes the most sense logically. It makes no sense to make China our enemy when we literally import just about everything from China it is like we are biting the hand that feeds us. As for Russia they need Ukraine’s resources such as their gold and precious metals to back the new currency. Our government has been keeping all this from its citizens in an effort to hide the fact that all these conflicts are over money and that doesn’t fit their narrative. Again, this is not substantiated and is just a theory based on logic and what is going on in the world today. As we all watch to see what is unfolding the average American is being choked by inflation and is not being able to save or afford to buy a house with the high interest rates caused by the high inflation.
Another attack on the Real Estate industry, specifically of late, has been the lawsuits filed by prosecutors in certain states with regards to the way Agents are compensated. The National Association of Realtors (NAR) was recently found guilty of non-disclosure of buyer’s Agent’s commissions upfront as were several large National Real Estate Franchises and Companies. This has sparked confusion and frustration in the Real Estate community. The industry has been in the process of changing the way they disclose since the settlement by creating new forms and even more confusion for the consumer. Now the Federal Department of Justice, the DOJ, has begun to look at this further as they apparently don’t like the Real Estate Industry and we can only guess why. Yes, we are witnessing the weaponization of our government against its citizens or that’s what the actions look like. We are living in very trying times in the Real Estate Industry and these disruptions to our way of doing business is furthering the decline in the industry.
To further make things seem like we are living in a bizarre world the Federal Department of Labor Statistics is putting out economic numbers that both the Stock Market and the Federal Reserve have used for decades to determine the direction of the economy. These numbers have been indicating that inflation is under control or is at least cooling down, but what they are not telling you is that those numbers take out Food and Energy inflation, both of which we know have been going up consistently. People are feeling this in their everyday lives and have taken measures to keep themselves financially secure. I might say, many Americans are steaming mad as their ability to save and live a happy life has diminished with these economic times. In the mortgage business, persistent high interest rates have taken the majority of people out of the real estate market as they simply can’t afford a $3,500-$5,000 mortgage payment as they would need to show $10,000-$15,000 in monthly income to qualify for those payments and those payments equate to a starter home in California of $500,000-$650,000. This economy is not sustainable.
To conclude, I have been in the Mortgage / Real Estate Business for 40 years now and I have never seen the business as slow as it is now. I have seen the Stock Market crash of 1987, 2008-2009, and the pandemic crash of 2020 but what we are experiencing now is far worse and has been lasting for a more sustained time and no relief in sight. This Real Estate market and high interest rates have been declining since 2022 and with war on the horizon and more misinformation being fed to us daily, I don’t see an end. I like to be a realist in life and a logical thinker, however, I have only seen negatives and nothing on the table to fix the situation. I see both political parties as compromised as well as our banking system and with more bank failures on the horizon due to bad commercial loans this is going to take a bit to get through and I pray that we all come out of this as better humans and realize that we are all better united as divided we will fall.
FHA Loans were born from the great depression in 1933. The idea of the government insuring a Real Estate loan, at the time, was groundbreaking. In today’s world, we expect the government to step in and try to fix things when the economy is sluggish or depressed. Back then our government was far less a part of the ordinary citizen’s life. So when the private sector was approached by the government to insure mortgages that were traditionally insured privately by large down payments was a groundbreaking concept. At the time Banks and Brokers were the only way to get a home loan and they required that a potential home buyer put 25-50% or more down to buy a home. So when the government said they would insure mortgages up to 95% of the value of the home, you can imagine how this changed the way Real Estate Loans were originated. It was designed to stimulate housing growth to get the country out of the grips of the Great Depression. It worked, along with a whole new age of people relying on the government to help them when things were tough. Out of the Great Depression, we also got a welfare system, unemployment insurance that the government collected from employers to help with displaced workers and a whole litany of other programs that expanded the scope of the Government. The Federal Housing Administration (FHA) was designed to be a short-term way to get the housing markets stimulated to get America out of the Depression. The program still exists today, and you can take full advantage of it.
Today FHA loans are still alive and well and are still used today to get people into a home with a small down payment of 3.5%. FHA loans are still viable loans for those who have a small amount of money to purchase a home. The way an FHA loan works is very similar to Conventional Loans in that a potential borrower must qualify for the loan with their income and current credit. When we say qualify there are several factors that a lender must review in order for a client to “qualify” for any loan. These factors are but not limited to having shown the ability to handle credit or in today’s word have a credit score that meets the criteria of an FHA loan (550 or better). Generally speaking, FHA loans are more liberal when it comes to having a good credit score than that of its Conventional counterpart. If a borrower has a low credit score due to circumstances out of his or her control and has shown that they are trying to take care of it and that is the only factor with regards to their financial situation they generally can get approved for an FHA Loan. There are several other factors that must fall into line before that can happen, however. For instance, a borrower’s house payment combined with their monthly bills should not exceed 43-50% of their gross monthly income. This brings us to verifying income and what is required by FHA. First, a potential borrower must have a two-year history of working which could be multiple jobs or a combination of school and a job and must be able to show that their income will be stable enough to maintain the mortgage payment. Next, a borrower has to be able to prove they have enough money for the 3.5% down payment. This money can come from savings or can be a gift from a relative a close family friend, or an approved Down Payment Assistance Program.
We talk about FHA loans being a federally insured loan, but what exactly does that mean when you have to pay the mortgage insurance on a FHA loan? Simply put there are two payments to the insurance fund a borrower will have to make; one the upfront insurance is 1.75% of the loan amount (Sales Price minus the 3.5% down payment requirement) this is added to the loan so you don’t have to come out of pocket for this; two the monthly payment of the mortgage insurance is a small percentage of the Loan amount every month. These insurance payments go into pools that are designed to protect the lender’s yield on the loan if there is a foreclosure allowing for the lower down payment. This insurance makes FHA loans more appealing to lenders and thus lenders have more flexible underwriting guidelines and can get more people into homes utilizing the FHA Loan.
When talking about flexible Underwriting guidelines your eyes probably just rolled to the back of your head. Not to worry I am here to help break it down to simple bullet points that you may not have heard of before. Being evaluated for loan approval seems daunting but that is why we have a team of folks to walk you through the whole process. Our highly qualified loan originators will walk you through the process. The Loan Officer will gather your pay stubs, tax returns, bank statements, and W2’s and they will do the analysis for you. Your loan officer will check your credit, check your debt-to-income ratio, and make sure you have enough money verified to close the transaction. The loan officer’s job is to paint your financial picture with your financial information and present it to the underwriter, who will approve your loan. Our Loan Officers do this every day, multiple times, so they are experts at what it takes to get an FHA loan approved, so when you are looking for expert advice and guidance please let us to walk you through this process.
The benefits of using an FHA Loan are:
Now that we have explored the history and the benefits of using an FHA loan you may ask: “How do I apply for an FHA Loan?” At MAE Capital Real Estate and Loan, we have over 39 years of experience working FHA loans, so we should be your logical choice, not to mention our interest rates are better than the rest. Simply click on this link and you can start the process or call us at 916-672-6130 and we can do it for you over the phone.
As this article is being written Congress is still sending our money overseas. What does this mean for the Real Estate market? I will break this down in this article to hopefully shed some reality on the situation. First, we all must remember what drives interest rates today and that is inflation. The Federal Reserve (the Fed) or our Central Bank has only one way to regulate inflation, and that is through raising and lowering interest that banks borrow from the Fed. When the Fed raises its overnight interest rates Banks will raise their cost of money to the consumer through interest rates it lends to its customers. This will lead to higher interest rates for everything Banks lend on including Real Estate Loans.
Real Estate Loans or Mortgage rates directly affect the buying power of consumers when they go to borrow money from their home. If you are a first-time home buyer, then you know what this does to your power to purchase a home. With 30-year fixed-rate loans in the 7s now it will take a combined income of over $120,000 a year to qualify for a starter home in California and that home is nothing to write home about. These homes are in the $500,000 range and depending on where you are in California there may be no homes in that price range and if you find one it might be in a neighborhood where you don’t want to live.
With housing costs being high due to inflation it is making it really tough for the average American especially in California to buy a home. With a house in the $500,000 range, you will have had to save up for the down payment minimum of 3% which will be between $15,000-$20,000 and that does not include any closing costs. In a market like this where the cost of everything is rising daily it makes it difficult for the average family to save for that down payment. Rents are so high as well and that makes it even harder to save. It is legal to tap your retirement account to use for your down payment and closing costs, however, this may take everything you have saved. If you have high-interest-rate credit cards that you are carrying a balance on this may be a further hindrance to saving for the down payment.
The question I get every day is “When are interest rates going to come down?”. This question can be answered if you follow the money. As our government spends more money on foreign aid it is essentially creating a greater money supply. If our government prints more money the less it will be worth as this is an oversupply of money. This concept is similar to a store having too many of one item and to sell those items they have to lower the price to sell them. The same concept holds true for the supply of money, more money in circulation makes it less valuable. Less valuable money means inflation and inflation means the Fed will raise interest rates. When the Government spends more money than it takes in through taxation there becomes a deficit or a debt and this is called the National Debt. Currently, the National Debt is over 34 trillion dollars and we the people hold that debt. To get this money, the government has to borrow it, and to do so they issue Treasury bonds at higher interest rates. As the government borrows to spend, it must pay interest on the debt, and as the debt rises the more interest they have to pay. Currently over 40% of all income taxes brought in, are covering the interest on the debt and that number is rising daily. This is why I can’t see mortgage rates coming down in the near future.
The next step is that the government will have to raise taxes on its citizens to cover their spending habits and this will further hinder Americans from being able to purchase a home. My advice to potential home buyers knowing the state of our economy is to buy now if you can. If you buy a house now and you have to struggle to do so in the beginning, in the long run, your income will go up, and if you have a fixed-rate mortgage that mortgage payment will remain the same over time. If you buy a house in an inflationary time the value of that house will also increase over time. This is one way to build personal wealth. If you wait in the hopes interest rates will come down, you may never be able to afford a home as the cost of living will continue to increase and you will be chasing the housing prices and interest rates. If you have the means to purchase a home now you should be buying not waiting or if you wait you may miss the opportunity to own a home. I understand that things are not ideal but if you wait it could become a lot worse.
By now you may have heard that things are changing in the Real Estate world with regards to commissions. In a landmark decision, the National Association of Realtors (NAR) has lost a lawsuit that stated that Real Estate Buyers should be able to negotiate commissions with their agent and or Seller. The lawsuit further states that Real Estate Buyers have the right to negotiate how their agent is paid and by whom. We will discuss some of the pros and cons of this landmark case and how it will affect buying and selling real estate in the future.
Currently, Real Estate commissions have been paid by the seller of a property and is negotiated upfront prior to their property hitting the open market. The traditional commission structure has been 5-6% of the sales price and if another Agent other than the agent who procured the listing called the buyer's agent generally splits that amount with the listing agent. For example, if you are selling a home with a 5% commission in the listing agreement when another Agent brings a buyer to the home the commission to that buyer’s Agent has already been negotiated with the seller and that has traditionally been half of the total amount and in this case, it would be 2.5% to the Buyer’s Agent and 2.5% to the Listing Agent. With the new ruling against the Real Estate industry, it now states that the buyer will have to pay for the commission when represented by an independent Agent. It still can be asked that the seller pay this amount but now the Buyer has to be notified that it is their responsibility to pay their Agent.
One should know Real Estate law states that any Agent in a Real Estate transaction must take the seller’s best interests into account during the Real Estate transaction. The exception is that if a Buyer contracts with an outside Agent to represent them their Agent can look after their best interests, not the seller's. This is done with a contract between the Agent and the Buyers they choose to represent them, this is called a Buyer Broker Agreement and from this day forward this form will become mandatory for all Agents that represent home buyers. Although this may seem like just another disclosure form in the already sea of forms a home buyer and seller must sign it and it has far-reaching consequences for the Buyer notwithstanding the cost of representation. A potential home buyer may be forced to come out of pocket to pay for representation similar to an attorney-client relationship with a contract upfront stating how they will be paid to represent them. If a potential home buyer chooses to use the listing Agent that buyer will not have the same representation as the Listing Agent has to look after the seller’s best interest before that of any potential home buyer. This type of representation in California is called Duel Agency where the listing Agent represents both the buyer and the seller. This is not legal in a lot of states so it will leave home buyers having to contract with another Agent.
The intent of the lawsuit other than the enrichment of attorneys was to allow potential home buyers to negotiate the commissions in the transaction. This ruling missed the mark for home buyers as now they may have to come out of pocket with money for representation where before the seller has paid the buyer’s Agent. In typical fashion, something that was spun to help home buyers will end up hurting them in the long run as it could dramatically raise the cost of buying a home. A potential Home Buyer could now end up paying more for a home to get their Agent paid so they don’t have to come out of pocket to pay them. If they go directly to the Agent who has the listing on the house and try to negotiate without an Agent representing them they too could pay more for the house without representation.
All is not lost however, here at MAE Capital Real Estate and Loan, we have a solution to the problem of buyer representation. We have been using this method to help our Home Buyers over the years and have been very successful and that is where we represent the home buyer and do the mortgage for them. Yes, our Agents are licensed for both Real Estate and Mortgage which allows our Agent to negotiate with a home Seller for a commission which we also give a portion back to the Home Buyer for their mortgage. In this scenario a home Buyer will not only get representation on their purchase, but they will get representation on the mortgage at the same time. This method has proved to be far more convenient for a Home Buyer as they only have to make one call to their Agent to get information on the home as well as the progress of their mortgage as opposed to having to make 2 calls one to their Agent and One their Loan Officer. Not only will this save them time it will also save them thousands in having to pay the new Buyer Broker it will save them on their costs of the mortgage and in some cases our Buyers get a lower interest rate as we have successfully negotiated all the fees to be paid by the Seller and we contribute some of the commission on the sale to the new loan. In some other cases we have helped our clients Sell a home and Buy another home and we do their mortgage for them, in this case, we negotiate a far lower commission for our Seller and when they buy our contribution saves them now on both brokerage fees as well as mortgage fees. If you are considering Selling and buying another home this way will save you thousands and thousands of dollars when you work with MAE Capital Real Estate and Loan. We call this service bundling which is similar to the way insurance companies work when you give them the opportunity to cover your house and cars. Bundling Services in Real Estate now makes more sense than ever. If you are looking for the best way save look no further than Mae Capital Real Estate and Loan.
Today’s topic might be a bit confusing to some, but rest assured if you know, you can make the right decisions with your money. We are all seeing a tightening of money lately due to inflation which is where prices of goods and services go up faster than income does. Inflation is the worst possible economic effect on any society as the people who are affected by inflation have less disposable income left over after they pay for housing, food, gas, and services. In America, there is a significant amount of people that live paycheck to paycheck meaning that they spend every dollar they make on housing, food, fuel, and services every month. When these prices go up and their income does not follow then people have to go to other sources to make those essential payments such as credit cards and this puts the average American in a deficit. Although this is not good for the average American it is also not good for the banking system as the banks rely on the deposits of Americans so they can lend out that money to keep the banks in an income stream.
This brings us to the banking system itself and most see the system as confusing and have no idea how banks actually work. In America and other Western countries, the banking system is what is called a Fractionalized Banking system. That is a big word that means that the banks can lend out most or all of the depositor’s money. For example, if a bank has $100,000 in deposits from 5 customers ($20,000 each) and it pays 3% interest to those customers the bank then can lend out a good portion of that money at higher interest rates. Remember that the banks have to keep cash on hand in case their customers need cash and in the past banks have held back about 10% of that money for cash. The other 90% is lent out at a higher rate than they are paying the customers that have savings in their bank. In our example, there is $100,000 from 5 people paying them a 3% return to keep their money in the bank. The bank can lend out $90,000 and only keep $10,000 for cash reserves and when they lend out the money they collect say 6% on the money they lend out. This process should leave the bank positive in income and has throughout the history of fractionalized banking.
Here is the problem with the system. Banks currently have no reserve requirements meaning that in my example the banks can legally lend out every dollar of your savings. This should not happen, and most banks will not lend out 100% of their customers’ deposits as they want to stay open in case there is a day when there is a heavy amount of withdrawal money. Banks are in charge of regulating themselves based on their lending models and most banks do a good job of regulating this. Here is the biggest problem facing the banking system today and that is inflation. As we talked about earlier when prices go up faster than incomes the bank’s customers are spending more than they make and they do this with credit cards and equity loans. There will come a point where the average American can no longer pay their debt due to inflation. Human nature is to make sure they have food on the table first and foremost. When the consumer can no longer pay their debt, they default. This means that if Americans can’t pay their credit cards they go into default and the bank receives no money. This holds for mortgages as well.
This is where things start to get crazy so hang on. Remember, that Banks will lend out around 90% of depositor’s money and if those loans start to go bad there is only 10% of cash left for banks to operate. So, a bank’s reserves may get eaten up quickly if there is a high default rate. Banks lend out money for Credit Cards, Residential Mortgages, and Commercial Real Estate loans and lend to other banks. When customers start to default on their loans the income stream to the bank is greatly diminished and they still have to pay interest on the deposits they have for their customers. If the bank has not held enough in reserves to account for this then the bank will fail. Or as we saw in 2008 when this started to occur the government stepped in to save the larger banks not through the use of the Federal Deposit Insurance Corporation (FDIC) but actually printing money to put back into the system. The smaller banks were bought up by the bigger banks. In 2008 we had other factors going on to bail out the system as we were not in an inflationary time it was more of a recession meaning the economy was retracting with no inflation. Real Estate values during this time went down the stock market sold back and there was high unemployment due to the recession. Interest rates went down during this recession as there was no real inflation so with lower interest rates those who had the means bought homes and commercial real estate as the cost of money was cheap and this brought the economy back.
Fast forward to 2020 when the COVID crisis hits. This was a forced recession by the government telling people they could not work. We had never seen anything like this in American history and the result was that the Government and the Banking system were faced with something they had never dealt with before. The mistakes that were made have led us to where we are today. The biggest mistake was to shut everything down that was not essential. The next mistake was that the government did not take into consideration where we were in the business cycle with a healthy economy at the time before they shut the economy down. The Government printed and sent out money to every American and it may have helped some in the short run the long run is what we are paying for today. The Government also lowered interest rates to stimulate the economy and it sure did with people buying houses and freeing up equity to buy more stuff. The money was flowing through the economy and people were buying things at a crazy rate until inflation hit people had to slow their buying habits and in addition to that the Federal Reserve saw the inflation and the only tool they had to slow inflation was to raise interest rates and they did.
Today all that stimulus money is gone, however, the government has continued to spend money by sending it overseas and starting foreign wars. I can guess that the reason for the wars is to get the economy moving again as war requires a lot of money to flow. We could go into the problems of this all day long, but this is not the forum for now. The problem is, currently with the high interest rates and high inflation the more the government spends the less the dollar is worth on the world stage. That coupled with the BRICS system that threatens to remove the Petrodollar on the world stage is further devaluing the dollar. The banks are starting to see their default rate climb with inflation and this is diminishing the bank’s liquidity as this continues to happen, we see a tightening of the availability of money. Today March 11, 2024, the Bank Term Funding Program (BTFP) which is a way for banks to secure funding from the Federal Reserve will be ending. This will force the banks to go to the discount window to borrow short-term funds. This will lead to money being tougher to borrow. We are also beginning to see defaults start to rise and that coupled with the already tight money supply for Americans high interest rates and rising inflation it is a wonder why this is being done. Is it being done so deliberately? You can’t help but think there is some master plan to change the monetary system in America or to create a global currency minus Russia China, Brazil, India, South America, and countries in the Middle East (the BRICS nations). But why?
I am beginning to think that all this stuff we have never seen before such as wide-open borders, money being sent to some foreign war nobody seems to want, money given to illegals, civil disruption, and propaganda being spread all over, is all part of a plan to make America weak. The reason is to change the monetary system and move to more globalization that not many Americans want. I see the UN helping in this destruction of America in that they are funding the illegal migration and to make it worse the US is the largest supporter of the UN. I mention this not to scare you but to open your eyes to the great sellout of America and a move to the International Monetary Fund or something else, instead of the Central Banking system we currently use and enjoy independently of the rest of the world. Before this can happen the Banking system in the US must collapse and it appears from someone who has watched and studied this for the last 45 years that this is what is happening. I don’t want to scare people and I might be stating the obvious, but things are changing fast. I am not holding out much hope for the Federal Reserve to lower interest rates any time soon as we still have inflation, and this is known not by the numbers the government feeds us but by simply going to the grocery store and filling up my car. The mortgage business is the slowest I have ever seen, even worse than 2008. This is also true for the Real Estate market and as things get tighter we should start to see more inventory hit the market as people are having a tough time paying their mortgages even if they have a 2 or 3% mortgage. I am also seeing more people defaulting on their mortgages creating a higher foreclosure rate. We as Americans can only do one thing to fix this crisis and that is to vote correctly, although I live in California and the system has been corrupt for decades it’s all we have to save our Constitutional Republic.
What is going on with Real Estate and Interest rates? This is a question that many are asking right now, including myself. I started in the mortgage business while I was in college in the early 1980s, so I have seen a lot about the industry. My father was in the mortgage business before me so you could say I grew up in the business. I received my bachelor’s degree in economics and started full-time in the mortgage industry in 1986. Things have changed over the years in the business, but the core of the business has remained the same. When I started in the business there were no computers and everything that is now printed by a computer was hand typed and there were no fax machines or cell phones at that time either. From a technological standpoint, there have been many changes but the way we qualify a potential home buyer for a home loan has not changed. The Stock Market’s DOW Industrial average was around 2500 in the early 1980’s so things have changed there as we are over 38,000 today. I have observed many changes, some for the good and some not so good but overall up to this point in my life I can say the business cycles have been pretty consistent.
What I am seeing now is something I have never seen, nor did I think I would see in my lifetime. Like I said above the business cycles have been pretty consistent over the decades until now. With all the economic data I see and more importantly, what I am observing is happening right now is scary. I have always trusted the economic numbers that have been spoon-fed to us from the government until now. Yes, I have lost confidence in the system I helped create throughout the years. When the executive branch of our government stands in the public eye and lies directly to us I have to believe that everything that doesn’t fit their agenda is a lie and that is very sad for America. When I hear the powers at be say that Bidenomics is working and America is thriving I have to call B.S. We all know that things cost more than ever at the store, at the gas pump, and with housing so why is it that the powers at be say otherwise? I try my hardest not to get into politics on this blog but is has gotten to the point that I have to bring it into the conversation as this is why the Real Estate markets are sluggish and interest rates remain high.
My observations in the Real estate markets are that people want to buy but with prices so high and interest rates that are too high, they can’t buy. Inflation has made the cost of everything go up and the value of the dollar goes down. So, when prices of Real Estate should have gone down with higher interest rates and lower demand, we have seen Real Estate values stay the same and, in some markets, continue to go up. The reason for this is that inflation has caused the dollar to go down so much that housing prices have stayed the same which means that they have gone down as inflation has eaten away the buying power of consumers. To put in in other words as inflation makes the price of things increase it also devalues them in that fewer people can afford to buy them. What higher interest rates should have done without inflation is to cause fewer people to be able to afford housing thus slowing the demand and making sellers of real estate have to lower prices in order to sell. As we have observed with the higher interest rates over the last 2+ years Real Estate prices have not reduced as they should have or were intended to do. They have stayed steady or have gone up and this is due to the inflation or the devaluing of the dollar which is the same thing.
What is going on here, you ask? It is pretty simple from my standpoint, but I am not sure our education system is actually teaching these concepts for the younger generation to fully understand. To be clear, how the dollar devalues is simple economics. The government is spending more money than ever, thus putting more dollars into the world economy. When you have an oversupply of anything the value of that item will go down and that is what we are seeing with our US Dollar. The national debt has risen over the last 3 years from $30 trillion to north of $34 trillion consumer debt (Revolving debt credit cards) has risen to historic highs of over $1 trillion in the US alone. This means that every Citizen of the US bears the liability of government spending. When we send Billions and Billions of US dollars overseas this becomes a double whammy in that there more dollars are in circulation but no benefit to the American Citizen. Ironically a lot of the money the US is sending overseas is to protect the borders of other countries while our borders are wide open. This poses many problems for our economy, the most obvious problem is that as more dollars are pumped into circulation the value will continue to decline, thus inflation. You may have heard that” core inflation” has come down which we all know to be a lie, however, core inflation is the price of those goods that exclude energy (gas and fuel) and food prices which is what most middle-class Americans use the most. When your cost of living goes up so high that you can only afford food and housing you have lost wealth and wealth potential.
How do we get out of this cycle of lies and deception from those we used to trust to give us the truth and who are constantly lying to us? I would say vote them out and start over, however, deception, lies, and corruption have taken over the media, social media, and the voting booth. You see when the average citizen loses confidence in the voting system, we have lost our constitutional Republic. When you hear that the United States is a democracy it is not, it is a Constitutional Republic, that is the kind of rhetoric we are hearing that is either a lie or something they want you to believe. I am tired of people blindly believing everything they are told; we need some real changes quickly or our way of life we grew up with will be gone forever. We as a nation are as close to a tipping point as ever before in our history and my fear is that with spending for foreign wars, out-of-control illegal immigration, and corrupt leadership we are very close to something we all should fear. What we need to do is to come together to see what is happening right before our eyes and collectively do something about it. If we don’t stand united, we will fall divided.
To conclude, the Real Estate and Mortgage Markets are being drastically affected by the ridiculous monetary policies put forth by the current administration. With out-of-control spending outside of our own country, cutting oil production in our country, and starting foreign wars we stand to be in this type of crazy economy for a long time without some significant changes. My next big concern will be a crash of the stock market due to American companies not being able to profit like they have been able to in the past. We must also watch the emergence of the BRICS monetary system that Russia and China are spearheading this could cause further inflation by the devaluing of the dollar on the world stage and if the BRICS system replaces the US Dollar as the world’s reserve currency, then we have more problems than I can write here. This has not been covered in the media and is one of the biggest threats to the US Dollar in our lifetime. This could also be one of the underlying reasons it seems we are marching into World War 3 to prop up the dollar. To think how many people will die in a war so the US Dollar is protected when other moves could have been to avert this situation. This is a very pivotal time in our history, and it seems that our media is more concerned about who’s feelings are getting hurt rather than the hard-hitting stuff we all know is going on and we should be concerned about. So, if you are reading this I hope you understand the magnitude of what I have written and I pray it doesn’t get censored in our so-called free society.
PS
I fear we may have gone too far with out-of-control corruption to the point where the economy as a whole is suffering from incompetent leadership. If we don’t get immigration under control we will have too many people trying to get the same jobs and the same housing that American-born people need. As it is those same immigrants are getting government checks or taxpayer money to compete with natural Americans for housing, food, goods, and services not to mention that these people have not been investigated properly at the border so there may be bad people that could hurt Americans or damage property or worse we don’t know. This is causing a higher demand for housing and the longer it goes on the more it will hurt the American people. Crime is also rising in the cities where these migrants have gone and is getting worse every day.
2024 has started off with a bang with earthquakes and Tsunamis. On the first business day of 2024, the bond market gave back some gains from the last couple weeks and the Stock market was flat but still positive. If the first few days of 2024 are any indication of the year we will be in for some turbulent times. 2024 is also an election year so prepare yourself for a political ride that we have never seen before in history except for possibly in 1861-1865 (the Civil War).
This year will start off with a slow economy, and a slow Real Estate market as interest rates are still too high for the average person to afford to buy a home, especially in California. The Federal Reserve (The Fed) has vowed to lower interest rates if they see the economy start to decline. The Federal Reserve's Chief, Jeremy Powell, stated that there could be 3 times they consider lowering interest rates in 2024. This would be a great thing for Real Estate as more people could afford to buy a home. If the Federal Reserve does lower interest rates and you did buy a house in the last 2.5 years you would have an opportunity to refinance and lower your monthly mortgage payment. If you have a $500,000 mortgage at 7.5% and the rates move down to 6.5% this could save you $336 a month in your mortgage payment and for most families every penny counts in this economy.
Watch the election antics as this will also drive interest rates. If it looks like people will be electing more of the same types of people to Congress and the Senate and the Presidency be prepared for more oddities like we have seen since the current administration has taken office. We the people in the Real Estate and Mortgage industries know what has been done to the Real Estate Market over the last few years due to inflation caused by giving away taxpayer funds to other countries and stimulus checks and the general devaluing of the US Dollar. You will not hear the truth on your TV or radio about what has really happened to the economy, so I am glad you found this article to see what has been done to the Real Estate Industry due to the mismanagement of the monetary system by our government. This election will probably be the most pivotal election of your lifetime to determine the direction of the United States States. I am not going to tell you who to vote for as I still believe people have the right to choose but some don’t as you see playing out in current news.
One giant issue that is failing to make the news that is affecting the dollar is the advent of the BRICS money system which has vowed to take the US dollar out of being the world’s reserve currency. BRICS is Brazil, Russia, India, China, South Africa, and now many other nations have joined this movement powered by China and the Yuan (Chinese money) to become the new world’s reserve currency. This is slowly gaining traction as most countries are tired of Americans running the show and flexing their power all over the globe. The BRICS system is poised to bring the US Petrodollar down which is how all oil has been forced to be purchased over the last almost century. This means that until now all other countries had to convert their currency to the dollar to purchase oil which has made the dollar dominate and has allowed America to thrive over the years. This is also a major reason why our military is in the Middle East currently and could spark World War 3, which is another topic that could have strong implications for the US economy. If the BRICS money takes over as the world's reserve currency the US will be forced to convert the dollar to the Yuan to buy oil which could further devalue the dollar causing even more inflation for the U.S..
This is one reason why with the high interest rates we have seen we have not seen Real Estate values crash as inflation or the devaluing of the US dollar is keeping Real Estate values high. We should also be aware of the debt the country has accumulated as America has over $33 Trillion in debt and until now it has not been a big issue as the US has controlled the world markets, if that changes then the dollar will be further devalued and we will have more inflation and with inflation comes higher interest rates. Some would argue that America just needs to print more money and if that happened it would further devalue the dollar and cause even more inflation and more inflation means higher interest rates. At this point in American economics, we are at a tipping point, and with the current path we seem to be on a collision course with monetary disaster unless we get spending and money giveaways under control, if not we could run into serious economic problems that I don’t want to get into in this piece.
The economy is going to be the biggest issue of 2024 and that will directly affect the Real Estate markets if it is not managed properly. Real Estate values will be in line with inflation this year and interest rates will have little effect on Real Estate values as inflation drives interest rates. Interest rates are the Federal Reserve’s only way to combat inflation. The theory is that as inflation increases the Fed will increase interest rates to slow consumer and business spending and thus slow the demand for goods and services. What is not being addressed is the devaluing of the US dollar by other countries which makes all the goods we get from other countries more expensive, especially oil. To conclude, I believe that 2024 will be a very volatile year for Real Estate and we can pray rates come down enough to get more first-time home buyers into homes.
What is an assumable mortgage? It is a mortgage that another person can pay the difference in the current equity position and assume the underlying mortgage. In this piece, we discuss the advantages, disadvantages, the process, and how to get it done efficiently. This is not for everyone but if you are having to sell your home and you have one of those nice home loans with interest rates in the 3's or 2’s your home is more marketable than someone that may not have that available to them.
To define what happens when someone assumes your home loan you need to be armed with the right information. Realtors that have been in the business less than 10 years will probably have never had to deal with an assumable mortgage but those who understand how to market it for their sellers can end up getting the Seller more money on the sale of the house. An example of an assumable mortgage in a Real Estate transaction would look similar to this: Take someone who wants to sell their home and have an assumable FHA loan. They Owe $490,000 and the market is selling homes in that neighborhood for $550,000 to $600,000 and the potential seller has an assumable FHA loan with an interest rate of 3.5%. A potential home buyer will have to put down the difference in the sales price and the amount owed on the mortgage. Being able to offer an interest rate in the 3’s will make this home more marketable, but it is not for everyone as you need to be able to put the difference down in cash. So in this example, the house sells on the higher end of the market because of the 3.5% mortgage for $600,000 and the potential home buyer has to come up with $110,000 for a down payment the difference between the $600,000 agreed on sale price and the amount owed of $490,000.
Once a contract is negotiated between the new Home Buyer and the Seller the process begins. If you have a good Real Estate Agent, like an MAE Capital Agent, they would have done the leg work before the house went on the market to make sure the existing home loan is assumable and get the paperwork for when a potential home buyer does come knocking it will be ready for them. The process to get an assumption started is to complete the entire Residential Mortgage Application from the existing lender and provide them with all of your Income documentation, your banking info, and your credit report with a minimum credit score of 620, however, this may vary from lender to lender. You will be applying for the existing mortgage payment, balance, and remaining term. You will need to be able to show enough income to qualify for the existing mortgage by being able to prove that the mortgage payment and your existing monthly bills are no greater than 49.99% of your income. This is done by providing pay stubs tax returns and W2s.
Once you have gathered all the documents that the existing lender needs to issue an approval by analyzing all the documents provided such as pay stubs, bank statements, retirement statements, tax returns, W2s, and any other supporting documentation they require. If you are involved in an assumption transaction you should be prepared to wait as lenders are just getting the message that this is a viable way to sell a house, they have not fully ramped their assumption departments so it could take a bit, up to 30 days once they have the documentation. This is why you need a Real Estate professional on both ends that understands the process. At MAE Capital Real Estate and Loan, most of our Agents hold both a Real Estate license as well as an NMLS mortgage license so they can help talk the talk with lenders with trying to get an assumption accomplished. Knowing how the process works and being able to understand what the existing lender is saying is invaluable as this could save the transaction from falling through or taking longer than it should. Also when you bundle your services with MAE Capital Real Estate and Loan you will save money on the sale of your home and the purchase of your next home.
As a seller, you may not know if your loan is assumable without talking to your existing mortgage holder. If you know you have an FHA or VA loan you know those can be assumed. If you are a Veteran, you should know that if you allow your VA home loan to be assumed by a non-veteran you will not be able to use your VA benefit to buy a home again until that home loan has been paid in full. So, if you are a Veteran you may want to look at this more carefully especially if you are planning on using the VA home loan on your next home purchase. If this is a process that you are interested in please contact one of our Realtor/ Agents today as you will have a pro on your side.