Today, we’re gonna talk a little bit about interest rates, because there’s been some pretty substantial changes on what’s going on in the market for sure. So always a hot topic with buyers and sellers with what’s going on, but we’re entering into some unprecedented times right now, so to avoid triggering all the regulation Z disclaimers and disclosures we have to go through, we won’t get into very specific rate quotes, but, my goodness, Jon, we’re in the low 3% range for just plain old vanilla 30 year fixed rate loans. It’s getting, again, to the point we’re almost at all time lows.

I mean, when’s the last time we saw something like this? How far do we have to go back to see interest rates of low 3s?

Yeah, yeah, you know, 4 years ago we got pretty darn close and then prior to that we were sitting in a recession when rates were at super lows and there’s a lot of things that are underpinning this, that are making this happen, but I think for our purposes the important thing is that this a tremendous win for buyers of course. It’s a tremendous win for sellers too, you know, when sellers are entering the market, as you know, part of that question is “well how many potential buyers can I expose this home to?” And that exposure just got broader because now the affordability is more attractive and folks that maybe wanted to keep their purchase price here can now go here, and have the same kind of expense, the same monthly payment. So, it’s a good thing, you never know how long it’s gonna last, but for homeowners right now, and potential home buyers, it’s really attractive.

Just out of curiosity, how much more buying power does a one point drop in interest rates give somebody in general? Just in general terms, we don’t have to get into specifics.

So one point, so do you mean from four and a quarter down to three and a quarter?

Yeah, say four and a quarter to three and a quarter.

So I’m really gonna wing it here, Jon, but I’m gonna say 70 to 80 thousand dollars.

That’s huge!

But same payment, yeah.

That’s the difference between being able to buy in a community and not be able to buy in a community.

That’s a good point, yeah. Now that’s a severe window from low fours to low threes, but we’re there, it wasn’t that long ago that we were talking to home buyers, and the 4% interest range was the conversation. So, it’s happening, home buyers are benefiting from it right now and home sellers hopefully too. Unfortunately, a lot of the things that are driving that are based on negative things that are happening in the economy, and the Coronavirus is big news right now as well and that’s having a global economic impact too. So, it’s not a positive that’s it’s happening because of that, and many economists are saying that this was gonna happen anyway, and the Coronavirus just sped things along, and that’s a surprise for a lot of folks, you know, because a lot of folks look at where the stock market was, and they say “Everything is wonderful, “why would the interest rates be falling “because of negative news?” But what I like to say and I’m just mimicking a lot of economists, is that the stock market is not the economy. They’re two different things, and there were a lot of indicators about average hourly work week, industry capacity, factory capacity that were down, and so these were things that are really the foundation of the economy, and this is why the interest rates have been pointing in that downward direction, and then the concerns over the Coronavirus and how that is gonna effect global economies is just speeding that up.

What do you think? You think the Coronavirus is overblown? Do you think everybody should be panicking as much as they should? As you know, I just came back from the Century 21 convention in Los Angeles and it was interesting to me to see the number of people wearing those face masks that cover their nose and mouth, Especially younger people, now older people, maybe people that have health issues, I get it. Even young children, I get it. But there were some pretty healthy looking adults that were wearing these things and just a thought going through my mind, what a, you know.

Yeah, absolutely, yeah. Well, perception is reality, isn’t it? And this has been all over the media, needless to say, and not to say that it’s completely unfounded, when you look at it from a statistical standpoint, there have been other outbreaks that have been far more impactful, you know, SARS, H1N1, all these things that have happened in the past that, where mathematically the numbers were worse, from completely non medical opinion, I think one of the things that is driving the concern is the fact that there just isn’t a vaccine for it right now, you know, certainly there’s, you know, the powers that be are working on that, but this thing outbreaks and there’s not really a light at the end of the tunnel if you will, but the fact is, and I forget who I was listening to last night, but they were saying that just the regular flu in the United States has taken far more people than what they’re seeing from this, but having said that, people are making decisions and those decisions are effecting the economy. People are going out less, factories are saying we’re not gonna have workers congregate in the same place, that’s what’s happening.

Yeah, you know, flying out and flying back, I wasn’t concerned about that at all, now when you’re on a plane, you’re in a closed environment, so somebody coughs, somebody sneezes, you know, all that stuff’s on the plane and the inside of the cabin, but whenever I travel, my biggest concern is am I gonna have enough goddamn leg room in this plane seat? Which is never the case. You know, they’re charging you now, if you want an aisle seat, you gotta pay for an aisle seat, if you wanna sit in the exit row, you gotta pay extra to sit in that exit row, sometimes, 50, 60 bucks to sit in that exit row. So, going out I’m fortunate, I was able to get a good seat, I was comfortable, I had enough leg room, happy. Coming back, I had a layover in Dallas, so, I fly out, I’m in an aisle seat and it’s tight, it’s tight, but at least I can put one leg out in the aisle, but I have to be conscious because people are coming by, I don’t wanna trip anybody, you got this big old honking let out in the aisle way. But it was okay, and then from Dallas back to Detroit, oh man! It was terrible, so you know, you get that feeling, you’re walking on the plane, you know you’re in row 29, you’re walking back, you’re walking back, and then you stop because people are putting their luggage in the overhead bin, and you’re waiting and you’re waiting, and then what do you do? You start counting the rows. Okay, I’m at row 20, 1, 2, 3, 4, 5, 6, 7, 8 ,9, oh man, are you kidding me? I gotta sit in the seat, there’s somebody in the window, there’s somebody in the middle, and there’s my seat, and there’s empty rows around it, and so I’m like “Of course.” My row is gonna have three people, So I get to the row, there’s still people coming behind me, so I’m figuring okay maybe there’ll be an exit, you know, an aisle seat I can maybe snag and move over to, ’cause when I sit down next to these two guys, you know, the guy in the middle is like “Oh shit, “not this guy.” I’m a big guy. But my knees, my knees were, I couldn’t even touch them. I had to sit like this, open leg, so one knee out in the aisle, the other one trying but I’m jammed, and it’s totally uncomfortable, and so luckily I was able to move, the guy across says “Hey you can come sit in the window seat “over here, well we got the middle seat in between so you “can spread out.” And I’m like, well that’s gotta be better than this, so I go sit in the window seat, no man, it’s less comfortable because of the way the plane comes down, so now I’m pinned, but fortunately I was able to move to the next row in front, a woman was nice enough to sit in the window seat and allowed me to sit in the aisle seat, so, I’d just like to say to the airlines, why do you discriminate against tall people? I just need to know, why? It’s terrible. It’s not fair, I shouldn’t have to pay extra because of the leg room I need.

That is true, yeah, yeah.

I’m sorry, I didn’t mean to get on a rant like that, but, you know, I just I get frustrated. Traveling is sometimes difficult, oh and the kicker is, I had to check my carry on bag, because I was… They have these groups for this airline, one through nine. I’m in group eight, so one through seven take up all the overhead bin space, so I have to check my carry on bag, this is in Los Angeles, and I said “Now if I check it here, “are you gonna have it waiting for me “when I get off the plane?” Nope.

Gotta go down to the track, huh?

No they said “No it’s just gonna get moved “to the next plane, so you won’t see it until Detroit.” I said “You’re kidding me, “I don’t get to put it back on the next plane?” So I was pissed off about that too. So, all around, I blame my travel agent, Scott, It’s your fault.

Let him have it. Luckily the next convention–

Group eight! I paid for an aisle seat, why am I group eight? I’m sitting with all the other people who just said “Gimme whatever random seat you want, “I don’t care, sit me wherever you want.” You know, so I’m uncomfortable, there’s no way I’m sleeping on either of these flights coming back, you know, and it’s a long day, I leave Los Angeles at 10:30 in the morning, I don’t get home to Detroit until 8:30 at night, it’s been snowing out, now I gotta go get my car, and nobody said to me at the car place where I parked, “You probably wanna write down where it is “just so you remember when you come back.”

Oh no.

I had no idea, so when I got out there, the lady said “Where’s your car parked?” And I said “Is it on my ticket?” Because they told me where to go, She said “Honey, it ain’t on there, you don’t know “where you parked your car?” I said “No, I didn’t write it down.” She said “Sweetie I’m gonna have to take you round last, “we’re gonna drop all these other people at their cars first “and then we’ll look for your car.”

Oh my gosh.

So, we’re driving around, dropping the other eight people off, I said “You know what, I’m pretty sure, because “when we pulled in I made a jog to the left, “so what aisle is that?” She said “That’s aisle I.” I said “That’s where it is, it’s in aisle I.” So she’s like “All right, honey, we’ll go to your car “last after we drop everybody else off.” So this guy’s like “I’m in aisle B.”

Oh no.

Slow down, slow down, it’s coming up, so he’s flashing, he’s like “Oh woops, I’m wrong. “I’m in aisle C.” She’s like “Don’t worry, honey, I’ll swing–” So 20 minutes later, I found my car, it was actually pretty easy to do that. But, you know, and then I got home smartly I had the hardwood floors done while I was gone, so I wouldn’t have to inhale all those fumes and the dust and everything, right? You don’t wanna be around when your hardwood floors are being refinished. So I get home 9:30, quarter to ten, and of course, there’s dust everywhere, so, you know, I just, ’cause I was tired, I just wanted to get to bed, I just threw down a plastic tarp on the floor, put the mattress on the plastic tarp and just slept that way. Woke up the next day, and, you know, went to work.

That’s like planes, trains, and automobiles part 2. Right, “You’re messing with the wrong guy.” What a airport venture that was, my goodness. Luckily you’ve got a full year before the next convention though.

Got a full year but, can my travel agent not book me in group 8 again please? Can I get in group 4 or something sooner? Come on, Scott.

I think there’s a train ride in your future, I have a feeling.

Oh man.

But you came back armed with a lot of cool real estate stuff from the convention, so that’s a good thing.

Yeah, it was, there was a lot of breakout sessions, there was a lot of interesting information that they talked about, and yeah, I found it very informational, you know, and most of it is broker stuff, and different things like that to help agents, to help managers, to help brokers, and owners, so it was really good.

Good, good.

So, it was a good time. Back to interest rates.

Yes.

So, you said that this could help sellers, so explain to everybody why it could help sellers, lower interest rates.

Sure, so, we’ll look at both sides, so you wanna sell your home, you wanna put it on the market and of course, I’m speaking your language now, Jon, but the best way to get the highest price is to expose that home to the most potential buyers, one of the best ways anyway, and from the buyer’s standpoint, two things are impacting that buyer, it’s the qualifying and it’s also the goal of where do I want my housing expense to be for a given home price. So as interest rates go down, there’s gonna be a larger subset of potential buyers that can look at more expensive homes and still stay within their budget. So it’s a little bit of a revelation, folks that were looking a year ago, and their interest rates were in the 4s at that point in time, when they were doing the initial qualifying and what have you, if they’re back in the market now, their price range has changed, because now that buyer who could not entertain looking at that seller’s home can do so now. So it’s not just the one sided win, the sellers benefit, and then of course what else happens to sellers, typically they become a buyer too. So they’re the beneficiary as a seller because their home is going to be exposed to a greater number of potential buyers, and then they benefit as a buyer too, because they’re going to be getting the mortgage at the time when the market is really, really low. I’d love to say how long it’s gonna last, my crystal ball doesn’t get quite that clear, but we know what they are right now, and they’re very, very attractive.

Have you seen an uptake in refis?

Yes, for sure, a lot of refinance activity, a lot of folks are uh, we’re seeing a variety of things, we’re seeing folks refinance to get out of PMI, we’re seeing them refinance to move into a shorter term loan, from a 30 to a 15, or a 30 to a 20. We have folks that are doing debt consolidation, rolling other financing into one payment at a very low rate. So it’s happening for sure, if a person hasn’t looked at it either from a refinance standpoint or from home purchase standpoint, it’s definitely worth the conversation. This is going to be an opportunity that might not come again, might not come around again for quite some time for sure.

Yeah it’s been several years since we’ve, as you said, seen interest rates this low. Wouldn’t it be nice if it shootka lot of those sellers who have been reluctant to sell because, “My interest rate on my current house is this, “why would I move to a house and get a higher interest “rate and have a higher payment, “I’m perfectly happy to stay where I’m at.” So maybe, just maybe, with the interest rates where they are, it shakes some sellers loose of holding on to that house because of the low payment that they have, and maybe says to them “You know what, “we should start looking, interest rates are really low, “we should jump, we should definitely put the house “up this year, get it ready, jump.”

I think so too, Jon, and you bring up a good point, we need more inventory for one thing, there’s not enough homes on the market for sale to satisfy all the buyers, and when, I’m sure you’re talking to sellers, they come up with a litany of objections as to maybe why they don’t want to sell, and a valid reason for a long period of time was “I currently have a really, really good interest rate, “why would I want to sell “and take on financing that more expensive?” Well now, not only are they not going to be in a higher interest rate when taking on a new loan when they purchase a home, there gonna be a much more attractive interest rate that what they left, so not only can they improve their living situation and maybe move into the home they were looking for, but their financing is gonna cost them less too. So, absolutely something for sellers to think about, whether this helps the inventory unwind a little bit and grow so that the buyers that are out there can buy, I don’t know, but it certainly removes one of the objections that a seller might have.

Yeah, that’s a good thing. So, I would say, based on that, if inventory stays low, we’re gonna have a seller’s market again

Yeah.

I’m hoping though, I’m hoping that the lower interest rates will shake sellers out who’ve been kind of hanging on, and we’ll have more of a balanced market, there’s homes that’ll sell quickly, but, you know, obviously the people that are selling, they have to have a place to go, so if each, so if you got the entry level, looking to buy into the next level, and those people need to go somewhere, so maybe they’re downsizing. If they’ve got nowhere to go, there’s no incentive for them to sell.

There is some gridlock, yeah.

We really need all segments to hopefully cooperate at the same time, and people who wanna move up, and people that wanna downsize and maybe move to another area, were they’re all seeing this as a great opportunity to do that.

Yeah, I’d like to think so, I mean folks are, you know, they’re got newfound and restored equity, right? Especially if they’ve owned the home for a period of time that crossed over the recession when folks lost a lot of value, it’s back, I think we’re certainly back to pre-recession levels, and probably in some markets we’ve exceeded that, is that safe to say?

Yep.

So it is an opportunity, you know, folks can reap the rewards of having all that benefit and all that equity that came back as the market improved, and purchase a new home with really, really inexpensive financing. So, yeah, time for them to call us I think, huh?

I would agree.

For sure, for sure.

Call us whether you’re looking to buy or sell, and before we go, Scott, sorry buddy, it’s not your fault. It was actually my first time having him help me make accommodations, the hotel that I did stay at in Burbank was top notch, they had great breakfast, and the rental car that he set up too for me, when we went there, he was telling me “It looks like we’ve got a pickup truck.” And I said “Pickup truck? I don’t drive trucks, “I hate trucks. I’d never drive a truck.” But he said “It’s the least expensive one.” So I showed up there and they said “All right, you’re all set, “go pick any full sized vehicle you want.”

Wow, really?

Yeah, so I ended up in a Ford Fusion. Love the Fusion, that is such a cool car, the technology that car has is great, push button start, you know, I paired it with my phone real easily, the only thing it didn’t have and it’s a little bit of a bummer, is, you know, most Fords have, they don’t have the electronic steering wheel, they have the pull down and pull out telescoping, but it’s manual telescoping, it gets a little frustrating, you pull it out and downwards comfortable and you lock it in, and then you go to get out and you bang your leg as your trying to get out. So, you know, every once in a while, I’ll have those, look like rope burns across your thigh, ’cause you’re dragging it across the steering wheel, but other than that, Scott, good job on the car, good job on the hotel, but next time let’s see if we can get some extra row aisle seat accommodations for me, for my leg space please, but I appreciate the job you did, you did a good job, thank you.

All right, all right, thanks everybody.

Thanks everybody.