Mortgage Rates Surge to 7.5%: Are We Facing a Housing Affordability Crisis?

Summary

Earn Your Leisure Podcast Summary Episode: Mortgage Rates Surge to 7.5%: Are We Facing a Housing Affordability Crisis? Release Date: May 31, 2025

Hosts: Rashad Bilal and Troy Millings
Podcast Description:
Earn Your Leisure provides behind-the-scenes financial insights into the entertainment and sports industries, highlights entrepreneurial backstories, breaks down business models, and examines the latest financial trends. The podcast blends college business class concepts with pop culture for a unique and engaging exploration of the business world.

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1. Introduction to the Mortgage Rate Spike

Timestamp: 01:37

The episode kicks off with the Financial Analyst addressing the significant rise in mortgage rates:

“Mortgage rate Spike with the 30 year mortgage rates now hovering around 7.5% levels unseen in decades, are we seeing in the early ages the early stages of a housing affordability crisis?”
— Financial Analyst [01:37]

This startling increase sets the stage for a deep dive into the potential housing affordability crisis unfolding in the United States.

2. Economic Implications of Rising Mortgage Rates

Timestamp: 01:56

An Economist responds to the analyst's concerns, highlighting broader economic challenges:

“If I was the Fed chair, I would not want to have this job right now. But the Japanese bond market is going through a crisis, so are we.”
— Economist [02:07]

Key Points:

• Bond Crisis: The economist points out a looming bond crisis, mentioning $350 billion in interest payments that could accumulate if refinancing doesn’t occur.
• Treasury Auction Issues: Recent treasury auctions saw minimal interest, signaling potential prolonged high rates.
• Long-Term Interest Burden: Projections indicate a $5 trillion interest payment over the next decade, exacerbating economic instability.
• AI’s Role: While AI could offer partial solutions, it isn't sufficient to address the systemic financial issues at play.

3. Real Estate Market Impact

Timestamp: 03:01

A Real Estate Expert elaborates on the direct effects of rising mortgage rates on the housing market:

“It's our highest rate since the early 2000s. I remember being in the pandemic and saying, man, 2.85. That's incredible. And now we're here at seven and a half, just a few years later.”
— Real Estate Expert [03:16]

Key Points:

• Affordability Crisis: High mortgage rates make home buying increasingly unsustainable, limiting potential buyers.
• Supply Issues: With fewer people buying or selling homes due to high rates, the housing supply remains constrained.
• Wage Stagnation: Without corresponding wage increases, the affordability problem is only likely to worsen.
• Policy Intervention: The expert emphasizes the necessity for new policies to manage interest rates and address both institutional and individual debt burdens, including student loans and credit card debt.

4. Strategies for Navigating High Interest Rates

Timestamp: 05:07

The conversation shifts to practical strategies for dealing with high mortgage rates, featuring a Financial Analyst who shares personal experiences:

“Shout out to Matt. Because, yeah, he's definitely a talented mortgage broker and he's one of these people that actually does the business.”
— Financial Analyst [05:12]

Key Points:

• Cash-Out Refinancing: The analyst discusses using cash-out refinance strategies to leverage property value increases. For example, purchasing a property below market value and refinancing it as its value appreciates.
• Property Investment: Buying auctioned properties at low prices, renovating them, and then refinancing to extract capital for further investments.
• Scaling Real Estate Portfolios: This method allows for relatively quick scaling of real estate investments, provided one has solid credit and sufficient capital.

5. Credit and Debt Considerations

Timestamp: 08:52

The discussion turns to the importance of credit health in leveraging real estate investments:

“Oh yeah, you got to have credit.”
— Real Estate Expert [08:47]

Key Points:

• Credit Health: Maintaining strong credit is crucial for securing favorable refinancing terms.
• Debt Management: The hosts highlight the looming issue of student loan repayments resuming after deferments, which could negatively impact credit scores and overall debt levels.
• Credit Improvement Resources: There’s optimism about the availability of resources and information to help individuals improve their credit scores, potentially mitigating the bad credit epidemic.

6. Future Outlook and Policy Needs

Timestamp: 09:22

The Real Estate Expert and Economist reflect on the broader implications and necessary policy responses:

“If everything goes according to plan, I'm not done yet. I'll update you when it's over. But it looks like I could potentially maybe get more, slightly more, or at the very least like around the same that actually paid for the property.”
— Financial Analyst [06:07]

Key Points:

• Continued Investment Strategies: The financial analyst remains optimistic about using strategic refinancing to continue growing a real estate portfolio, despite high rates.
• Policy Recommendations: There’s a consensus on the need for targeted policies to stabilize interest rates and address escalating debt levels, ensuring long-term economic and housing market stability.
• Debt Accumulation Concerns: With ongoing student loans and credit card debts, the potential for increased financial strain on individuals remains a critical issue that needs addressing.

Conclusion

The episode of Earn Your Leisure delves into the complexities of the current housing market amid rising mortgage rates. Hosts Rashad Bilal and Troy Millings, alongside their expert guests, explore the economic ramifications, the real estate market's response, and strategic financial maneuvers to navigate these challenging times. The discussion underscores the urgent need for policy interventions to mitigate a looming housing affordability crisis and stabilize the broader economy.

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Notable Quotes:

• Financial Analyst [01:37]: “Mortgage rate Spike with the 30 year mortgage rates now hovering around 7.5% levels unseen in decades, are we seeing in the early ages the early stages of a housing affordability crisis?”

• Economist [02:07]: “If I was the Fed chair, I would not want to have this job right now. But the Japanese bond market is going through a crisis, so are we.”

• Real Estate Expert [03:16]: “It's our highest rate since the early 2000s. I remember being in the pandemic and saying, man, 2.85. That's incredible. And now we're here at seven and a half, just a few years later.”

• Financial Analyst [05:12]: “Shout out to Matt. Because, yeah, he's definitely a talented mortgage broker and he's one of these people that actually does the business.”

• Real Estate Expert [08:47]: “Oh yeah, you got to have credit.”

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This comprehensive summary encapsulates the critical discussions and insights from Earn Your Leisure's episode on rising mortgage rates and their impact on housing affordability, providing valuable information for listeners and those unfamiliar with the episode alike.

Transcript

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[Financial Analyst]

So let's get into it. Okay, so Mortgage rate Spike with the 30 year mortgage rates now hovering around 7.5% levels unseen in decades, are we seeing in the early ages the early stages of a housing affordability cris basis?

[Economist]

I don't know. We would have to ask Matt. But given the bond crisis that I've been talking about for a while, a couple interesting things. There's $350 billion in interest we're going to have to pay if we don't end up refinancing. And then when they had the treasury auction last week, not no one but virtually no one wanted to buy our bonds. So as a result, I think that rate will stay for a while. If I was the Fed chair, I would not want to have this job right now. But the Japanese bond market is going through a crisis, so are we. We can talk about the bill or if Doge is being dismantled through this bill now. But there are a couple of things on the table where I'm like, I don't see how we begin to correct this. So over the next, I think they said 10 years, we're going to be paying $5 trillion in interest. I don't know how you correct that. AI is partially a small part of the answer, but we have to get this under control before we lose our lead permanently. What do you guys think?

[Real Estate Expert]

I mean, it's our highest rate since the early 2000s. I remember being in the pandemic and saying, man, 2.85. That's incredible. And now we're here at seven and a half, just a few years later. It's a tough position, right? Like the affordability situation in America is becoming almost unsustainable, right? When you're talking about who's going to be buying homes, what demographic of the population is going to be incoming coming into home buying if wages aren't increased and, and housing price is going up, that doesn't make for a great formula. On the other end, when you're talking about people who are selling homes when interest rates or even refinancing, when interest rates are this high, you find that people aren't doing any of those things. So the supply becomes an issue, affordability becomes an issue, because wages are an issue. The only way I see going fit, going forward to be fit with the situation is policy is going to have to be put in place, whether it's going to be a new declaration on how interest rates are going to be levied over 5, 10 year span. Because if we're looking at debt like you just brought up from an institutional standpoint, but even from an individual standpoint, like the amount of debt that people are accruing from college, from credit, those numbers are going to start to creep in over the next two or three years. I know it's kind of been hitting back and obviously student loan was on deferment for a few years here, but that number is going to be accounted for very shortly. And so when you add that into this problem, housing, it's going to be an issue unless new policy is put.

[Economist]

In place, like what affordable big cities are there for people to live in. When the cost of housing, like you said, is going up so high and everything needs to be refinanced at scale. It's very scary. One more note, the Japanese bond auction was the worst since 1987, which is that Black Friday crash. There's a lot of things on the board right now that are just incredibly scary. And I don't know if anyone has planned correctly on how to fix it.

[Financial Analyst]

Yeah, for sure. And I will say this. When it comes to mortgages, shout out to Matt.

[Economist]

Shout to Matt.

[Financial Analyst]

Because, yeah, he's definitely a talented mortgage broker and he's one of these people that actually does the business. Like, he's not just a social media influencer. So, like, even me, like, he's helping me out. I think I might have mentioned this before, but I actually have a property that I purchased in cash and I'm doing a cash out refi. So this is information for anybody that's interested. If you own a property, you could still refi a property that you don't have a mortgage on. And the benefit with that is that you. So it's like I got this property at auction. Well, kinda. It's a long story, but it was way under market value.

[Economist]

Wait, you invested in another piece of real estate after telling people not to invest in real estate?

[Financial Analyst]

Shame to Jamie Dimon play.

[Real Estate Expert]

Oh, shame.

[Financial Analyst]

So I was able to get a property way under market value.

[Economist]

That's amazing.

[Financial Analyst]

With the cash out refi. Thanks. When they do an appraisal, they appraise it at what the current price is. So long story short, if everything goes according to plan, I'm not done yet. I'll update you when it's over. But it looks like I could potentially maybe get more, slightly more, or at the very least like around the same that actually paid for the property.

[Economist]

Yeah.

[Financial Analyst]

So that's helpful because that's like, you know, if you buy a property for 280 and then it's worth 400, then you actually can get 280 back or 300,000. Right. That's. That's beneficial because now, I mean, of course you, now you actually have a mortgage on it, so you got to pay monthly. But if you have a tenant, then they could pay that via their rent. But even if you don't, you're able to have capital that you can do other things with, deploy into the market, reinvest, buy more real estate if you're interested. So cash out refi. I don't think we, I don't think we spoke about that before, but that was something that I wasn't fully aware of and he actually educated me on it. So once again, shout out to Matt. But that's pretty powerful tool in the disposal when it comes to real estate. So you always have options when it comes to real estate.

[Real Estate Expert]

Does the interest rate become higher because of the cash out refi?

[Financial Analyst]

Well, remember, I don't have an interest rate right now because when you do it, it's whatever the interest rate is, it's not, it's not like, it's like, it's like buying a new home.

[Real Estate Expert]

Okay. So like if it's seven and a half is the rate right now, then seven and a half is the rate that you're getting.

[Financial Analyst]

Yeah.

[Real Estate Expert]

Okay.

[Financial Analyst]

So yeah, yeah. Matt definitely is somebody that's extremely knowledgeable when it comes to real estate home buying. And there's so many different things, right. Like there's so many different stuff that we're not educated on. That's why the home buyer's blueprint is vitally important. Ey University. But that when I found that out, I was like, damn, that's kind of crazy. Like, because imagine if you could just go around buying auction properties at low prices.

[Economist]

Yeah.

[Financial Analyst]

Then doing some, some quick or even like fix her up. Right. Then increasing their value very, very quickly. And then doing cash out refis and then getting more money than you actually paid for it. Put a tenant in there, have the tenant pay the rent, which is covering the cost of the actual new mortgage that you actually have. But now you have new money that you can buy new property with. Right. Like you can scale a relative. In my mind, you can scale a real estate portfolio relative relatively quickly in that type of scenario.

[Economist]

Yeah. Especially if you have cash or you're a high net worth individual.

[Financial Analyst]

Yeah.

[Economist]

It's a good way to scale.

[Financial Analyst]

Yeah, yeah.

[Real Estate Expert]

And solid credit too. Right. Because if your credit.

[Financial Analyst]

Oh yeah, you got to have credit.

[Real Estate Expert]

That seven and a half is going to look a lot higher than that.

[Financial Analyst]

Well, I mean, at this point in time, nobody's credit should be in shambles.

[Economist]

You would be surprised.

[Financial Analyst]

No, no, I'm saying as far as the information, like we have enough information out there to clean your credit. Right. Like the bad credit epidemic should be coming to an end.

[Real Estate Expert]

I hope so for some. I got, I got a few calls over the past couple of weeks from entrepreneurs.

[Economist]

Yeah, I was gonna say you'll be surprised in entrepreneur class.

[Real Estate Expert]

Yeah. And, but even the other part of it is this, this student loan, these people who are now just graduating. I know we spoke about graduating last year, but I mean, last episode. But think about it now. Like the kids who have come out of college over the past two or three years who have been in deferment, who, who had their student loan suspended and now are having to pay what that effect will be on their credit going forward. Right. If they default on that. So Yeah.

[Economist]

I mean, in addition to credit card debt.

[Financial Analyst]

Yeah.

[Real Estate Expert]

The education process never stops, man.

[Economist]

Car note Yep. And that's a great point no matter how, because you may have a plan now, but as you scale and that lifestyle creep seeps in, it's a lot of people that are owing 30 and 40 thousand dollars a month.

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