← The David Greene Show
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- [00:00]
A
Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no bs, and no sales pitches. I'm David Green and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you, too. So if you want to build wealth through real estate or you just love learning about it, you found your home. What's going on? Real Talk Real Estate. We are back with another Mortgage Monday. It's me, the bald wonder, and my good friend, the Lone Ranger, Christian Bashelder. Christian, how are you doing today?
- [00:32]
B
I'm doing good. I feel like a lot of our. A lot of our tried and true clientele have been asking us where mortgage Monday has been and we're back at it. I know it's been a few weeks since you all have heard from us, but we're gonna have a lot of content coming out over the next course of, you know, about a month or two here, so.
- [00:46]
A
Absolutely.
- [00:47]
B
With the channel, check in and make sure you leave comments below on what you think so we can get back to you on them.
- [00:52]
A
That is all on me. I've been in the Smoky Mountains doing a lot of work to the cabin Christian. I actually have a cabin out there that a lot of work has been done on. You guys are probably going to love that as well as some of the other cabins that I manage and ones of my own. Christian's got some beautiful cabins out there. So if you guys want to stay in it, go to davidgreen24.com and ask me for a list of our properties and we'll let you see what they look like and talk you through your best options. And if you want to buy one, well, we can finance that for you as well, help you get a real estate agent to buy out there and manage it. So make sure you reach out to David green24.com use a chat option, get a hold of me, and you may get to sleep in the same bed that the Lone Ranger himself has. It's guaranteed to make you smarter, more ambitious, and more money. Just saying. All right.
- [01:37]
B
I don't know how pitch that would have been for me, but you said
- [01:40]
A
it worked for me. Dude, I. I sucked at life and then I slept in a bed that you slept in. And all of a sudden I got handsome, I got muscular, I got smart, I got driven. And I know a lot about loans, so I don't know, it could be a Coincidence. Or maybe everybody needs to dip themselves in the old crazy Christian Bashelder pool.
- [01:56]
B
There you go.
- [01:57]
A
In today's show, we got some good information for everyone that should be known. It's about interest rates going up because of oil prices. Now, I didn't know that there was a connection between these, but apparently they are. CNBC reports that high oil prices are not good for mortgage rates and that home buyers should know about it. So they get into talking about how potential home buyers who have been looking forward to the spring selling season may be watching with trepidation as interest rates on mortgages tick higher. Now, Christian, this is in pretty much direct opposition to what they were doing. They were going down and down and down. We've been frantically trying to get everybody that we can to refi before they go higher. So if you are one of those people that reached out to me or Christian about that, good on you. You probably locked in a rate because they're starting to go back up again. But just give us, like, a brief summary of what the market's been like for the last month with rates coming down and now bouncing up.
- [02:49]
B
Yeah, it's been super interesting. I mean, we really have two very conflicting, you know, impact moments happening right now. On one side, we have, you know, the. The historic, you know, over the last two or three years, kind of our combating of. Of inflation, getting it down, slight ticking up to unemployment rate. And obviously, we have a replacement of the Fed chair. You know, Trump came out and announced his new replacement. You know, the market was kind of, you know, hit and miss about who he picked, but general sentiment was that, you know, he was going to probably bend a little more to Trump's will and do what he can to decrease rates. That's the general consensus. That was obviously before Iran. That was before, you know, we're recording this in the middle of March here, and just last week, we had a jobs report come out that missed substantially.
- [03:36]
A
Oh, bro. Like what, 92,000 or something?
- [03:39]
B
Well, we were expecting. I believe it was. And somebody's gonna get in the comments. Correct me if I'm wrong here, but I believe it was. We were expecting to add 40,000 jobs, and we lost. I believe it was 92,000 jobs. So it was a miss of 150,000 on the job, which is like.
- [03:53]
A
That's even more.
- [03:54]
B
Which is massive. Yeah. So, but here's the funny thing. If that just happened in a normal day, that alone would have probably decreased mortgage rates a quarter to a half a percent that day. That would have been Like a massive event. And what happened is they actually didn't decrease very much because simultaneously the stuff in Iran's going on and they're shutting down the Strait of Hormuz, they're strutting down oil production, they're doing a lot of tax on oil infrastructure. And there's not really. I want to make sure everybody understands this article. You know, obviously clickbait News are going to say what they're going to say, but oil doesn't have a direct impact on mortgage rates. Oil is a huge impactful factor on inflation, though. And if oil prices go up, that means the cost of energy goes up, that means the cost of transportation goes up, that means the cost of goods go up because all goods get transported and that takes oil. Right. So the idea was if 20% of the global oil supply going through the Strait of Hormuz is shut down, that will spike oil prices. And that's exactly what it did. And the market reacted fearfully by saying if oil goes up, therefore most inflationary metrics would go up. And that's where we would potentially need to discuss dropping or increasing rates to combat inflation. So, versus the jobs report should have decreased rates to stimulate growth. So we have these two, you know, unstoppable force and immovable object kind of combating right now. And it's leading to the last week we've kind of had a flat line, but it's been real spiky prior to that. Right. And that's like how David said the last two months have been very good on rates because that's before the Iran stuff. The last two weeks have been very hairy. Right.
- [05:34]
A
And at the end of today's show, stick around because we're going to talk about where we think they'll be going and what I think you need to do.
- [05:39]
B
Yeah.
- [05:41]
A
All right. So they go on to say that as of Thursday, the average rate for a 30 year fixed rate mortgage with a conforming loan balance that is $832,750 or less. That's weird that they quote that, because how do they know which county they're referring to for that?
- [05:59]
B
That's the highest one.
- [06:00]
A
Yeah. In the whole. In the whole country was 6.35, according to Mortgage News Daily. Christian, do you mind just telling us briefly how they come up with the 6.35 number when every single bank and mortgage lender quotes different rates?
- [06:12]
B
Yeah, that's a very good question. It's a cumulative total across all originations. I believe it's in the last 10 days. And you can. I mean, there's actually. If anybody's ever looking at this article, you can click According to Mortgage Due Daily there and they may discuss it. But the, the. The mindset is they cast over everybody, which should theoretically get a good balance of FICO scores, a good balance of down payments, a good balance of locations, loan amounts, all that good stuff. And they basically, you know, accumulate a total, essentially, and then they find the average from that. It's not a perfect science. I see a lot of people say the average 30 fix is 6.3. Why is my rate 599? Or why is my rate 699? You're somewhere in that average spectrum. Right.
- [06:58]
A
So they have like a list of different, like, really probably successful banks that do a lot of mortgages. And maybe they ask, hey, where are you at today? And then they just use it kind of like the CPI in a way. They take like a basket of these different lenders and then they average it out.
- [07:12]
B
Very similar. We actually have to file what's called in the industry a mortgage call report, which is where we report our originations and we do it as well, even though we're not Chase or Wells Fargo. Right. But obviously the bigger banks have a bigger impact, of course. But this is. You're absolutely right. You know, not Every bank's originating 635 right now. We're on a lot of loan products. We're less than that. Right. On some loan products were higher. It just depends. That's kind of just the cumulative average across the last, you know, couple weeks that banks have been issuing out there, you know, publicly available.
- [07:42]
A
Yeah. All right. Two weeks before that, before the joint U.S. and Israel military strikes against Iran, it was 5.99. So this is when I was reaching out, frantically posting on my Instagram. By the way, go give me a follow at David Green, 24, and give Christian a follow at the. The/1/ broker so that you can get notified of this. You can also sign up for my free newsletter by messaging me on Instagram. I believe the word is text letter. And you'll get weekly rate updates every single week without having to bother asking. It was really low, and we were trying to push as many people into refunding as we could because it didn't look like it was going to go down forever. It looked like it was going to hit bounce and then come up sharply, which is exactly what it appears to be doing. High oil prices are not good for mortgage rates, said Lawrence Yoon, the chief economist for NAR. However, a year ago the average rate was higher, 6.82 when it was about 8% in October of 2023. So this is still relatively low for what we've seen under the Jerome Powell era. Now, if you listen to this show, you know that I am not a huge fan of Jerome Powell's economic policy. I don't think Christian has made a public statement on it, which he probably doesn't want to because he's a mortgage broker. But I'm not the one ridging the loan. So I'm going to say I think that too slow Jerome needed to put push rates down and I personally blame him in large part for this entire collapse that's going to be looming, it looks like because he slowed down job growth so much by raising rates so fast. The jump in mortgage rates over the last two weeks is largely attributed to the specter of inflation. Well, that's a really soi not sphere of influence. Specter of inflation, which appeared due to sudden constraints on the world's oil flow after the war broke out, with part of the oil supply not getting through the Strait of Hormuz. As Christian mentioned earlier, a key maritime channel in the Persian Gulf. You want to know what they're talking about here? We bombed the ever loving crap out of Iran. They don't have many options to hurt us back. So what they did was they threatened to and attacked ships that were trying to get oil out of their country, knowing a lot of it was going to us. That was pretty much all they could do. So we destroyed their country and they increased our gasoline by 40 cents a gallon. Not exactly an even exchange there. But prices spiked with, and along with them, inflation fears. Brent crude, a global oil price benchmark, traded as high as $119.50 a barrel on Monday, which is up from about $70 before the military strikes. The Iran conflict is a major headwind for mortgage rates, said Steven Rinaldi, the president and founder of the Rinaldi Group, a mortgage broker based near Philadelphia. We don't know how it's going to shake out. Oil drives inflation and inflation drives rates. Now, funny story, folks. Christian was not allowed to read this article before I put it out. I frequently don't read it myself or read it and surprise Christian with it so that our answers don't sound canned and rehearsed. And he said exactly what the article said. And if he can predict inflation, he can definitely predict what could go wrong with your mortgage and make sure it closes and gets you a great rate. Now there is the possibility here, with probably a solid one, that rates are not going to stay this way. We're going to talk about that in a second. There's an interesting part to wrap this up though, Chris. Possible alternatives to locking in your interest rate. For buyers, uncertainty means it's important to understand how rates can change as you go through the process. When you get pre approved by a lender to borrow a certain amount, ideally you'll sign a purchase agreement for a particular house and then you can lock in the interest rate that's offered, which means you're guaranteed that a particular rate for a set period, 30 to 60 days, usually assuming nothing about your financial situation changes in a material way. Locking in the rate comes with the key benefit of knowing that if rates go higher before you close in on the house, you'll still get the agreed on rate. That is a thing you can do. What's the downside to this, Christian? Are you stuck? If they go down, does it cost extra money to lock in? Why wouldn't everyone just lock in every single time as soon as they get pre approved or go under submission?
- [11:38]
B
I should say there's, you're limiting the potential upside benefit of rates going down and you take advantage of it for sure. This is where the guidance of a mortgage officer that knows what he's doing right now. I, I can't, I can't lie. I've been wrong in my career. I've predicted rates go down and they've gone up and vice versa. I can tell you that many loan officers do not track the market with the same, you know, the same Tasmanian Devil mentality. Right.
- [12:03]
A
Tenacity. That you do. Yeah. Also, I'll cut in and say I've been wrong at one point in my career and then I slept in a bed you'd slept in as an.
- [12:11]
B
I got some, I got some comfy pillows, I'll give you that. But no, in all reality, I, you know, we, we at the one brokers. This isn't just me, this is all. Our loan officers are trained, taught and guided on how to do this, how to track the market. Just like David said, you know, I'm, I'm telling you news before reading the article. Right. That's because we prepare ourselves to know what's going on, how it's going to impact the market. We're humans, you know, we don't know what Trump's going to tweet next. Right. Of course. And we, we live in a world where a tweet can actually move the market, which sounds crazy, but it's true. So there are things outside of anybody's control, no matter how prepared you are, but at the very minimum, you know, you're the financial advisor or the financial professional, whether it's a cpa, a loan officer, a realtor, they should be aware of what's going on in the financial world.
- [12:55]
A
Right.
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B
That's part of their fiduciary responsibility to you.
- [12:58]
A
And if you don't, they're a dingus, in which case they don't pay attention. They just wait for their phone to ring, and then they go through a process that they learned two years, three years ago. And they're on autopilot.
- [13:08]
B
Absolutely. And I mean, not to speak ill about our industry, but it's probably 80% of them. You know, David, you've been a realtor, I've been a realtor. I think we both agree it's probably 90% of realtors, right?
- [13:18]
A
Yeah, totally.
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B
You know, I mean, look at the hostess.
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A
When you walk into a restaurant, are they usually paying attention? And how can I pitch in? How can I run food? How can I help a customer? Can I get refills? Or are they sitting there looking irritated that they're alive? Yeah, that's how the mortgage industry is. That's how the real estate industry. That's how pretty much all human beings have settled in post Covid. So if you're looking for someone that's paying attention and can advise on this rate buy down, I think we're a really good bet. Now, another. Oh, let me tell you a funny story. You mentioned Trump's tweets. I just got back from the White House two days ago. Did you know that at the White House, they put out stands with, like, 3ft by 3ft posts of his tweets for people to read. They circle how many retweets and how many likes. It got like, you walk through the White House, okay, And you see a 3D real.
- [14:14]
B
I believe you entirely. Like, that's. You hear that? And you would think. You should think. That would be so shocking. Unbelievable. Yeah, I 100% believe that we're in
- [14:25]
A
some kind of like. It's almost like this is an SNL skit of what Trump would do. But. But it's real and it works. I don't know why that doesn't seem odd in that scenario. You're just like, cool, like 111 million likes or whatever the case would be. And it's like, it's like, about, like, you know, bombing Iran or whatever they have that's going on. They definitely don't have like lack of confidence over there.
- [14:50]
B
I think one of the funniest things, if you saw the presidential posters, you know, through the hallway where they explain every president. And I think I saw the one for Abraham Lincoln. He's like, Abraham Lincoln would have loved Donald Trump.
- [15:02]
A
It's just like, I think even on top of that, I do believe hearing that he did something to the like Biden poster to make like he got
- [15:11]
B
a really bad, worst president in history or something.
- [15:13]
A
Yes, he put something like that. Okay.
- [15:17]
B
It wasn't even a picture of Biden.
- [15:18]
A
So they have like a little plaque under all of them that describes him and he made Biden's to be something like it was the worst president we've ever had. Yeah, that's funny. All right, now what about a float. No, sorry, not a floating rate. What about. What's it called when you lock in the rate but you have the option to increase incrementally?
- [15:34]
B
Yeah, a float down.
- [15:36]
A
Is it is a float down.
- [15:37]
B
Okay.
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A
What's different than a floating rate though?
- [15:39]
B
Correct. Yeah. When you leave your rate when you're getting a mortgage, you have the option of locking or floating your rate. Floating. You just let it, let it go
- [15:46]
A
with the, with the tide goes up, tide goes down.
- [15:49]
B
That's exactly right. If it goes up, you lose. If it goes down, you win. Right. A float down though, is once you've locked some banks, not all of them allow you to negotiate your rate downwards if enough margin has been given. Right. So if you're blocked at a six and a half and now you can get a six percent two weeks later. Right. Something in that scenario. Now a lot of banks will charge you for a float down, so they get some of that margin back through a fee.
- [16:14]
A
Okay, that was my question. Is there is a downside to this because you're going to pay for the right to float down. Right? Yeah.
- [16:21]
B
The hard thing about giving general advice here is that there's thousands of banks in the US and they all have their own float down policies. Right. The cool thing about a broker, and we've explained this previously on One on Mortgage. I almost said on the one brokerage on Mortgage Mondays, when you work with a broker, we can pull your loan from one lender and give it to somebody who hasn't seen it yet. Now, obviously we need to make sure we have enough time in escrow and all that, but we kind of control your rate and who sees your deal a lot more inclusively because you're working with us, you're not working with the bank, right. We may get you a Chase loan, we may get you a rocket mortgage loan, we may get you a whoever, right. All the lenders that are out there, but you work with one brokerage, right. And that's, that's for the benefit of working, you know, with the broker. In a lot of cases there's benefits the banks have as well. But you know, that's something that if it does come time for a float down, you can probably get it for cheaper with a broker.
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A
So give me like a $400,000 house. They want the option to float down. What's like a ballpark range of what it might cost to do that.
- [17:20]
B
I mean with, with a broker, nothing. Because we, as long as we have enough time in escrow, we can, like if we have you submitted with Chase, we can pull it and give you to Wells Fargo.
- [17:27]
A
Right.
- [17:27]
B
And we can go get the lower rate with Wells Fargo as long as we have enough time left in the purchase contract. What a lot of banks will do is they'll usually charge you between an eighth and a quarter point, just so everybody understands that's a quarter percent. So if you're getting a million dollar loan, one point is ten grand, that's 1% of your loan amount. And a quarter of that would be $2,500. And they would charge you that in order to drop your rate, let's say in our example, down half a percent.
- [17:52]
A
So it's almost like an insurance policy.
- [17:54]
B
Yeah, they're, they're, they're scraping a little bit back in the margin. That's what they're doing. Charging you because they're losing money on you long term because they already had that rate pre sold. Right. And that gets into how the back end of the third party of the mortgage sale process happens. Like who owns your debt once you get it? They already kind of have it pre allocated.
- [18:12]
A
So I would expect that, right. Why would you say, hey, I'll sell you this car for this price. But if car prices drop, I'm like, okay, well I'll drop the price on the car. That's not fair because I don't get to increase the car price if they go down. So if you, you got three options, you float it, which would be if it goes up, you pay more, if it goes down, you pay less. And that's kind of like the gamble, right? But it's free, you can lock it, which is the safe move. But it could hurt you if rates go down. So you're losing the upside to eliminate the downside and Then you've got. I've already forgot the phrase. You use the float down.
- [18:49]
B
Float.
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A
Mixing it up with floating. Okay, so you got the float down, which is kind of like the happy medium where you're going to pay some money up front that you're not going to get back. So this is somewhat risky. It's like an insurance policy. If you don't ever need it, you lost the money. But if rates go down, you can float down and you don't have to worry about floating up. So in these scenarios, obviously, there's no one answer. We can always tell people what to do. You're. You're making a bet, and you're trying to make that bet based on world events patterns that we see happening in the industry. And like Chris just mentioned, what's going on behind the scenes. Is there a big appetite for loans or do people not want them? There's not a very big chance. Maybe like our top two fans of the show is paying attention to what I just described, like major nerds. These are people that think like a fun Friday night is staying home and watching the big short. But that's not a lot of people. Right? So for those people, call Christian, call one of the guys in the company, tell them what your concerns are. Here is what I want to make sure, and then let us tell you what we know. We may even say, this is what I'd recommend if it was me, but you're always going to make the choice. Does that sound good? 100%.
- [19:53]
B
That's literally how we talk about the clients. I can give you all the advice and guidance and you can still choose to do something different. That's fine. You're in control of your own money. I just want to make sure that you make an educated decision.
- [20:03]
A
That's all.
- [20:03]
B
That's all my job is, right. I always tell people I'm an educator first and an originator second. I know obviously the origination is what pays my bills and makes. Makes the one brokerage go. But really, I mean it when I say it. I. I am very committed to being an educator. First, I want to make sure that the advice we give is better than even the loans we give. The advice is the first thing.
- [20:26]
A
All right, well, thank you, man. I promise to give a prediction on what I think is going to happen. And I don't think that this is very outrageous prediction. I think it's pretty obvious that Iran is doing the only thing that they can do. And it's kind of sad that this is really all that they can do is half heartedly launch missiles at some embassies in other countries and do their best to destroy oil tankers. And we're not idiots. So we see them doing that and we go after their ability to do it. We have destroyed their entire navy. We have destroyed pretty much their entire air force. We have just bombed the crap out of all the mine layers that they had in the Strait of Hormuz. And when we find out where they're firing from on these oil tankers, we will go destroy those. They're not going to have anything left to do to hurt us. And when that happens, oil is going to be flowing from there. When we get the infrastructure running up for Venezuela, you're going to have even more oil from there. And I think I just read that there was a $300 million investment for an Indian company into a Houston oil refinery here in America. There's a lot of oil that is being produced and the prices are not going to stay high for long and neither are the rates. So if you are in a position to refinance, talk to us about it. But there would be less urgency that you got to do it right now. From my perspective, I don't think we're going to see rates that keep going up. I think that when this conflict settles down, which I think will be relatively quickly, you're going to see mortgage rates come back down again and we'll be in good shape. And any, any consenting opinion there or dissenting, I guess I should say.
- [21:56]
B
Yeah, I mean, I, I agree. Obviously the, the oil has an impact and you know, depending on how much damage is done to the infrastructure, you know, like what's really happening today does, you know, if we get, you know, 20 to 40% less oil for like a couple weeks, it's not a huge impact in a long term scale. It's if, you know, it's how long the rebound will take. Right. Because there is a lot of bombing of oil infrastructure right now. And that's things that don't impact this week, this month or this, you know, today that, that impacts years down the line because you got to rebuild that stuff. You know, we can get oil out of the ground, but if you can't, you know, I was a chemical engineer in my past life, so I, I know a lot about the oil refinery process. And it's not just pull it out of the ground, throw it in a car. You got to make it usable. Right? Yeah. And that's, you know, if refineries are going down and we've taken Out a couple, Iran, I know they've made some, some damages to a couple in Qatar and in couple of the other, you know, Middle Eastern countries there.
- [22:50]
A
Saudi refineries.
- [22:51]
B
Yeah, Saudi Arabia, I think Qatar took, took a, took a hit to one of the refineries. That's, that's big stuff, you know, because when a bomb hits an oil refinery, it's not just like go put out the fire. It's, it's lighting oil on fire. Like that's not good. You know, it's, it's massive damages that are made there. Now obviously a lot of money in the industry. They can rebuild know probably quicker than a lot of other industries can. But the long term effects I think is what worries people and worries the rate movers of the world. You know, that if, if this is something that takes a significant hit to the global oil supply. Oil supply from a long term perspective, that's, that's scarier than, you know, a 20% increase to oil this week and then it goes away. Right. And depending on what the final damage outlay looks like after this, you know, all the dirt, the dust settles here, I think that will be a big motivating factor in how we treat the futures of the financial markets, at least in the intermediate future here.
- [23:46]
A
Solid points. I would roll the dice on the fact that even if oil stays a little bit more sparse, I think rates still come back down. I think this is a temporary shock. Like, oh no, something happened and we don't know how it's going to go. And that tends to be money leaves the stock market, interest rates go up, home sales slow down and then everyone realizes, okay, we overreacted and money goes back into the stock market, interest rates go back down and people start buying houses again. Not an old man, but I've seen this happen several times. Or there's this shock factor that does.
- [24:15]
B
Boop.
- [24:16]
A
Little hit on the radar, comes back down. Who knows? I don't know for sure, but I wouldn't panic about it just yet. However, if we do get to the point of panic, we'll be sure to talk to you guys about it here on Mortgage Monday. Christian, thank you for joining me today. Where can people go if they want to talk to you about getting a loan?
- [24:31]
B
Absolutely. Yeah. If you guys want to connect with me directly on Instagram the 1 broker underscores between the underscore 1/broker. Make sure it's me. A lot of scams out there, guys. If you DM me and I take you to the right place, it's me. And if you get on the call with me, it's somebody trying to sell you crypto. It's not me. Okay. Other than that, though, if you guys just want to learn about more about what we do at the one brokerage, you can go to the one brokerage.com made it easy on you guys. And that that has a little Contact Us now tab at the top right too, if you want to get in touch.
- [25:00]
A
And there you have it. If you want to talk to me, head to davidgreen24.com, use the chat option or go right to my phone. I get asked all the time, is this the real David or is this a bot? Which I interpret as being I have a very boring personality and people can't tell the difference between me and a bot. I'm working on that. Just like I'm working on growing hair and trying to get back in shape after my bicep tear. But we're back in the fight. So thank you all of thanks to everybody who has been waiting and watching and listening and ready to go. Let us know if you have any questions about real estate and let us know in the comments what you thought about today's show. We will see you guys next week on Mortgage Monday.