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If 7% Mortgages Are The New Normal, What Happens To American Housing? · The Jon Sanchez Show

• Jon G. Sanchez: Good Tuesday afternoon to you. Welcome to the John Sancho Show on Newstock Seven Eighty K a Wage. Pleasure to be with you this Tuesday and a pleasure to be with my co-host around the horn we shall go, Mr. Curry Edge Vidge Reality. How you doing, sir? Cory Edge: I'm doing fantastic. How are you? Jon G. Sanchez: I think we lost Corey already. Not a good start. Dwight Millard: Yeah. Jon G. Sanchez: you look so surprised. There you are, Corey. There you are. Yeah, there you are. We can hear you. Can we hear it? Cory Edge: Really? Can you hear me? Strange. Yeah, I'm doing great. How are you? Jon G. Sanchez: Good, good. Glad to hear it. Fantastic, thank you. Appreciate it. Nice calm day in the market today. It was nice change. I know I know I know this guy at the bottom of the of the of the screen here, he's he's the one that's really gonna be hack happy today. Well, kind of, but not really. Yeah, I know. I had to throw that in there. I gotta make you laugh, Dwight. Someone's gotta make you laugh, because I know there's not a lot of laughter in, you know, in in the in the world of Morgan's Lindine right now. Dwight Millard on Q Home Loans, how are you? Dwight Millard: So yeah. John. Yeah. No, I'm doing good. John, I had a opportunity to have lunch with a dear friend who's you know been doing this as long as I have. And you know, we both were just talking about how, you know, it's so much different than the 08 meltdown. You know, there's just less activity. And Jon G. Sanchez: Like you've always said, yeah. Dwight Millard: and and and and you know, we were talking because he listens to the show and he says, you know, I agree with you guys, but The way that we're spending the way that this is growing, you can raise rates to 12%. You're not gonna slow down the growth. So I don't know, maybe there's some truth to it, right? I mean, you're Jon G. Sanchez: Really? Like it can slow down the housing growth? Dwight Millard: not gonna slow down the growth in the economy. Just, you know, things are going like you talk about the AI, AI and stuff like Yeah, well, well, it's it's not slowing it down yet. You know, so well, that's true. That's true. Are we looking at real data? Yeah. So Jon G. Sanchez: in the economy. I don't I respectfully disagree with that side of it. Yeah. Yeah, no. No. Well, it depends upon what data you look at. I I think I think a lot of it, you know, as we've Yeah, I think a lot of it as we've discussed is being you hit you touched on that point, Dwight, is being held up by the AI side of things, but this economy cannot handle these rates much longer. There there there's Dwight Millard: No. Jon G. Sanchez: just no way. There's just no way. And I think I think it is we're gonna discuss here momentarily. I think everybody is convinced that it is a short term situation and that's why no one has really panicked yet, right, with it. but if if they continue for a long period of time, you are gonna see the impacts. There there is no doubt about it in my mind. There is no this economy cannot handle this this this type of of of craziness that's going on in the bond market. You know, it's it's Dwight Millard: Well, at at some point in time, right, the the the the the lend the credit market's gonna get tighter and tighter and you just how how you gonna do anything if it's not already tightened and and Jon G. Sanchez: yeah. Right. Right. Dwight Millard: j John, this is just really when we get to it's really, really unfortunate that where we're sitting. I mean, you know, we we talked and I don't wanna be a Debbie Downer, but you know, I mean, really is eight around the corner, you know, I mean, that's not gonna make very many people happy. Jon G. Sanchez: Well, based upon what's happened the last couple of days, yeah, not too far when I when I j made that comment la was last Thursday and I I asked you Dwight Millard: Yeah, yeah. Jon G. Sanchez: that and yeah, it we're getting close, Dwight. We're getting close. it's it's it's amazing. Dwight Millard: Right. Yeah. Which is just it ju it just it blows my mind if you would have told me, you know, I mean we started this little ride, what, March of twenty two, right? That was when we started Jon G. Sanchez: Yeah, yeah. Dwight Millard: it. And if you would have told me, you know, March of twenty three that we'd be higher than we were in March of twenty two and the you know, the feds are thinking about raising rates again, you know, four years later, I would have said Jon G. Sanchez: Yeah. but wait a minute. We had a Fed member today saying, no, no need to raise rates anymore. Tell me that wasn't orchestrated. Tell me that was not orchestrated. I'll boy, are they ever. Yeah. It it Dwight Millard: Yeah, yeah. Right, right, right. They're pl they're playing the game that you always say, right? It's just it's yeah. Jon G. Sanchez: ev at everybody's expense. That's that's the part that gets me gets gets my blood boiling Dwight Millard: Yeah, yeah. Jon G. Sanchez: is you know, you're you're playing with so many people's lives and and how can you know what what has changed in the economy where where this Fed member again is Well, let's get to it right now and then we'll get to our what our topic's gonna be. But what what Dwight and I are talking about, Corey, is and I'm sure you saw this, things calmed down. We, you know, we had a real strong, you know, bond yield you know, surge again this morning. And then late morning, voting FOMC member John Williams, New York Fed president, by the way, he said a quote, There's no need for urgency following the Fed's September action and that policymakers have time to gather additional information. And then So just I, you know, again, out of the blue, here he comes and says, Cory Edge: you Jon G. Sanchez: you know, basically everything is fine. We're we're in no hurry there. But what was interesting, Dwight, and I thought about you, the the CME FedWatch tool, you know, this is the tool that we talked about that gives us the probability of what the Fed's next move is going to be, it dropped Cory Edge: Thank Jon G. Sanchez: like a rock. Yesterday, there was a 70.9% chance that the Fed was gonna give us an October interest rate increase. Just after after Williams' comment, Cory Edge: you Jon G. Sanchez: that probability dropped from yesterday 70.9 to today. 49.3. So so let's just call it a fifty-fifty shot, right? Dwight Millard: Yeah. Jon G. Sanchez: but yeah, you cannot tell me because we we've had both yesterday as well as the end of last week, we've had other Fed members say absolutely just the opposite. So what's this guy seeing that nobody else is seeing, right? So I just found it bizarre. Cory Edge: you Jon G. Sanchez: But it didn't affect your Dwight Millard: Yeah. Jon G. Sanchez: world, unfortunately. You know, it didn't affect your world. You're the Dwight Millard: Yeah, i you know, yeah, I mean to the positive, it didn't I mean we still can like you said, continue down the negative route, but yeah, I I I John it's it's it's just perplexing and and you know, the the the Jon G. Sanchez: Yeah. Dwight Millard: The the harm that you say who it affects is it's affecting the sixty percent of the bottom line, you know, going, Hey, we c we can't afford this. The forty percent, it doesn't matter. They don't, you know, they pay cash or they do other things, but it's affecting most of the population out there. And it's just Cory Edge: All right. Jon G. Sanchez: Mm-hmm. Yeah. Yeah. Dwight Millard: unfortunate. You know, I went yesterday, I had to stop at a different gas station than I normally John it was and I I I you know, I older, you know, higher miles, I I put premium, it was seven dollars and five cents. Cory Edge: Okay. Okay. Jon G. Sanchez: Mm-hmm. Oof. Dwight Millard: for premium. And Jon G. Sanchez: Yeah. Yeah. Dwight Millard: you know, how how how much more can the consumer go? How mu how much more? You know? Yeah. Yeah. Yeah. Jon G. Sanchez: Yeah. Yeah. that's it. That that that's exactly the the situation. All right, Mr. Edge, looks like we got you back all well and everything. real quickly before we get to the the topic, Corey, your comments on Mr. Williams' comments today. What do you think of that? Cory Edge: I agree with you wholeheartedly that they're all saying different things. Jon G. Sanchez: No, I guess we don't have Corey back. Cory Edge: I thought we. Did you not hear me? You can hear me? Okay, sorry. I agree Jon G. Sanchez: Yeah, you're good. Go ahead. Yes. Dwight Millard: Okay, yeah. Cory Edge: with you that they're all saying different things. I thought Kevin Warsh was going to have committees that make these decisions and speak and do all these things. So the whipsaw that they're going Jon G. Sanchez: Good point. Good point. Good point. Cory Edge: through back and forth to me is it's ridiculous. But you know, they get their they get their beds in and they do all their stuff and then they change their tune and Jon G. Sanchez: Yeah. Cory Edge: it's all just a sham. Jon G. Sanchez: Yeah. Yeah. Yeah. Yeah, it really is. It really is. Okay, let's get down to what the topic's going to be today, because it's very tied into what we've already started the show with. So we have titled today's show, if seven percent mortgages, and I I wish it was only seven percent as Debate will enlighten us, it's significantly higher than that, but I thought it'd be real simple just to say seven percent. If seven percent mortgages are the new norm, what happens to the American housing market? You think about that. We sit here behind this microphone every Tuesday and Thursday. I do it Monday, Wednesdays and Fridays by myself. I say as much about the bond market and rates as Dwight, I I've even had to, you know, because there's been such big moves. I've even had to on the days you and Corey are not here or you and Aaron aren't here, I I touch on what the 30-year mortgage is doing because it again it's impacting everybody. So I'm talking about it, you know, five days a week. But you know, Dwight Millard: Mm-hmm, mm-hmm. Jon G. Sanchez: what happens again if we get up and we stay up at these levels here? Because Dwight, as you have said so many times. What's going to be the relief? That's really what the question boils down to. We're not going to bore you with I I I do want to spend some time. I think, I think, guys, we have been remiss explaining to the audience what is causing this. What, what how how do how do mortgage rates relate to the bond market? I think we need to spend some time kind of going back to the basics just real briefly of you know how our mortgages affected by what the bond market does. So I wanna I want to absolutely do that. But again, what no what no one is talking about is. The lasting impact of this to and back to my point, Dwight Millard: Yeah. Jon G. Sanchez: there is nothing out there that says what it that indicates what is it that's going to take, what's gonna be the catalyst Dwight Millard: Right. Jon G. Sanchez: to drive these rates lower? Because if they don't start to come down soon, I I I'm fearful. I really am. And we know obviously how absolutely vital the housing market is to the overall economy. And I don't think economists are spending enough time talking about this. I don't think Cory Edge: Thanks. Jon G. Sanchez: the politicians are spending enough time. When was the last time, Dwight, that you saw either the president or I I I'm not getting a pick on one side of the aisle. Any any politician come out publicly Dwight Millard: Mm-hmm. Yeah. Jon G. Sanchez: and say, you know what? There's a there's a crisis that's unfolding in this great country Dwight Millard: Mm-hmm. Jon G. Sanchez: of ours called the seven plus percent mortgage rate. No one is talking about it. What Dwight Millard: Mm-hmm. Jon G. Sanchez: are all the politicians doing? They're all spending their time talking about AI safety and and so on. So Dwight Millard: Mm-hmm. Jon G. Sanchez: people don't give a darn about that. They care about Dwight Millard: Mm-hmm. Jon G. Sanchez: What's coming out of their pocket, right? They care about can I get into a house? Can I move up to another house? The first time buyer, can I buy my first? That's what's on the mind. If I was running for office right now, that's what I would be focusing on. I would be looking at ways to cr to solve this problem because there are a number of ways, but no one gives a you know what about the public, right? All they care about is geez, what's the hot trend? AI safety is the hot trend right now. And you Dwight Millard: Yeah, yeah. Mm-hmm. Yeah. Jon G. Sanchez: know, Trump has all the AI, you know, executives at the White House and they're all laughing and giggling and they signed all these new bills and they're leaving it up to the safety of the AI companies. You know what? That's not on the mind of people. Talk to their pocketbooks. Dwight Millard: Mm-hmm. Jon G. Sanchez: So, anyways, back back just real quickly. So, back to today's topic. So, again, we have these mortgage rates well Dwight Millard: Mm-hmm. Jon G. Sanchez: above 7%, 10-year treasury above 5%. We're going to give you all the exact details. The 30-year Dwight Millard: Yeah, hoodie. Jon G. Sanchez: treasury, which again, no one is talking about. But let me tell you, folks, this is very important. The 30-year treasury today reached levels that we have not seen. Get this. Going back to the year of 2002. You were talking 2022, Dwight. How about 2002 Dwight Millard: Mm-hmm. Jon G. Sanchez: on the 30-year mortgage? Right? 2002, 25, 24 years ago. So today we're going to stop asking when are rates going to be coming back down and ask Dwight Millard: Right. Jon G. Sanchez: a completely different question. I want all of you to be thinking about. If rates stay here, how long does American house or how does American housing have to change? Because it cannot sustain at these levels. So Dwight, I think it's going to be a fascinating topic. Dwight Millard: Absolutely, John. And and you know, to your point, I don't think they know how to fix it. I don't think they understand. It's the same reason why they don't talk about forty trillion, a forty trillion Jon G. Sanchez: I don't think they want to fix it for some reason. Dwight Millard: dollar death. I I you know, I just don't think that they have any no, you're right though. Nobody's even talking about it. Nobody. You, you, you're it. You know, you talk about it five days a week pretty much now. Yeah, because it's it's the nearest and dearest thing to everybody's heart right now. Jon G. Sanchez: No, no, no. I know, I know. T tr trust me, I feel like a yeah, yeah, I I I feel like a a lone soldier and sometimes I yeah, some sometimes I sit here and go, you know, why am I wasting my breath and my efforts talking about it? Because I can't do anything about it, you know, I'm nobody. but yet you get the, you know, politicians that should be talking about it. Why why isn't anybody campaigning about this? Why you know, Republicans, if we want to win in in midterms, come out and talk about this. Come out with a solution to help these poor people in our country. Talk about a solution to $8 a gallon diesel prices. Talk about a solution to help our great farmers. Talk about a solution to help our great truckers. These are the real life issues that are facing people, not AI and, you know, this and that. And we're going to open the straight. We're not going to open this. You know what? Do something that's going to benefit us, is the point I'm getting to. And, you know, Dwight Millard: Yeah. Jon G. Sanchez: when we when we put this topic together, Dwight, I sat here and I really did some self-reflection. I said, you know, I my heart just bleeds for everybody. I mean, I can afford seven plus dollars diesel for my ranch. I really can't. But I'm I'm still spending I spend probably five, six hundred dollars a week. I was telling you guys off air, five to six hundred dollars a week. And we're not a big operation. imagine that farmer out there that's spending, you know, they're most farmers will go out and those they'll buy, you know, thousands of gallons a couple times a year. you know, and I'm talking four or five thousand gallons at a time. A lot of these guys are like, we're not gonna we can't afford it, number one. And number two, we're hoping that prices are gonna come down. Well, let's keep hoping and praying and everything else. So Dwight Millard: Yeah. Jon G. Sanchez: It's just it it I Dwight Millard: Tough scenario. Jon G. Sanchez: I just I'm just really frustrated today, as you can tell. Just really frustrated that that once again, no one is looking out for us. No one is looking out for us. The politicians are on their own agenda Dwight Millard: Yep. Amen. Amen. Jon G. Sanchez: and no one's helping us. So, anyways, that's what we'll get to when we come back. We'll go through the stock market recap. Not a lot of things to tell you about. Again, nice, really quiet day. Got one more day in the month. We'll see how tomorrow fares. Some very important reports coming out tomorrow. I'll share with you, and then we'll get into our topic. If seven percent mortgages are the new normal, what happens to the American housing market with Corey and Dwight? Welcome back to the John Sanchez show on New Stock 780 KOH with Corey H Vegrility and Dwight Millard of OnQ Home Loans. All right, before we get to our 7% mortgage problem, let's talk about the market for just a moment. As I indicated, a relatively lackluster session Cory Edge: you Jon G. Sanchez: towards the end. We had a lot of volatility in the morning, but that doesn't count. All it fit matters is where we are at one o'clock. How about this? 132 Cory Edge: you Jon G. Sanchez: decline on the Dow, 0.26%. Our close is 51,349. NASDAQ lost just 22 points, and the SP lower by 13 points. moving things over to the commodity side, one thing that helped was a nice pullback in oil prices today. some are suggesting that Iran may be losing some leverage over the Strait of Hormuz, and therefore oil prices back down today. $3.18 loss, $89.26 a barrel. Quiet for gold, just an $8.70 increase, $4,180-40 an ounce, Cory Edge: So Jon G. Sanchez: and up one basis point on the 10-year treasury, $5.26. Again, if you just joined us, we were discussing this earlier in New York Fed president John Williams, a voting member of the Fed. Cory Edge: you Jon G. Sanchez: Said there is quote no need for urgency following the Fed September policy action and that policymakers have time to gather additional information. And so Dwight Millard: I think Jon G. Sanchez: all that's all it took. And we saw bond yields come down. Okay, Mr. Millard, let's get to the the the big story of the day, the thirty year mortgage. I think before Dwight Millard: Mm-hmm. Mm-hmm. Jon G. Sanchez: we do, let me do one thing and let me I'm gonna bump over to a different screen real quickly because I wanna hit the thirty year bond yield. Cory Edge: you Jon G. Sanchez: Two basis point increase, five fifty-nine. Again, this brings us back to a level that we have not seen since about two thousand and two. Okay, Dwight. So Dwight Millard: Yeah. Jon G. Sanchez: had pretty good strength across the curve, except the shorter end two year was down four basis points. Again, just based upon Mr. Williams' comments. Let's see what happens tomorrow when we don't have his comments. Now, your turn. Let's go to Dwight Millard: Yeah. Cory Edge: you Jon G. Sanchez: mortgages. Dwight Millard: Yeah. So John according to Mortgage News Daily, so it was a rough, it was a rough day all the way around mortgage backed securities and the and the treasuries, but the 30-year fixed mortgage rate according to Mortgage News Daily is Cory Edge: you Dwight Millard: up eight basis points to 7.58. You know, you're just shy of just yeah, so Jon G. Sanchez: Just today a pay basis once. Just today. Dwight Millard: you were at 7.5, 758, you know, you got lose another eight, you know, but you I mean, you know, it's just the the trajectory is just going such Jon G. Sanchez: Yeah. Yeah. Dwight Millard: the wrong way. You know, here you are your FHA and VA's seven and a quarter, so well above the seven, you know. So I you know, John, it's just a tough, tough market out there. You know, everybody I'm talking to just feels like everything just doom and go. It's just rough. And and and Jon G. Sanchez: Everything yeah. Yeah, it is. Dwight Millard: it's just I I I you know, I don't know. And and you know, you start looking at you know, the interest rate model, the future, it just doesn't look very encouraging. And I just don't know. And that's why the topic's What now what do you do? Right. You gotta get creative with product. You Jon G. Sanchez: Yeah. Yeah. Dwight Millard: gotta get creative with pricing. You gotta get it you know, Corey's talked about it forever. It's all about the payment, all about the payment, you know, and so we're gonna have to get creative again. Jon G. Sanchez: Well, Corey Corey, you you like looking at charts as much as I do. I'm looking at the chart, Cory Edge: you Jon G. Sanchez: Dwight, on on Mortgage News Daily. October sixteenth, twenty twenty three, we're at seven ninety-four, seven point nine four percent. Again, today we close at seven fifty-eight. Corey, what happens to the housing market if we w I guess the reflection reflection would be take us back if you Cory Edge: you Jon G. Sanchez: can recall that time period, you know, latter part of twenty twenty three. What did that, you know, almost eight percent mortgage, if we can use that as a inflection point What happened then? Were were we weak? Were we you know, oblivious to it? What kind of what happened? Let's use that as a as a point. Cory Edge: If I can remember correctly, it was later in the year, right around October. It's funny because I've known Dwight for, geez Dwight, how long? Over 25 years and a lot of my life events, I can remember what Dwight was doing at the time. And I remember that show because Dwight was going absolutely a zerk about Jon G. Sanchez: Berserk. Cory Edge: the Fed and the rates and the 8%. And if I remember right, it didn't last that long. Jon G. Sanchez: Correct. Yep, you're right. Cory Edge: The question will be like, are we gonna hit 8 % before we hit 7? And if we hit 8, if we're only there for a couple of days, that's one thing. If we're there for two or three months, then it's gonna be, because back then it wasn't that bad other than we were panicked, but it didn't last long. Jon G. Sanchez: Right. Cory Edge: If we hit it and it lasts long, then it's gonna be a problem. Jon G. Sanchez: Yes. Corey, you're you're Dwight Millard: Yeah. Jon G. Sanchez: so right. I know you don't even have the luxury of looking at a at a chart right now, but you're absolutely right. It it it it did not last. I'm looking at the chart. It was a straight fall down right after it hit that. So again, I think i you know, Dwight, I don't know if if your world is so pragmatic to history as my world is, but that's why we watch charts and things like that to give us a historical perspective of what happened, you know, this time or what happened last time, could it be the same this time? Dwight Millard: Mm-hmm, mm-hmm, mm-hmm. Jon G. Sanchez: So Yeah, maybe, maybe Corey brings up a great point there that it, you know, as long as it doesn't last too long, we're there. But Dwight Millard: Well, you even mentioned last Tuesday, John, that you thought we were maybe encroaching on the top. So therefore you're right. Maybe if we get in that six, seven, six to eight, seven, nine or something like that, maybe that's where we, you know, maybe that's where we crest and we start to, you know, come back down. But I I I Jon G. Sanchez: Right. Dwight Millard: it does I don't I my hope is starting to fade a little bit because I just don't feel like you to your point, nobody's talking about it. Nobody is talking about it. Jon G. Sanchez: Well, just to give everybody, yeah, just no, no one's talking about just to give a little perspective. So now I'm looking if I go back August thirty first of this year, we're at six point eight nine percent. So again, we're at seven point Cory Edge: Hmm. Jon G. Sanchez: five eight today. So you know, what nine, ten, sixty basis points we'll call it. So Dwight Millard: Sixty basis points. Mm-hmm. Jon G. Sanchez: yeah, so that's less than what we have to do to hit eight. So we've done that in essentially a month, right? rough roughly a month. We've we've Dwight Millard: Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Yeah. Cory Edge: Yeah. Jon G. Sanchez: so that that's that's Right, guys. That's the that's what Dwight, this is what this market is capable of doing, meaning the mortgage market, mortgage backed securities, et cetera. That's what what's it's capable of. In a month, it could hit eight. It is. It is well, it's like the stock market. It it's just, yeah, it doesn't work that way. Now they want to punish us. Yeah. Yeah. Yeah. Dwight Millard: Well, and John, and it's the slow drip syndrome, right? This is just it's the it I'd rather just go up and then and just come back down, but it's just this it it's a hangman, you know. I'm just waiting for the last vowel. You know, it's just it you're just it's slow and methodical. yeah. Yeah, yeah, yeah, yeah. Jon G. Sanchez: Slow pain. Death, death by a thousand cuts, as the saying goes. Yeah. Corey, real quick before we go to break, now that we have you back, I want to I wanna pick your brain on this one real fast. if you were a politician, would you be talking about this to to to the voting public at this point? Don't you think to to my point and Dwight's point, this is an area that that politicians are not even touching right now for some strange reason? Cory Edge: Of course they're not touching it. And yes, they would be talking about it because it affects everyday Americans. But unfortunately, politicians aren't like normal people. live in La La Land and they don't have to deal with all this stuff. But yeah, they should be talking about this not only from the housing market, but looking back all the other expenses that go into it, all the other things that Jon G. Sanchez: That's right. That's right. Cory Edge: higher rates do. And is there an easy fix? I don't know. That's why we elect them to fix these kind of things and they should be at least talking about it and thinking about working on Jon G. Sanchez: Yeah, yeah. Okay. Dwight, real quick before we go to break, I gotta throw this in and then we're gonna move over to our topic. So Fair Isaac today, the the parent of FICO, right? Matter of fact, the symbol Dwight Millard: Mm-hmm. Yeah. So Jon G. Sanchez: is FICO, big pressure today. 26.66% loss on the stock down two hundred and twenty-four dollars. That's right, two hundred and twenty-four dollars and seventeen cent loss, closed at six sixteen seventy-two. the reason behind this, FHA FH FA director, Bill Poulte, said a fanny may Which finished the day down 27 cents, but that's a 6.14% loss to $4.13. And Freddie Mac, which lost 4.81% or 19 cents to $3.81, will move to a single pricing grid, incorporating vantage score alongside the existing FICO classic model, increasing competition in a market where FICO has long held a dominant position. I tried explaining this on the stock update this morning when this news broke, and is when I said it's. Pretty simple. FICO's been the big dog. You in the you use FICO predominantly. Now this vantage score model has started to come around. If correct Dwight Millard: Mm-hmm. Mm-hmm. Cory Edge: you Jon G. Sanchez: me if I'm wrong, isn't vantage score a combination of the three credit bureaus? Dwight Millard: Yeah, yeah, but it takes in traditional credit models. It takes in different things, Jon G. Sanchez: That's right. Dwight Millard: rent payments and things like that. So it's kind of giving you a for those that don't have Jon G. Sanchez: Things that FICO doesn't. Dwight Millard: I don't know if it's gonna trump bad credit or it, you know, if you all of a sudden you have a a 580. Can I go vantage and make it look better because I paid my rent on time? I I don't know, but I didn't make my car payment on time. Jon G. Sanchez: Right. Right. Dwight Millard: you know, it's gonna be interesting, but I don't Jon G. Sanchez: Right. Dwight Millard: like the one scoring model. I don't know what that means. You know, where it says the pricing. Cory Edge: you Jon G. Sanchez: So so Ross Mitchell had a question that he wanted me to ask you on this real quick. And that is, what are you gonna do? Are you gonna do an average between the two, between FICO and and and vantage score? But how can you be when when your director says they're Dwight Millard: No, w we're still just we're still on the FICO. We're still on your traditional FICO right now. I've not I don't even why don't I have vent? Well, because the Jon G. Sanchez: moving to single pricing? Isn't this gonna be an industry norm? Well, it's move we'll move to a single pricing grid, incorporating vantage score alongside FICO. So Dwight Millard: Well, I don't know what that means I well, that's gonna be weird because it Cory Edge: you Jon G. Sanchez: Do you have do you as a lender have the option to use one, both, an average, or the other? So you and the so okay, so sounds like this is relatively brand new news. Okay. Yeah, do some digging for us and maybe back on Thursday you can you let us know. But yeah, boy, Dwight Millard: Or the other yeah. Well that's like two appraisals, right? am I gonna use? Cory Edge: you Dwight Millard: Yep, brand new. I'll yeah, I'll look it up and see if I can find some more information. I yeah. Yeah, yep, yep, yeah. Jon G. Sanchez: what pressure on that stock. That was amazing to see that. Huh. Maybe their credit will get downgraded, Corey. What do know? Maybe maybe maybe their you know corporate lending will have to they'll have to pay a little bit more because they're did so terrible in the stock. Wouldn't that be something? Cory Edge: Well, and I think part of it to Pulte's credit, unfortunately, is they have raised their fees and Dwight can speak to this over the years, jacking up the fees that they charge consumers. And so, Jon G. Sanchez: Yes. Yeah, it's monopoly. Yeah, monopoly. Cory Edge: you know, it's time for it. It puts people like Dwight in a bind because yeah, they don't know exactly what they're supposed to be doing at the moment. Jon G. Sanchez: Yeah, absolutely. All right, boys, we're late for break. Let's come back and talk about the seven percent mortgages. If they're gonna be the new normal, what happens to American housing with Corey and Dwight? Welcome back to the John Sanchez show on Newstock 780KOH Corey's Veg Reality and Dwight Millard of OnQ Home Loans. Once again, relatively quiet when it was all said and done. The dust settled, as we say. we finished down just 132 on the Dow, 0.26%, NASDAQ down 23%, a fraction of a percent loss, and the SP lower by 13 points. again, just a fraction of a of a decline there. all right, we're gonna get to our topic here. If 7% mortgages are the new new normal, what happens to American housing? So we don't know, no one knows where mortgage rates are gonna go. But what we have to look at is begin to give our best predictions, because that's all anybody can do as to what happens if something doesn't give. Okay. Now, Dwight, before we get started on this and get Corey involved, I want to go right straight to you. All right, we said today the 10-year Dwight Millard: Mm-hmm. Jon G. Sanchez: treasury up one basis point five twenty-six. We said today, according to Mortgage News Daily, the 30-year mortgage 7.58% up eight basis points. It felt so strange yesterday when I gave that that quote white when I said seven and a half percent 30 year mortgage. bizarre. Does not feel good. Dwight Millard: Right, right, right. Jon G. Sanchez: but let's take two seconds here and and give the audience Dwight Millard: Mm-hmm. Jon G. Sanchez: an idea, you know, what what is going on? How do these mortgage companies determine their rate to bring it up to seven point five eight, even though again, one basis point increase today on the 10 year at 526? Dwight Millard: So so John, it's just the o open market in terms of what you can get from either an aggregate investor like a Wells Fargo or a Chase Citibank, or you go directly over to the you know, ticket window through Fannie Freddie, you know, FHA to Cory Edge: you Dwight Millard: get the rates. But I mean, I can tell you that, you know, looking at rates, I mean your par rate is right there on that si seven point five, seven point three seven five range. So I mean, there's not lot Jon G. Sanchez: And what is par rate? Dwight Millard: Par rate is where you have no additional points. It's it's just what is it pardon? There's no points to it. So you you know, you Cory Edge: you Dwight Millard: can pay points, a point to start buying down the rate or two points. You can pay whatever you want to buy down the rate. But you are correct. I mean, we're right there in that mid seven range right now, which is just a really uncomfortable, uncomfortable range for people. Jon G. Sanchez: So remember, those of you that are trying to, you know, track this, remember the 10-year yield is not exactly correlated to the 30 year mortgage. It's to Dwight's point. again, we should do an entire show on this. There's a lot of variables that go into, in this case, the seven point five percent seven point five eight percent rate. There's different expenses and so on and so forth that are there. But the bottom line, you can see a good majority of what the rates are gonna do by following the 10 year and of course listening to the show each and every day. but Dwight, Let's talk about this now. And Corey, let's talk about this now. Let's get right to it. So, Corey, you know, something has got to give on this, right? I mean, we sit here and again, we've said no one really cares about no one's, I guess, no one's doing anything about it. Those that can do something about it, no one is doing anything about it. So we've come up with five things that we need to discuss. Because if rates aren't going to come down, where else can we be get kind of start to get back to a little bit of affordability? So, Corey, let's break these down one by one. Home prices need to come down, home price. Size, you know, size of homes needs to come down. financing, Dwight, location, and buyer expectations. So let's start with the home price side of things. And before we do, before we do, Dwight ran some numbers. I want to just give this to everybody really quick, just to show what a difference. You know, we talk a lot about the the good old days Cory Edge: you Jon G. Sanchez: of a 3% mortgage. So half a million dollar mortgage, 3% including PI, you're looking at about 2,108 a month. At seven and a half percent, that 2108 payment jumps to 3,496 a month. Again, that's including P and I. A difference of $1,388 a month or almost $17,000 a year. That's how important the rate is. And then we're talking just a half a million dollar house. Now, Corey, home prices. How long can they sustain this? Dwight Millard: Mm-hmm. Cory Edge: When we got the topic this morning, I looked at all the points and we were going through them and everything was great. But the more I thought about it all day, John, is I don't know that anything will change. So how long can it sustain? It can sustain indefinitely because it sustained itself basically at these levels for the past three years due to low inventory. The more I think about it, if we stayed at seven, seven and a half, eight, you're just going to get a further transaction revolt or no activities happening. The few transactions that do happen make up the market, have an inflated median price, and there's just really nothing happening under the surface. Right now on a national level, our home sales are 50 % lower than they were pre-COVID, right? So there's none of this activity. Jon G. Sanchez: Ooh. Wait, wait, wait. Repeat that one more time on a national. Cory Edge: The national home sales were averaging three and a half to 4 million right now where we should be averaging Jon G. Sanchez: Yeah. Cory Edge: six to six and a half million. So a little less than 50%. That's what we averaged pre-COVID. So you hear people and they're starting to Jon G. Sanchez: I never heard that stuff. Cory Edge: know they have words for it, they've been saying a transaction recession is how they've been talking about the market now, at least the real estate market, that there's just no activity happening. And let's say rates go to eight. You'd have further level, in my opinion, of no activity. You'd have a few sales that keep the median price up. So everybody would think the housing market's doing great, but there's really nothing happening. There's no transaction volume whatsoever under the surface. The buyers would continue buying down rates because they have to keep their wheels spinning. But I think you'd get more people that say, well, we were thinking about selling our house, even though we have a 3 % rate, but at 8%, no, we're gonna stay here another six, seven, Jon G. Sanchez: No. Yeah. Cory Edge: eight years. Jon G. Sanchez: Yeah. And same same logic for the render, right? The render's gonna go, There's no way in heck I'm gonna get that mortgage at eight percent. I'm gonna wait. Dwight Millard: Yeah. Mm-hmm. Cory Edge: No, because you have a glut of apartments. You have a lot of debt that needs to be refinanced on apartments across the country. Like they're not feeling it yet, but they should see a little bit of relief or at least less inflation in their rent prices probably over the next couple of years. Jon G. Sanchez: Okay. But not good news. Yeah, it'd be interesting to dig up some stats. you know, when when's that next round of commercial financing coming due, right? They they 'cause they they usually go, what is it, Dwight, every ten ten year cycles, right? Typically is what those loans are. Yeah. The twenty this year. Okay. No one's talking about that either. All right. Dwight Millard: But yeah, yeah. Yeah, yeah. Cory Edge: It's 2026. This year is, there's a huge slug. Yeah, the biggest slug of apartments is due this year. Jon G. Sanchez: Let me squeeze on point number two, Corey. Dwight Millard: Well John, you in the and the Jon G. Sanchez: Holmes Go ahead, do it. Dwight Millard: No, I just gonna say, you know, at what point in time, at what rate do builders stop building? You know, I mean, because you just cannot, I mean, Jon G. Sanchez: Right. Right. Yeah. 'Cause they're they Dwight Millard: you you can only absorb so much inventory. You're buying down. How much are you gonna pay to buy down? There's only a certain we talked about we've been talking about that. So there's a whole nother Jon G. Sanchez: Yeah. Yes, yes, exactly. Dwight Millard: issue there. Jon G. Sanchez: Corey, the home size, could we start to see builders focusing more on smaller homes to to kind of fit in that affordable range a bit more? Cory Edge: Yeah, I do think if this sustains itself, again, let's say we get up to eight and it looks like this is where we're gonna be for the next 12, 24 months, then as Dwight mentioned, they're either gonna have to stop building or they're gonna have to build something that's more affordable. The problem is they're locked in on their land prices. The municipalities aren't gonna lower the sewer charges. So Dwight Millard: Mm-hmm. Cory Edge: they've got all these locked in costs and you can't build a 200 square foot house and sell it to somebody for 400 grand. Jon G. Sanchez: Yeah, yeah. Cory Edge: It would be an interesting, I don't know how they would deal with it. They would figure Jon G. Sanchez: Yeah. Cory Edge: it out though. Jon G. Sanchez: Yeah, exactly. All right, boys, sit tight. Welcome back to the John Sanchez show on New Stock 780K, which we've been talking about. 7% mortgages. If they are here to stay, what happens to the American housing market with Corey and Dwight? Corey, phone number, please. Cory Edge: 673-6700. Jon G. Sanchez: Beautiful. Miss Millard. Dwight Millard: two four zero two zero two two. Jon G. Sanchez: Thank you. All right, guys. so we're we're rapidly out of time as usual. Let I want to skip around here a little bit. Corey, let's talk about seller financing, right? again, this is something that that obviously the seller can offer. If you own a home free and clear, you have that ability to always carry the paper if your buyer is willing to do that. Is that a is that an option at this point, Corey, if we stay in this high sevens, potentially eight mark on the mortgage side. Could a seller come in and go, Yeah, you know what? Instead of dropping my price, guess what? I'm gonna carry the paper at I don't know, seven percent. I'm gonna look like a hero and I'm gonna make some nice interest. You hearing anything about that? Cory Edge: Absolutely, I think it'll be, I think I might be off on the number, but I think upwards of 40 % of the American housing stock is free and clear, has no mortgage on it. Not all those Jon G. Sanchez: Yep, I think you're right on that one. Cory Edge: people, they don't all wanna carry mortgages, but some of them, especially if you're in retirement and depending on the house and whatnot, like, yeah, the current going rate, seven and a half, I'll charge you seven and a quarter, you gotta give me my 100 % of my value, which seems like a good trade off. Jon G. Sanchez: Mm-hmm. Cory Edge: That would make a little bit of sense, you already know the asset, you know what it is. Most of those people with seller carry still have substantial down. So it's not a problem of affordability. It's a problem Jon G. Sanchez: Right. Cory Edge: of tight lending standards. And so yeah, I'm sure there's a lot of those deals happening and they're probably good for both sides. It works for everybody. Jon G. Sanchez: Yes. Yes. Exactly. Dwight, we haven't touched on this in a long time. And I don't even know I think last time we touched on it a couple of years ago, you said there's John, there's not many of these out there, but let's throw this Dwight Millard: Mm-hmm. Jon G. Sanchez: out there as far as a solution. Assumable mortgages. I mean, if if someone has a mortgage that's assumable, my gosh, that could be a a gold standard right now. Are many of those around anymore? Dwight Millard: N not too much on the on the conventional side. There are some n non-QM products. VA has a a feature. So does FHA. You you gotta you gotta qualify. So there are a few out there still. But the problem with that, John, is typically the equity position is too large. They gotta pay the difference in there. the difference what they're selling and what they're getting the loan for. So it just doesn't make it real feasible. But what you're gonna start maybe seeing, John, is some arms, graduated payment mortgages, things that are gonna try, if we're here for you know longer than we anticipate, we're gonna have to figure something out on our side. We're gonna have to. Jon G. Sanchez: Wouldn't you would it wouldn't you say that your industry, Dwight, has been in a dry spell in a lot of different ways, but a dry spell as far as new creative financing. Did the industry get their hand slapped too bad in 08 and 09? Where I mean, I I can't remember the last time I've heard your industry come out and say, Hey, we got this new product, you know, the old four on one or I mean that was a disaster, but Dwight Millard: Yeah. Jon G. Sanchez: something along those lines where it's it's I'll call it alternative to the traditional. you know, fifteen or thirty year. Why is that? Dwight Millard: Yeah, but John, the yeah, John the typically the leader of the pack was someone like Wells Fargo and they got out of the mortgage business altogether. So, I mean, those are the those they create the innovation, you know. Yeah, yeah, exactly. Jon G. Sanchez: Okay. Okay. No more countrywides around or anything else, yeah. Dwight Millard: You know, just try to pick, you know, pick some products that, you know, I was just talking today at lunch. You know, we need to find a good bridge loan, a really good bridge loan where somebody's trying to sell a house and buy one. We don't have anything Jon G. Sanchez: Right. Dwight Millard: good. You know, it costs a lot of money, it's expensive, and people just, you know. It's it's just hard. So you're right. We're gonna have to go back to the but most of these most of these product guys, John, having been this business more than five or six years, they don't understand it. I mean, you know, so Jon G. Sanchez: Yeah, yeah, yeah. Yeah, it's Dwight Millard: they're gonna they're gonna have to figure it out. Jon G. Sanchez: been a long time since you've heard any new products, that's for sure. Corey, Dwight Millard: Mm-hmm, mm-hmm. Jon G. Sanchez: you were joking during the break, but this is this is really not a joke and it it could be a potential issue, and that is multi-generational housing. A lot of lot of a a lot of countries do this and we've kinda dabbled with it a bit, like with the the mother in law quarters where mom and dad move in. I have a lot of client not a lot, but a handful of clients that do this. Talk to us about that one as an option. Cory Edge: Well, we were kind of joking because they do have a product for the person living in the main house and then usually mom and dad or somebody living next to them are in the same building. Jon G. Sanchez: Mm-hmm. Mm-hmm. Cory Edge: But we were talking about you might need in-laws and aunts and uncles and everybody. And it goes back to what we talked about a few weeks ago where Dwight said, hey, people are coming in and they don't qualify on their own. I got to throw mom and dad on there. I might have to go get Jon G. Sanchez: Yeah. Cory Edge: uncle Bob. So if it's taking more than one generation to afford the house, then they're all going to have to live somewhere there too. Jon G. Sanchez: Right. Cory Edge: The other point that I think people can watch for that comes to my mind is you really need these prices to kind of stay where they're at because remember buyers go in and it's a big leap to take on a mortgage at these prices, at these rates. And the anticipation is I get to live here but it's gonna hold its value or maybe go up. As soon as any buyers get a feeling that it's not gonna hold its value, they won't even go near it and they will completely Jon G. Sanchez: Great point. Great point. Cory Edge: back out of the market. So just something to keep an eye on. Jon G. Sanchez: No, that's that's an excellent point, Corey. And just yeah, it's obviously not all about the rate, but so many other factors involved with it. Well, guys, I think we made a great dent. We opened everybody's eyes a bit, and we'll just continue to watch it. And Dwight, thoughts and prayers are with you and and everybody that's you know looking to to to Dwight Millard: Amen. Thank you. Yep. Jon G. Sanchez: get into this side of it. Excellent job, boys. Great data that you brought to the table. Sure appreciate you both so much. And we'll do it again tomorrow on the John Sanchez show. God bless. Have great afternoon.