Latest / The Can-Do Lender Podcast Series: Products & Coffee / Products & Coffee with Josh Ep 2: Use the Income Lever — Manufactured, Modular & Starter Homes

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Products & Coffee with Josh Ep 2: Use the Income Lever — Manufactured, Modular & Starter Homes · The Can-Do Lender Podcast Series: Products & Coffee

• 0:00
  SPEAKER_00: Last week I said this was not the 2008 financial crisis.
• 0:04
  SPEAKER_00: And it's not, it's worked.
• 0:05
  SPEAKER_00: At least that's what the graph's about to show you today.
• 0:07
  SPEAKER_00: But keep in mind, this is an affordability crisis and not a financial crisis.
• 0:11
  SPEAKER_00: Ultimately, they're just overlining at the end.
• 0:13
  SPEAKER_00: Also remember that affordability has three levels home prices, mortgage rates, and income.
• 0:18
  SPEAKER_00: Income is the one you can still move.
• 0:20
  SPEAKER_00: Welcome back to Products and Coffee with John, episode two.
• 0:23
  SPEAKER_00: I've got my black home version bug here and tribute to my most recent alma mater before opening MAP.
• 0:29
  SPEAKER_00: Speaking of alma mater, after episode one, Dale Odom, one of my career long top broker partners and my big sis, wrote me the cleanest version of my current assignment.
• 0:39
  SPEAKER_00: Look at the income, spend on needs, not wants, stop dreaming, and create your own dream.
• 0:45
  SPEAKER_00: Dale, you caught it.
• 0:46
  SPEAKER_00: This cup of coffee is that as well.
• 0:48
  SPEAKER_00: That said, this week the market said it back to me.
• 0:51
  SPEAKER_00: Look at this chart from J Jeff Rhodes using Redfin and MLS data.
• 0:54
  SPEAKER_00: About 1.53 million active sellers, about 972,000 active buyers.
• 0:59
  SPEAKER_00: That is roughly 563,000 more sellers than buyers, a record 58% gap.
• 1:05
  SPEAKER_00: Now look at this one from John Brooks.
• 1:07
  SPEAKER_00: This is the NBA purchase application index.
• 1:09
  SPEAKER_00: Mortgage demand has fallen back towards the ninth uh 1995 levels, much lower than the incredible 2020 pandemic boom and mid-2000s boom, pre-2008.
• 1:19
  SPEAKER_00: And here's the third chart from Nick Jurley at Reventure using NAR pending sales.
• 1:24
  SPEAKER_00: August pending sales index came in at 71.2.
• 1:27
  SPEAKER_00: That is below the 2008 through 2011 lows before the recovery.
• 1:31
  SPEAKER_00: Contract signings are down about 47% from the pandemic peak and about 35% from normal pre-pandemic levels.
• 1:38
  SPEAKER_00: Now hear me clearly, this is not another 2008 bank crash.
• 1:42
  SPEAKER_00: As I shared last week, this is an affordability crisis, not a financial crisis.
• 1:46
  SPEAKER_00: Pending sales this low simply means buyers are not signing because the payment does not fit the paycheck.
• 1:52
  SPEAKER_00: Demand is frozen.
• 1:53
  SPEAKER_00: That is the income lever talking the loudest.
• 1:55
  SPEAKER_00: And Wednesday, the Fed raised the federal funds target by a full quarter point from three and three-quarters to 4%.
• 2:02
  SPEAKER_00: First hike in three years, which was a super gut punch to me.
• 2:05
  SPEAKER_00: And I do not agree with it, but is where the silver lining could come in later.
• 2:09
  SPEAKER_00: For now, 16 of the 18 officials who submitted projections see at least one more hike this year.
• 2:14
  SPEAKER_00: Their 2026 inflation projection is 3.7%.
• 2:18
  SPEAKER_00: That is not a rate cut cycle.
• 2:20
  SPEAKER_00: That is a harder payment for you.
• 2:22
  SPEAKER_00: So if you are waiting for the miracle rate cut, don't hold your breath.
• 2:25
  SPEAKER_00: However, the door that still opens for you is the house that matches the income you have today.
• 2:30
  SPEAKER_00: This is the Florida answer when the paycheck is what it is today.
• 2:34
  SPEAKER_00: Let's talk about why so many first-time home buyers and some move-up buyers feel locked out.
• 2:39
  SPEAKER_00: A lot of the new construction product in Florida called track bills are coming in over half a million dollars.
• 2:44
  SPEAKER_00: Builders will buy the rate down to make the payment look friendlier with what's called a forward commitment and pay your closing costs.
• 2:49
  SPEAKER_00: That helps a lot, but it does not change the price tag, and math is math.
• 2:54
  SPEAKER_00: If the house is$500,000 or up, a rate that buy down still has to fit within your income, including taxes and insurance, and allow you to have a life after payment.
• 3:03
  SPEAKER_00: For a lot of first-time buyers and for some people trying to move up, that math still does not work.
• 3:08
  SPEAKER_00: So what's still pencils in?
• 3:10
  SPEAKER_00: Manufactured and modular homes do.
• 3:12
  SPEAKER_00: Not a consolation prize, the affordable option that still finances like a house when the file's set up right.
• 3:18
  SPEAKER_00: I'm specifically talking about manufactured and modular homes that meet FHA and VA guidelines, and conventional or USDA when the property and the park or the land qualify.
• 3:27
  SPEAKER_00: Modulars are placed on a foundation like a regular frame or block home.
• 3:31
  SPEAKER_00: Manufacturers get wheeled in and the wheels and axles removed, but the home still sits on the original frame, normally placed on block footers with tie-downs and other foundation equipment.
• 3:40
  SPEAKER_00: For manufactured, the home normally needs to be post mid-1976.
• 3:44
  SPEAKER_00: Single wides are typically 12 feet or wider and more than 400 square feet.
• 3:49
  SPEAKER_00: Double wides are 20 feet or wider and more than 600 square feet.
• 3:52
  SPEAKER_00: Modulars can vary.
• 3:54
  SPEAKER_00: The mobile home title gets retired at closing, so you're buying real property, not a car title at the DMV.
• 3:59
  SPEAKER_00: The modular is never titled by the DMV as it does not live on wheels and axles.
• 4:03
  SPEAKER_00: So you don't have to worry about that part.
• 4:05
  SPEAKER_00: However, they are both built with similar manufacturing techniques.
• 4:08
  SPEAKER_00: And with newer models, they're getting harder to tell apart, and many look just like a house and are just as nice.
• 4:14
  SPEAKER_00: Also, if fortunate enough to be doing a family transaction, a gift of equity on the land or the land and home package can cover a down payment, closing costs, and even some buyer debt.
• 4:24
  SPEAKER_00: This is when the family already has the property or the land to help a new household become homeowners, but is not a substitute for still needing the income to work.
• 4:31
  SPEAKER_00: Inspections still matter.
• 4:33
  SPEAKER_00: Foundations, roof systems, don't skip the ugly work because the price looks friendly on an already installed property.
• 4:39
  SPEAKER_00: And on new construction or land home packages, those inspections should already come built in with the installation process.
• 4:45
  SPEAKER_00: But it's still a good idea to educate yourself in the process before becoming too involved.
• 4:50
  SPEAKER_00: After you get a better idea on the process, this is a great way to flex your income lever.
• 4:55
  SPEAKER_00: Normally these properties come with a lower purchase price that more realistically equals a payment you can live with and a door you can own.
• 5:03
  SPEAKER_00: And in some cases, can be regardless of interest rates, at least within reason.
• 5:07
  SPEAKER_00: Two more rungs people ask me about.
• 5:09
  SPEAKER_00: HUD homes.
• 5:10
  SPEAKER_00: If you can get one off the list, a HUD foreclosure can be a real discount versus the same house at full market price.
• 5:15
  SPEAKER_00: Inventory's hit or miss, you have to move when the listing is live, and you still have to income and credit qualify and meet all the lender underwriting guidelines.
• 5:22
  SPEAKER_00: It's not a magic window for bad credit issues or not enough income, but it is another resource when homes are available.
• 5:28
  SPEAKER_00: Repairs can also be financed in depending on the property, which can help you pick up a property at a further reduced price.
• 5:34
  SPEAKER_00: The other is tiny homes.
• 5:36
  SPEAKER_00: You're seeing a rapid trend of people buying a piece of land and setting a tiny home on it, sometimes more than one.
• 5:41
  SPEAKER_00: I get the appeal.
• 5:42
  SPEAKER_00: Lower price, smaller footprint, control.
• 5:45
  SPEAKER_00: But before you fall in love with the picture, run it as a loan file, not as an Instagram post.
• 5:50
  SPEAKER_00: Some of those units finance as real property when they're on a permanent foundation, titled and taxed for the land, like manufactured homes.
• 5:56
  SPEAKER_00: But a lot of them do not.
• 5:57
  SPEAKER_00: And some do not meet minimum lender square footage guidelines.
• 6:01
  SPEAKER_00: And those with wheels, a temporary setup, a weird HOA, or a county saying no could turn what you hope to finance into a cash-only or seller finance deal.
• 6:10
  SPEAKER_00: So the trend is real, but the mortgage is a conversation you need to have up front.
• 6:14
  SPEAKER_00: Back to the current market.
• 6:15
  SPEAKER_00: I've got pre-approved buyers where the list price came down and the payment still doesn't work.
• 6:20
  SPEAKER_00: I've even got homeowners who want the downsides in the same town, but even the smaller house with today's rate is too much.
• 6:26
  SPEAKER_00: I've also got homeowners who are willing to bring a large town payment to the table to reduce the payment to something they can live with, but they are still hesitant in hopes prices will miraculously come down.
• 6:36
  SPEAKER_00: None of these are a credit problem.
• 6:38
  SPEAKER_00: This is the needs versus the wants meeting a stubborn payment they aren't ready to swallow.
• 6:43
  SPEAKER_00: It is where we need to get real with our finances and start asking the tough question: what can I really afford to live with versus what do I want to pay monthly?
• 6:52
  SPEAKER_00: If rates come down, you can always refinance later.
• 6:55
  SPEAKER_00: And back to that silver lining I was talking about earlier.
• 6:58
  SPEAKER_00: The Fed's rate hike has already had an unexpected impact on some sellers.
• 7:02
  SPEAKER_00: And it's called some of them to start cutting prices drastically in some areas.
• 7:06
  SPEAKER_00: So what if by the Fed raising rates and making payments harder temporarily, it's actually serving its true purpose, which is to get sellers to start asking their tough question.
• 7:16
  SPEAKER_00: How much equity in my pocket at closing is enough where I'm still willing to sell?
• 7:21
  SPEAKER_00: And if they keep asking this question, then buyers need to get lined up and ready to start buying.
• 7:26
  SPEAKER_00: Because the dip is only going to last for so long before prices start to stabilize again.
• 7:31
  SPEAKER_00: So a household is one disciplined buyer or two people who can carry the number and still have a life after payment today.
• 7:37
  SPEAKER_00: That's the new goal.
• 7:38
  SPEAKER_00: It's no longer the old rule of keeping the payment at one third of your income.
• 7:41
  SPEAKER_00: But what can I really live with today?
• 7:43
  SPEAKER_00: Because you don't want to miss an opportunity where sellers are dropping prices only to have them go back up when interest rates come down, because they will at some point.
• 7:50
  SPEAKER_00: And the realist and real estate is still the best long-term wealth builder in the market.
• 7:55
  SPEAKER_00: So don't sit around hoping prices in the Fed both collapse on your calendar.
• 7:59
  SPEAKER_00: Know the life after payment number you can live with today, run the real number, worst case, get pre-approved first.
• 8:05
  SPEAKER_00: If manufactured or modular is the wrong that fits, we structure it.
• 8:08
  SPEAKER_00: If a HUD home hits the list, go for it.
• 8:10
  SPEAKER_00: If land in a tiny home is the plan, find out if it can be mortgaged before you write the check.
• 8:15
  SPEAKER_00: Pray on it, meditate on it, and don't wait for the miracle.
• 8:19
  SPEAKER_00: Create it.
• 8:19
  SPEAKER_00: If you are buying a refinancing in Florida or you just want the numbers with no pressure, send me a DM or visit mmphomeloans.com, knowing it's half the battle.
• 8:27
  SPEAKER_00: Until next time, take care.