Latest / HPK Provident Advisors: The Weekly Bull / How Rising Rates Reshaped Home Buying And What Might Come Next

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How Rising Rates Reshaped Home Buying And What Might Come Next · HPK Provident Advisors: The Weekly Bull

• 0:14
  SPEAKER_02: Welcome to Friday Live.
• 0:16
  SPEAKER_02: Every Friday, uh the partners of HPK Provenant get us together and talk about the latest trends that we're seeing in the markets and the economy.
• 0:22
  SPEAKER_02: And every now and then we have a special guest.
• 0:25
  SPEAKER_02: So with us today is Michael Iltis, formerly of Iltis Lendigroup.
• 0:30
  SPEAKER_02: So Mike, thanks for being with us today.
• 0:32
  SPEAKER_01: Thank you for having me.
• 0:32
  SPEAKER_01: Hello, everybody.
• 0:34
  SPEAKER_02: And since I saw you're wearing your your uh old football team shirt, Colorado, um how about your boy Travis Hunter?
• 0:43
  SPEAKER_01: Yeah, he's uh yeah, you're up in Jacksonville, so you're you're a Jaguars fan.
• 0:47
  SPEAKER_02: I am.
• 0:48
  SPEAKER_02: I'm finally getting into football.
• 0:49
  SPEAKER_01: Yeah, he's uh he's a good asset for the team, and uh he's such an athlete.
• 0:54
  SPEAKER_01: Yeah, and and they're incorporating him, you know.
• 0:57
  SPEAKER_01: Um they got a a lot of uh a lot of talent on that team, so he's he's getting incorporated in to see him take the opportunities thrown his way and make some good things out of it.
• 1:08
  SPEAKER_01: So it's cool to see.
• 1:09
  SPEAKER_01: So I'm excited for him and the Jaguars.
• 1:12
  SPEAKER_02: Yeah, me too.
• 1:13
  SPEAKER_02: It's been fun to watch.
• 1:14
  SPEAKER_02: Although last last week was kind of brutal.
• 1:17
  SPEAKER_01: Yeah, you know, it it's crazy this day and age, you know, you got the Eagles losing, what was it, back to back, um, Bills.
• 1:24
  SPEAKER_01: Uh, you know, like it's any given Sunday, especially now more than ever.
• 1:29
  SPEAKER_01: You know, teams teams uh can surprise week after week, and um really it's early yet.
• 1:35
  SPEAKER_01: So we'll see where it all where all the chips fall.
• 1:39
  SPEAKER_02: All right, so we're gonna get into the markets a little bit, the economy, and then I'll I'm gonna ask you some questions about what you saw in the mortgage industry.
• 1:46
  SPEAKER_02: So that frameworks good.
• 1:48
  SPEAKER_02: Let's get ahead and get going.
• 1:50
  SPEAKER_02: So this is the SP 500.
• 1:52
  SPEAKER_02: We are kind of just trying to figure out which direction we want to go.
• 1:57
  SPEAKER_02: We had that big down day on Friday, and it's just been very volatile interday.
• 2:02
  SPEAKER_02: Even today, uh, we're about the flat line right now, but futures are down, I think, close to a percent.
• 2:09
  SPEAKER_02: Um so the market's trying to figure out which way to go.
• 2:13
  SPEAKER_02: We're in that vacuum of no economic data with the government shutdown being, I think, 17 days in at this point.
• 2:19
  SPEAKER_02: Um, we had that failed uh vote in the Senate yesterday.
• 2:23
  SPEAKER_02: So the shutdown continues.
• 2:25
  SPEAKER_02: It's just childish politics continuing on.
• 2:28
  SPEAKER_02: Um, we've seen it before and we'll continue to see it.
• 2:32
  SPEAKER_02: So we've been trying to rely just on the survey data we've got in.
• 2:36
  SPEAKER_02: Um we had the small business survey come out, came in a little lower than expected.
• 2:41
  SPEAKER_02: The biggest concern for small businesses is inflation.
• 2:45
  SPEAKER_02: Um, and the 58% of uh companies, small business companies that are looking for employees, they're they're not really finding any qualified applicants.
• 2:56
  SPEAKER_02: Um you turn to the beige book, which kind of shows a little different picture.
• 3:02
  SPEAKER_02: Um, many districts are noting uh a reduction in labor force.
• 3:06
  SPEAKER_02: Um that um and that's mainly through um companies are starting to lay off.
• 3:12
  SPEAKER_02: So that's contrary to what we saw um from remarks of Powell this week.
• 3:17
  SPEAKER_02: He was speaking at some symposium.
• 3:19
  SPEAKER_02: He says, you know, the employment situations decent.
• 3:24
  SPEAKER_02: Um both demand for labor and hiring is slow.
• 3:28
  SPEAKER_02: So we're kind of in that environment of not many layoffs, but um the pace of hiring is really stalled out.
• 3:36
  SPEAKER_02: So I think this is a good segue.
• 3:39
  SPEAKER_02: Um, this is a picture of the 10-year treasury.
• 3:42
  SPEAKER_02: We broke 4% yesterday.
• 3:44
  SPEAKER_02: Uh we we had a little bit of a regional bank scare um with some large loan write-offs, but I think this is a perfect transition into you talking a little bit about the mortgage industry.
• 3:54
  SPEAKER_02: So you were a mortgage broker for over a decade.
• 3:58
  SPEAKER_01: Um, so I joined um I joined in 2012.
• 4:02
  SPEAKER_02: Okay, and then that continued up until early this year.
• 4:06
  SPEAKER_02: Was it March?
• 4:07
  SPEAKER_01: About three three months ago, yeah.
• 4:09
  SPEAKER_01: I I closed uh officially down.
• 4:13
  SPEAKER_01: Um, I want to say it was the end of April, um, right before uh Stacy and I had our our baby.
• 4:19
  SPEAKER_02: Okay.
• 4:20
  SPEAKER_02: So now you're studying to be a CPA.
• 4:24
  SPEAKER_01: Yeah, so um I uh the the mortgage industry had been a great industry to be in.
• 4:30
  SPEAKER_01: Um, you know, over the 10 years, it it had some uh great opportunities of growth there during 2018 and 2020.
• 4:38
  SPEAKER_01: Um, but it's changed a lot and and uh became extremely saturated.
• 4:44
  SPEAKER_01: So with uh Stacy and I having our baby back in June, uh her, you know, she's she's pretty her job demands a lot of her.
• 4:54
  SPEAKER_01: Um it seemed like a good opportunity to take some time and transition uh into a different field, and accounting is uh is what I chose.
• 5:02
  SPEAKER_01: And so I've been uh setting, getting uh credits for my minimum credit hours for the state of Florida, and uh starting in January, I'll start fitting to take the uh first part of the exam.
• 5:16
  SPEAKER_01: Okay, so I got a little bit of ways ahead of me.
• 5:19
  SPEAKER_02: You want to talk a little bit about the paper you're writing right now?
• 5:21
  SPEAKER_02: I was fine.
• 5:22
  SPEAKER_01: Yeah, so I'm I'm actually I'm in I'm in government accounting.
• 5:26
  SPEAKER_01: Uh it's government and not not for profit accounting, and um we have a research paper uh as part of our big project for the class.
• 5:35
  SPEAKER_01: It's actually due this week.
• 5:36
  SPEAKER_01: And I I chose to write it on the federal budget.
• 5:39
  SPEAKER_01: And uh, you know, when we started this um about a month and a half ago, you know, things were a little different in terms of we weren't shut down, um, you know, things were still moving along there.
• 5:52
  SPEAKER_01: Uh, so there's been some updates, and uh the uh CBO um congressional budget office actually put a new updated forecast for the economic forecast because of some of the things they're seeing through tariffs and um for the uh economy and the and the interest rates and changes there.
• 6:13
  SPEAKER_01: So they just released that actually in September.
• 6:16
  SPEAKER_01: Um, and with the 10-year treasury, you know, it's interesting because we we came down below four, kind of sitting right around four there.
• 6:25
  SPEAKER_01: Um, you know, the 10-year treasury doesn't really move dramatically.
• 6:29
  SPEAKER_01: I mean, it can move dramatically, but it usually stays within a range, you know, whether it's moving flat, down, or up over a period of time.
• 6:37
  SPEAKER_01: So the CBO projection is saying, you know, based on what their numbers that they're looking at for the economy, that we'll see a 10-year treasury of 3.9 in the fourth quarter of 2028.
• 6:50
  SPEAKER_01: So that kind of, you know, that's that's a few years away, right?
• 6:54
  SPEAKER_01: Um, and we're kind of sitting there right now.
• 6:57
  SPEAKER_01: So there may be some um, you know, bounce back up into the low fours and and kind of like a a drawn out downward, um, you know, settling down into those threes, just like you're seeing on that chart uh Mike had where it's uh it's heading down.
• 7:15
  SPEAKER_02: Um, definitely a downtrend from downtrend in the year.
• 7:19
  SPEAKER_02: Um, but if you look at a long-term chart, um 40 years, we definitely broke that that previous downtrend um from the 1980s.
• 7:31
  SPEAKER_02: So um that signals that longer term we're probably gonna be in more of an uptrend, even though this this start is showing a downtrend in the in the intermediate time frame.
• 7:43
  SPEAKER_02: Um so and there's a lot of dynamics to that.
• 7:46
  SPEAKER_02: Um inflation might be running a little hotter.
• 7:50
  SPEAKER_02: Uh as you mentioned, the the deficit is very large, so that's gonna keep the pressure a little higher.
• 7:58
  SPEAKER_02: And that's really a tough dynamic because I I think I saw in that report that we are now paying a trillion dollars in interest a year.
• 8:07
  SPEAKER_01: Yeah, I think uh also it said that the deficit um is going to continue to expand over the next 30 years.
• 8:17
  SPEAKER_01: Um, you know, not much.
• 8:18
  SPEAKER_01: I think the average is like somewhere in the six percent of GDP, uh, but it's definitely in their projections, it's gonna continue to widen over that next 30 years into 2055.
• 8:31
  SPEAKER_01: So that net interest, yeah, obviously with the high rates, um, the trillion dollars in interest payments, you know, uh every every month, that's a lot.
• 8:41
  SPEAKER_01: I mean, that's that's a lot.
• 8:42
  SPEAKER_01: And if that's gonna continue to grow, um, you know, it's not gonna help our situation.
• 8:47
  SPEAKER_01: That's gonna keep things uh stressed for for an extended period of time.
• 8:52
  SPEAKER_01: And then you have the issues with the uh funding for you know, Social Security, Medicare, Medicaid, all those things are gonna continue to be at the forefront um of of these, you know, budget debates.
• 9:05
  SPEAKER_01: So it's gonna be interesting to see how all that unfolds.
• 9:09
  SPEAKER_01: Um you know, because uh a growing deficit over the next 30 years, it's not exactly where we want to be, I don't think.
• 9:16
  SPEAKER_02: No, not a good thing.
• 9:18
  SPEAKER_01: Yeah.
• 9:18
  SPEAKER_02: But for the markets, it's it's not a problem until it is.
• 9:22
  SPEAKER_01: Yeah.
• 9:22
  SPEAKER_02: So the markets can ignore that for a long, long time, maybe our entire lifetime, but at some point they could care about it.
• 9:31
  SPEAKER_02: And usually, and usually that we get a little bit of a a price shock when um we have a shutdown or something, and they don't the market doesn't really react to the shutdown, but then maybe in a couple weeks we get a downgrade to our US government debt.
• 9:45
  SPEAKER_02: Um, and and sometimes that shocks the market a little bit.
• 9:48
  SPEAKER_02: So we'll we'll have to see if that occurs.
• 9:50
  SPEAKER_02: Um right now we're entering the third week, I think, of the shutdown, and it takes about a tenth off GDP each week.
• 9:59
  SPEAKER_02: So the longer this goes on, the more economic impact it'll it'll have.
• 10:04
  SPEAKER_02: So we'll just have to keep an eye on it.
• 10:06
  SPEAKER_02: Hopefully next week's the week that we reopen and get things going.
• 10:10
  SPEAKER_02: Um, but let's hop back into the mortgage industry.
• 10:13
  SPEAKER_02: So obviously the last couple of years were very difficult with that 40-year high inflation really causing rates to rise.
• 10:21
  SPEAKER_02: Um so how how did that affect your volume of business?
• 10:26
  SPEAKER_02: Um, and did it have any effect on home prices or um anything else you're seeing?
• 10:32
  SPEAKER_01: So initially, when when rates initially um had that initial, you know, um spike, what was that a little over three years ago?
• 10:40
  SPEAKER_01: Uh you know, I think it was uh 10 or 12 of my mortgage contracts applications were uh had clients buying uh and we were gonna be closing on loans, they all canceled uh because of the uncertainty.
• 10:55
  SPEAKER_01: So, you know, in the mortgage industry, there was a very immediate um reduction in volume.
• 11:02
  SPEAKER_01: Uh uh things stayed steady, obviously not at the levels of 2020 and 2020, you know, 2018, 2019, 2020, when there was all that migration right before COVID and then after COVID, um, that volume was the highest probably it had ever been.
• 11:19
  SPEAKER_01: But things were steady, you know, volume was steady, people were still um buying and moving.
• 11:25
  SPEAKER_01: Uh prices stayed uh in in the Sarasota area and in parts of Florida in general, prices stayed high, uh, maybe not appreciation appreciating at the same level where you had multiple offers going 50,000 over asking price.
• 11:41
  SPEAKER_01: You know, you you had people coming in and still paying asking price.
• 11:45
  SPEAKER_01: Um, you know, and so those prices stayed elevated.
• 11:49
  SPEAKER_01: Uh they didn't continue to to skyrocket, but they stayed elevated for you know a couple years there.
• 11:55
  SPEAKER_01: And then in the last year, year and a half, you've seen you know, those values come down, especially um kind of in that range of 500 to you know one two here, one five in like the Sarasota Manatee area.
• 12:09
  SPEAKER_01: Um, that's kind of our general area.
• 12:11
  SPEAKER_01: So volume after rates spike, definitely a big chunk of volume came off the top.
• 12:16
  SPEAKER_01: Um, as rates stayed elevated for a period of time, it chipped away at the volume because prices were high, rates were high, loan amounts were high, which means payments you know were significantly higher, two, three, sometimes four times higher than what people were paying with their um three percent, two percent mortgage rates, you know.
• 12:34
  SPEAKER_01: And uh one of the things people like to compare, you know, initially they were like, well, back in the what 70s, there were 13, 14 interest rates, but the loan amounts were 50,000, 60,000, you know, 70,000, not 300,000, 400, 500, 600,000.
• 12:50
  SPEAKER_01: So payments are almost five, six, seven times more um than they were back then.
• 12:55
  SPEAKER_02: So in affordability is so tough right now, like for a family to buy a house, um, you're looking at 500,000 for something probably pretty small in Florida, and then interest rates being six percent, it's uh it's tough for people to afford.
• 13:13
  SPEAKER_01: Oh, yeah, it eats up all their all their income.
• 13:15
  SPEAKER_01: Um, just in and you know, it's hard to qualify in some areas, especially.
• 13:19
  SPEAKER_01: You know, one thing that uh has happened here recently is um you know, 500,000, I think across the United States, 500,000 more sellers than buyers.
• 13:29
  SPEAKER_01: So inventory has a net excess of 500,000.
• 13:33
  SPEAKER_01: And then um a lot of people in Florida, you know, Sarasota area can weather the storm longer.
• 13:40
  SPEAKER_01: So people are delisting their houses rather than you know, people have come down in price, sure, uh, but only so much, right?
• 13:47
  SPEAKER_01: And uh a lot of people are now delisting, so cancellations and delistings have been accelerating in the last couple months.
• 13:54
  SPEAKER_01: Um and uh, you know, a little bit of spike here in in uh volume with the softening of the 10-year and and Jerome's um you know, speech about interest rates cuts going into next year and all that.
• 14:10
  SPEAKER_01: So I think it does spur every time that happens, there's some positivity in the market, either with you know, prices or rates or or something of that matter, people do jump back in briefly and there's a little spike there.
• 14:23
  SPEAKER_01: But ultimately, people have buyers have pumped the brakes, they're not you know gonna pay more than what they can afford.
• 14:30
  SPEAKER_01: Um, I don't think people are making more money than they were maybe two, three years ago.
• 14:34
  SPEAKER_01: Um, some sellers, you know, bought at at a really high time um at the peak of prices, and they're probably down, you know, 10, 15, maybe even 20 percent.
• 14:46
  SPEAKER_01: Um and and you know, if they're not forced to sell, they'll they'll kind of sit there and hold on to it.
• 14:52
  SPEAKER_01: So right now, volumes coming, coming way down, especially in the last probably year in the mortgage industry.
• 14:58
  SPEAKER_01: You've seen, you know, maybe in a year and a half volume take a big hit.
• 15:02
  SPEAKER_01: Um there's still business out there, you know, there's the deals are harder to do.
• 15:08
  SPEAKER_01: Uh, you have to, I was a mortgage broker, so I had access to you know hundreds of different lenders across the country, and some offer hundreds of different scenarios that others won't fund.
• 15:21
  SPEAKER_01: And so you gotta kind of you know do a little shopping.
• 15:25
  SPEAKER_01: If you're a bread butter kind of, you know, income, history of employment, assets, all that stuff, you know, a bank or a broker, go shop around, get a good rate.
• 15:34
  SPEAKER_01: Um, if you're going somewhere and they're set telling you no or they're they're not giving you the time of day, you might be a tougher circumstance to qualify.
• 15:41
  SPEAKER_01: You might have to call a few more people and and and try a little harder.
• 15:45
  SPEAKER_01: Um, you know, it's uh the deals are harder to get done.
• 15:49
  SPEAKER_01: Um, the lending guidelines are a little stricter.
• 15:52
  SPEAKER_01: Um, you know, I think credit has changed a little bit too.
• 15:56
  SPEAKER_01: That's one of the things that we saw initially when when rates spiked over that next six to eight month period following that, FICO scores were coming in funky.
• 16:06
  SPEAKER_01: And uh it was it was interesting to see how Equifax, TransUnion Experian were um reallocating their you know model to increase the level of risk of of people just based on what was going on in the economy.
• 16:23
  SPEAKER_01: So it uh it was interesting, you know, to see all that unfold.
• 16:26
  SPEAKER_01: But uh where we go from here, I'm not I'm not so sure.
• 16:29
  SPEAKER_01: I think as long as things stay unaffordable for a lot of people, you're just gonna see people struggle to to buy and sellers to sell.
• 16:38
  SPEAKER_01: Um, and you know, it may just kind of be a little bit like that for another year or two, uh, until some things start to normalize a little bit more.
• 16:48
  SPEAKER_02: So I'm really mixed whether like if we so we're we're re-entering the rate cutting cycle, if we get a substantial decrease in the short end, that doesn't necessarily mean that's gonna be reflected in the long end and mortgage rates, um, given some of these dynamics we talked about with the debt level.
• 17:08
  SPEAKER_02: Um, but if it does come down, um, do you think do you think I I asked my realtor this a couple weeks ago too?
• 17:15
  SPEAKER_02: Do you think that's gonna flood the market with inventory for those people that have been waiting to sell their homes for the last couple years?
• 17:24
  SPEAKER_01: You know, I I yeah, I've been thinking about this for the last couple months, like really hard because I I have a lot of friends that are realtors, I still see a lot of real estate information.
• 17:34
  SPEAKER_01: I I stay tuned in, I read on a lot of stuff, and I think I ponder and try to figure out for my own theories kind of what what I think is gonna happen, you know, and I I kind of feel like you know, I think things are gonna kind of be stagnant for a little bit.
• 17:50
  SPEAKER_01: Um I think if rates stay where they are, you know, within a quarter of a percent either way, maybe half percent, that's still not that much of a move as long as prices stay high for a lot of people.
• 18:04
  SPEAKER_01: So if prices stay high and and rates kind of fluctuate a half percent down and up from where we are now, I don't think you're gonna see a whole lot change.
• 18:13
  SPEAKER_01: Now, if rates did come down, the 10-year uh, you know, gets down to 37, 3.6, you know, you're probably looking at 30 years in in the low fives and 15 years in the mid-4s.
• 18:25
  SPEAKER_01: You know, arms may come back if things normalize and there'll be more opportunity there.
• 18:30
  SPEAKER_01: You may see um if if buyers start flooding the market, you may see sellers, but the the issue that's still gonna arise is the sellers are they do they have to sell, you know?
• 18:45
  SPEAKER_01: Do the people here that have second homes and investment properties that you know they're retired, they have large net worths, do they are they gonna sell it for a loss?
• 18:54
  SPEAKER_01: And you know, are they just gonna keep it and hold on to it for a longer period of time?
• 18:58
  SPEAKER_01: So I think there are people that are probably desperate to sell.
• 19:02
  SPEAKER_01: Um, and you know, depending on where where prices go, um, if rates do drop enough, I think demand would pick back up in this area in in desirable areas in Florida, and you're gonna see prices kind of stay kind of in that elevated range.
• 19:17
  SPEAKER_01: I don't know how much more they will drop um unless there was a capitulation in the in the economy, you know, and people were forced by just the the you know um like a deep recession or something, they would be forced to sell.
• 19:32
  SPEAKER_01: But uh assuming everything's normal, I I think we're kind of gonna be stagnant.
• 19:37
  SPEAKER_01: Uh prices are gonna kind of stay where they are now.
• 19:40
  SPEAKER_01: Um, you may see some opportunities if people are in a tight spot and they just need to get rid of something, you know.
• 19:47
  SPEAKER_01: Um, you may see that, but I don't think you're gonna see a whole flood of you know uh homes reach the market at reduced prices because there's a fire sale, um, unless some type of capitulation in in the overall economy.
• 20:02
  SPEAKER_01: So um I think we're kind of it's just kind of gonna be stagnant.
• 20:05
  SPEAKER_01: I really do.
• 20:06
  SPEAKER_01: I just think it's gonna be like this for probably a while, um, you know, at least another year, if not, you know, maybe one to three years for all this to kind of settle itself out um under kind of where things are normally.
• 20:19
  SPEAKER_02: Um, you mentioned arms, and I actually did one for the house I bought uh about three, four months ago, and I I saw a recent stat that we're starting to see a big uptick in arms.
• 20:30
  SPEAKER_02: I did a 7-1 arm.
• 20:31
  SPEAKER_02: Um can you discuss that product and how exactly it works?
• 20:36
  SPEAKER_01: And yeah, so the the adjustable rate um will lock it in, lock in a rate at closing for a fixed period.
• 20:47
  SPEAKER_01: And you know, sometimes it's a three-year arm, a five-year arm, seven-year arm, ten-year arm.
• 20:55
  SPEAKER_01: I'm sure some banks get a little bit more creative and they may go in between those numbers.
• 21:00
  SPEAKER_01: Um, and so the first number in the arm product is the number of years that the rate is fixed once you close.
• 21:07
  SPEAKER_01: So if it's a let's just say a five-one arm fixed for five years, the one means after that five-year period, the rate will adjust every year based on where the current market rates are.
• 21:20
  SPEAKER_01: So um, you know, if if you get an arm with the anticipation that you're either going to pay that loan off by the end of the fixed rate period, or you anticipate rates will be lower at the end of that fixed rate period and you'll refinance into a fixed rate loan at that time.
• 21:37
  SPEAKER_01: Um, that's kind of the thought process there.
• 21:40
  SPEAKER_01: Uh, because the rates right now for arms can be, you know, one and a half, in some cases two percent, maybe cheaper than a fixed rate, just depending on uh what banks are offering or mortgage brokers are offering.
• 21:53
  SPEAKER_01: So the arm, you know, is a good opportunity to take advantage of doing things today with a cheaper rate than you would at a fixed rate, with the anticipation that you're gonna refinance out of that rate or pay that loan off before the adjustment period.
• 22:11
  SPEAKER_02: Um, so and and I think with mine, and it's probably with all of them, but I I could be wrong on that, there's a a cap that they can't go above a certain yeah, they're they're caps.
• 22:21
  SPEAKER_01: So they have like the uh the 225 cap is typical, meaning that um the first adjustment uh after the fixed period, it can't go more than uh 2% of the um initial note rate when you closed.
• 22:37
  SPEAKER_01: Um every subsequent period after that, it can't go up more than 2% at a time, and then uh above 2% above what the rate was when you closed.
• 22:47
  SPEAKER_01: And then the third number, the five would be um, you know, the lifetime cap um of five percent above what your your closing rate is.
• 22:58
  SPEAKER_01: So let's just say if the rate's six and a half percent, you know, the first adjustment period, um, if rates were over eight and a half percent, it would it would be capped at eight and a half, so it would go from six and a half to eight and a half.
• 23:10
  SPEAKER_01: After that, um every period after that, um, it would be capped at no more than two percent as well.
• 23:17
  SPEAKER_01: So, you know, worst case scenario, let's say you you close at six and a half, five years later, your first adjustment comes.
• 23:24
  SPEAKER_01: Uh let's just say rates went higher.
• 23:26
  SPEAKER_01: Um, and you know, it adjusts to eight and a half percent.
• 23:30
  SPEAKER_01: The next year after that, when it adjusts again, it would be capped again at going up no more than two percent.
• 23:36
  SPEAKER_01: Um, from that rate, so eight, you know, nine, ten and a half percent, but the lifetime cap is five above the six and a half, meaning eleven and a half percent would be the max it could ever go during the life of the loan.
• 23:49
  SPEAKER_01: So there are caps in there.
• 23:51
  SPEAKER_01: Um, and I just from a worst, worst case scenario perspective, if rates were going higher, that's where you would see the benefit of that.
• 23:59
  SPEAKER_01: Now, obviously, if rates go lower, nobody's nobody's worried about that.
• 24:02
  SPEAKER_01: That's what everybody wants, right?
• 24:04
  SPEAKER_01: You get an arm, rates go lower, and then you're you you know you're saving one, two percent when it adjusts.
• 24:11
  SPEAKER_01: Um, that'd be ideal, obviously.
• 24:14
  SPEAKER_02: Well, yeah, great insight, Mike.
• 24:16
  SPEAKER_02: Um, anything else you want to add before we flip on the disclosures and start our weekend?
• 24:21
  SPEAKER_01: No, I I think um, you know, if you're if you're anxious to get into a house, um, you know, all all other things, you know, equal if you plan on being somewhere for a long period of time, uh, just look actively, have a have a price set in your mind, talk to a lender and find out what you can afford.
• 24:41
  SPEAKER_01: Um, and just be patient and you know, look and see what's out there.
• 24:46
  SPEAKER_01: And uh you may it may be one of those things where you gotta look for a while.
• 24:49
  SPEAKER_01: You know, you might might have to look for six, twelve, eighteen months for you to find that right um circumstance.
• 24:55
  SPEAKER_01: Uh, don't be discouraged by it.
• 24:56
  SPEAKER_01: It's just you gotta work a little harder these days um than when you know things were were flowing so easily.
• 25:03
  SPEAKER_01: So great.
• 25:04
  SPEAKER_01: Um things will will normalize and stabilize at some point.
• 25:08
  SPEAKER_01: Uh just keep living your life and and um work with good brokers, good bankers, always shop around.
• 25:15
  SPEAKER_01: Um, you know, if you're gonna get a mortgage, see what the bank has to say, get a referral for a broker from a realtor, talk to them both, you know.
• 25:23
  SPEAKER_01: Don't sell yourself short.
• 25:25
  SPEAKER_01: Um, you may get you know different things.
• 25:27
  SPEAKER_01: Not not all banks and brokers offer the same products, have the best pricing for all the products.
• 25:33
  SPEAKER_01: Shopping around, you really gotta to see what's available, you gotta do put in that work.
• 25:37
  SPEAKER_01: So I recommend that.
• 25:39
  SPEAKER_02: Well, thanks for joining, Mike.
• 25:40
  SPEAKER_02: This was great.
• 25:41
  SPEAKER_01: Yes, sir.
• 25:42
  SPEAKER_01: All right, thanks, Mike.
• 25:43
  SPEAKER_02: And join us every Friday at 12 30 Eastern time.
• 25:46
  SPEAKER_02: Um, next week you'll just have Brian Peluso.
• 25:49
  SPEAKER_02: I will be on my wedding cruise.
• 25:51
  SPEAKER_02: So looking forward to that.
• 25:53
  SPEAKER_02: The big day's Wednesday.
• 25:55
  SPEAKER_02: So I'm sure I'll be uh posting some pictures on our HBK Facebook page.
• 26:00
  SPEAKER_02: Um but yeah, we're looking forward to it.
• 26:03
  SPEAKER_01: Congratulations again, Mike.
• 26:05
  SPEAKER_02: Thanks, I appreciate it.
• 26:06
  SPEAKER_02: All right, I'm gonna flip on the disclosures.
• 26:08
  SPEAKER_02: You can feel free to hop off whenever you want.
• 26:10
  SPEAKER_02: Uh all right, thanks again.
• 26:13
  SPEAKER_02: Yep, see ya.
• 26:14
  SPEAKER_00: Security is offered through LPL Financial LLC, member FINRRA and SIPC.org.
• 26:19
  SPEAKER_00: Advisory services offered through LPL Financial LLC, a registered investment advisor.
• 26:24
  SPEAKER_00: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
• 26:31
  SPEAKER_00: Content discussed is for informational purposes only and not intended as an offer or solicitation to buy or sell any security or investment strategy.
• 26:39
  SPEAKER_00: Any opinions expressed are those of the authors and do not necessarily reflect the views of LPL Financial or its affiliates.
• 26:46
  SPEAKER_00: All investments involve risk, including the possible loss of principal.
• 26:50
  SPEAKER_00: This communication may include links or references to third-party websites.
• 26:54
  SPEAKER_00: These links are provided as a convenience only.
• 26:56
  SPEAKER_00: LPL Financial and its representatives are not responsible for the accuracy or content of such sites.
• 27:02
  SPEAKER_00: Brian, Mike, and David and HPK Profit and Advisors may only transact business in states where they are properly registered or exempt from registration.