Latest / The Jon Sanchez Show / Will Falling Oil Bring Rate Cuts — And a Housing Boom?
Transcript
- Jon G. Sanchez, CEO: Good Tuesday afternoon to you. Welcome to the Jon Sanchez Show on Newstalk 780K which it's a pleasure to be with you and a pleasure to be with my co-host. We got a full house today boys and everybody stay in the entire show today, right? Dwight, you're your seat. Aaron Clark, you're... I'm happy man. Dad's happy today. Dad is happy today. Dwight Millard, how are you my friend? Good, glad to hear it. Good. Amen. Dwight Millard: Amen. Aaron Clark W Edge Realty: Yep. Dwight Millard: Yep. Yep. You're doing fantastic, Jon. Good to be around. Good to be here with you guys. Yeah. Jon G. Sanchez, CEO: Amen to that. Amen. Aaron Clark, Ed, really? How are you, my friend? Good. Yeah, ⁓ Welcome to my world. That's for sure. Well, love to I'd to get some take from you on that, Aaron, from the real estate standpoint, as far as ⁓ what you're hearing from your clients, same with you, Dwight and ⁓ so and so forth. But ⁓ yeah, everybody. What a wild ride again today. It was a day like Aaron Clark W Edge Realty: I'm doing great, yeah. Enjoying the wonderful windy day and the crazy market and everybody calling and freaking out about everything. Yep. Dwight Millard: Yeah. Aaron Clark W Edge Realty: You Jon G. Sanchez, CEO: like yesterday, but not quite as abrupt as yesterday, but it had its moments to say the very least. We had ups and downs and of it was up, but again, it was very substantial gains after the open this morning. We continued getting close to the closing bell at one o'clock ⁓ and then sold off. So I want to give you the details behind it. But you know, the boys and were joking before the show started, what a difference a week makes, right? When you guys were sitting on this show last week, ⁓ We were talking, you know, $90 oil. We were talking close to $100 oil was the projections. Obviously we hit that over the weekend. We hit $120 barrel oil. And you know, now here's where we sit at $83.88. $83.88. Just today alone, down $10.88 on top of the loss that we experienced yesterday. Absolute. I have never seen anything in my 36 year career, I've never seen anything like this where oil prices trade like a stock, like a NASDAQ stock, like a high tech stock. just absolutely crazy what is going on. This market, of course, is focusing on one thing and one thing only, it's oil, but it's really more importantly than that, the president is now in control of global oil prices. I mean, he really is just based upon his comments as to... ⁓ Aaron Clark W Edge Realty: hahahaha Dwight Millard: Mm-hmm, yep. Jon G. Sanchez, CEO: what he said yesterday and some of the comments that came out today that I'll share with you. I mean, let's just kind of start things. then, but I do that, let me tell you what we're going to be really getting down to as far as with the guys. You know, week we spent, I think both talking about Tuesday was really just about the market because it was such a crazy day. And then Thursday ⁓ we discussed again oil prices can influence what's going on in the housing market as well as what's going on in the mortgage rates and so on and so forth. But now what we to focus on because you know, That was yesterday, that was last week, that was like an eternity ago. What we need to focus on now is will falling oil prices bring something to Dwight's ears that puts a big smile on that man's face? Interest rate cuts and then a smile on Mr. Clark's face, which is a housing boom. I want to, before I get to what happened today, Dwight, I'm gonna ask you this question and Aaron, I'm gonna ask you the exact same one. Dwight, you've been doing this a long time, 40 years. Aaron North, at 20 years, have either of you, and I'll start with you, Dwight, have you ever seen your mortgage rates influenced by oil in all of your career? No, no, didn't think so. Yeah, yeah. Dwight Millard: Mm-hmm. Long time. Not like this, not like, I mean, this is unprecedented. said that word so many times in the last five years, but ⁓ is kind of crazy, Jon. This is, mean, as goes, so do the rates, right? So yeah, yeah, yeah. Aaron Clark W Edge Realty: Hehehehehe Jon G. Sanchez, CEO: Yeah, haven't we though? Yeah. Right, right, right. Aaron, same question to you. Have ever seen oil influence housing prices and the housing markets? Aaron Clark W Edge Realty: I mean, oil prices per barrel, no, but on a more micro level of the influx at the pumps are all, we've talked about this many times. use what's right in front of them as indicators as to whether or not things are going good or they're not going good. And so I think from that perspective, I think when people complain about gas prices, they start to think more about their finances than when they're at their average norm. Jon G. Sanchez, CEO: Mm-hmm. Right, right, right. Absolutely. Aaron Clark W Edge Realty: But no, not like this. This is crazy. I was reading an article yesterday that said, is the largest swing in barrel prices ever in the history ever. So I was pretty shocked by that. Jon G. Sanchez, CEO: Yes, They started tracking the oil futures back in the early 80s. it's never been this way before. I mentioned that stat on the show on Friday. And yeah, that's pretty historic. Again, oil trading like a tech stock does. Just big moves, big, big moves. But we're going to enjoy where we are right now, like I said, right around this $83 mark. This is almost back down to our normal levels. We've been spending between Aaron Clark W Edge Realty: Yeah. Yeah. Jon G. Sanchez, CEO: mid 70s to low 80s for years now, other than a few, know, outlying type of an event. But that's kind of the norm. So to think about that for a second, that we've got a war going on, we've got still the Strait of Hormuz essentially locked down. One ship got out today, and I'm going to tell you some of the headlines that really drove this market related to the Strait of Hormuz today. But the bottom line, you know, this 22 % of the global trade of oil, it's still not flowing there. I was talking with a client this morning and he said, yeah, you go on YouTube and there's a lot of non-mainstream media coverage out of China. And he was me that they're showing lines, miles of people trying to get gas in China, right? Because China imports 90 % of oil from Iran. I mean, that is a significant sum. Yes, we were. That's right. Aaron Clark W Edge Realty: We were talking about that on Tuesday about the impact for their market. Jon G. Sanchez, CEO: That's right, exactly. And of course, it's only got worse. Over the weekend, they told all their oil no more exporting anything, keep everything in house. ⁓ now hearing these, yeah, I know, right, exactly. So again, global situation. let's go to, for those of you that didn't follow things or you didn't catch the show yesterday, it really started this turnaround when really bought them and then ⁓ really the stock market bought them, least interim. ⁓ Aaron Clark W Edge Realty: Yeah. Jon G. Sanchez, CEO: was to yesterday. So it started with the president having a phone call with a CBS News reporter. And basically said, and ⁓ this much of a surprise that, look at conflict with Iran or ⁓ is quickly a resolution. He's essentially saying, look, they have no Navy, they have no Air Force, they have no nothing. This thing is way ahead of my four to five week time period of getting it over with. And the street it as, and the world took it as, okay, this thing's just about done. But what really drove this market and these oil prices yesterday, and then I'll bring you forward to what happened today, was when the president said in regards to the Strait of Hormuz, he goes, yeah, I'm thinking of taking it over. And no one, I did not read anywhere, anywhere that people are, that anyone's saying, a minute here, you can't do that. No matter what you think you can do, you can't do that. It can't be taken over. ⁓ can you control the vessels in and out? Well, maybe. that brings me to today. So things really recovering nicely. ⁓ All a sudden, this news report from the Secretary Energy, posts on X of all places, he posts on that the US Navy escorted ⁓ a ship, an refinery ship, oil ship, oil tanker through the of Hormuz. No problems. Man, oil prices tumbled. We down like 15%. Stock market rallied to almost 400 points. Like, OK. This is what the president was talking about. About an hour later, Carolyn Livett, the White House spokesperson, she comes out and she goes, didn't happen. The US Navy has not escorted any ships whatsoever today ⁓ of the Strait of Hormuz. ⁓ all of sudden oil prices start to rise and the stock market went negative. We just wiped out all of the gates. That's exactly ⁓ it was. ⁓ ⁓ power of the words. Aaron Clark W Edge Realty: ⁓ my gosh. You The power of the words. Dwight Millard: Yep. Jon G. Sanchez, CEO: So then later CNBC reported that the claim while separately reporting that a gone out flagged tanker had successfully transferred the waterway or transited the waterway. back to the CBS reporter, her name is, I mean, she's a superstar now. Everyone's like, wow, how'd you get this scoop? How'd you get this phone call from the president? ⁓ But name is again, Jennifer Jacobs, CBS reporter. She reported X Today that US intelligence had observed ⁓ Iran. that they may be preparing to place naval mines in the shipping lanes of the strait using smaller vessels capable of carrying mines. CNN later corroborated the report. Trump immediately came out and said, uh-uh, if they indeed do anything like that, you know, he had all kinds of rhetoric saying, basically, it's going to be the biggest mistake of your life. So then, once that happened, then not long later, the White House said, or actually Trump said in a true social post, Essentially, the US Armed found, I think it was nine ⁓ mine-lained vessels, they're now at the bottom of the ocean. that, you again, this is another thing that everybody is talking about. So it's like I telling my wife earlier today, I'm like, ⁓ I've never in career ever seen something like this where a market that just is driven every single heartbeat by the... Dwight Millard: . Jon G. Sanchez, CEO: by the words of the president, by oil prices. Those are the two factors. it makes it very difficult. A lot of investors are getting fatigued, guys. They're getting real fatigued from this. Dwight Millard: You know Yeah, Jon. I'm surprised. They don't just park those two aircraft carriers as bouncers You know mess with us. You're gonna. You're gonna. You know ⁓ just surprised there's not more presence and there is I only get what I can see on it, but ⁓ The intelligence on it, but it's it just yeah, it it would calm all this anxiety Global anxiety on if you can at least start to see like you said even one ship going through Jon G. Sanchez, CEO: I agree. Yeah, yeah. Yeah, yeah. Right. Right. Dwight Millard: made all the difference and no, no, didn't, you know, so I'm, yeah. Jon G. Sanchez, CEO: Yes, yes, yes, exactly, exactly. Yeah, mean, Trump is obviously, he knows the power of the jaws, the saying goes, right? Would he, this market listens to every single word that he says, whether you wanna believe it or not, it does. And all he would need to do exactly to your point, Dwight, and that's what many oil analysts are saying, the minute they start to see more than one ship going through the strait, you're gonna see these oil prices, I don't know, where are we gonna go? $60 a barrel oil now? I mean, it was easy to go. Hey, yeah, you know when we're at 100 or low 100s as easy to say, yeah, we're to get back to 80 or 90. But now that we're back to, know, again, 83 bucks right around there, where are we going to go next? Low 70s, 60s, who knows? Dwight Millard: Yeah, what was it ironic? What was it, two or three weeks ago? I said, Jon, nobody talks about how low oil was. Remember, I think it was like 63, $64. So I mean, it's funny when it's down, nobody really say it's only when it goes up, everybody panics, right? Jon G. Sanchez, CEO: Yes, yes you did. Yep, yep, yep, that's right. Oh, no, exactly. Well, it's right to Aaron's point is what the consumer can feel, right? The consumers had two problems in the last week. They're paying more at the pump and they're seeing their 401Ks and their investment accounts go down in value. Now those are starting to turn around. Consumers are going to feel good. They're going to pick up the phone and call Aaron Clark and say, all right, I'm ready to go by. And Dwight, I need that mortgage now. So yeah, you boys ought to be smiling. that's it. 30 days, my goodness. How about three hours? Gee whiz. Dwight Millard: Yeah. Yeah. Yeah. Yeah. Yeah. We need to last longer than 30 days. needs to be, you know. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Right. Right. Aaron Clark W Edge Realty: Yeah. Lock now, lock now. Jon G. Sanchez, CEO: Lockdown. That's right. That's right. That's right. Before any any other x posts or true social posts are made. My goodness. ⁓ Aaron Clark W Edge Realty: Yeah. Dwight Millard: But Jon, could you imagine though a hostile Iran with a nuclear capability, they would just, every time you'd make them mad, they're gonna, we're gonna bomb you, you know what I'm saying? It would be uncertainty forever, you know, type of thing. Jon G. Sanchez, CEO: ⁓ sure. ⁓ absolutely. I still have said along, I don't think it's about the nuclear weapons. I think it's about oil. I really do. think ⁓ is what I think is the driving force behind the US doing what we've done. really Think about it, you go to, ⁓ again, you to Venezuela, you go to that. There's one island no one's talking a lot about that's about 25 miles offshore of Iran that is where ⁓ all of not all, but a vast majority of the ships go right to. Dwight Millard: Well, okay. Venezuela. Jon G. Sanchez, CEO: and it's an island and it's old and it's archaic, but it pumps all the oil into those ships. There was talk yesterday, again, just chatter, that that may be the first place that we're going to see boots on the ground, that we're going to take over that island and really start to control everything. So if you got that, you got the straight open through with naval escorts, et cetera, see. But this president loves oil. ⁓ the liquid gold that's out there. And ⁓ think the more you can control, the you can kind of get your way. Because you think about it, Dwight and Aaron, real quickly, think about this. If we controlled Iran, if we controlled all that oil coming out of Iran, what's China gonna do? They're gonna pay us. What's Russia gonna do? They're gonna pay us. They don't get a lot of oil from Iran, but they get enough. But China gets 90 % of their oil. Can you imagine the smile on the president's face if Prime Minister Xi Jinping says, here's your $10 billion check. Notice no talk about tariffs or anything right now, right? Think about that. Tariffs have gone down the revenue. Dwight Millard: Yeah. ⁓ Yeah. Right. Mm-hmm. Mm-hmm. That's all oil. Jon G. Sanchez, CEO: scale and the level of importance. Oil prices are right at the top. So my theory, we will see. Time will tell. I don't know how if that would happen. But to me, it makes perfect logic sense. It's almost like Monopoly, right, Aaron? The old real estate, right? Yeah, I don't want two houses. I want that hotel on there because that's going to pay me a lot more. ⁓ I want just a few hundred thousand barrels. I want millions of barrels. He who has that is going to get paid a lot more. Aaron Clark W Edge Realty: Yeah, exactly. Jon G. Sanchez, CEO: Yeah, we will see. It's an interesting topic, but we'll continue on and tell you where this market's at, the mortgage rates, the bond yields, et cetera. When we return, let's turn it over to Kristin Snow. She's in the Right Now Traffic Center. Kristin. Welcome back to the Jon Sanchez showing news talk 780 K with Dwight Mallard of on Q homes mortgages and of course Aaron Clark of edge reality our topic again will falling oil bring rate cuts and therefore a housing boom. We're to delve into that shortly. Alright, how we finished up again. Wild ride up nearly 400 at our best level. I don't think we ever hit a foreign again. I think we're real close. Then we a lot of it back and then we caught our way back almost unchanged for the on the Dow side. 34 point losses all which. That means a victory with everything going on. 47,706 was our close. Nasdaq a whopping one point gain and the S &P negative 14. Oil prices as I said down $10.88 to 83.88 a barrel strong day for gold $1.30 I wish $130 rise, 5,242.50 an ounce. And Mr. Millard 10 year treasury a big old goose egg for the day at a yield of 414. How did we do on the 30 year mortgage? Dwight Millard: Yeah. Well, here's the good news. I like to do the comparisons. So last week, Jon, we got stuck in that 6.13 range. we 6.09, so five basis points improvement from yesterday. So at least on the downward till tomorrow, I guess. Then we'll figure out what tomorrow, or maybe futures are going to tell us, right? Jon G. Sanchez, CEO: Whatever the headline is there What why do you think what do you think with it with an unchanged day on the 10-year Treasury? But yet, you know, you lost five basis points on the 30. That's that doesn't happen very often. What do you seem behind the scenes are? Dwight Millard: Well, I think there was an appetite for the mortgage-backed securities, but that faded at the end, Jon. We lost the mortgage-backed security market, you know, lost 22 basis points. So if it carries on tomorrow, this will be back up to 6.13 tomorrow. So, but yeah, it just it moved. We opened up with a really good momentum and then it faded, you know, just kind of like what you did. Yeah, yeah, yeah. Jon G. Sanchez, CEO: Okay. Okay. Okay, kind of opposite of the opposite of the stock market. Yeah, we started weak, got strong. Yeah, interesting. I was trying to figure out the correlation there today. Let's forget, speaking of tomorrow, we do have CPI come in our way. So that'll be a very important report, retail level of inflation. Friday's the PCE, the personal consumption expenditure, which is the Fed's favorite measure of inflation. ⁓ Not anything out of the Fed right now. ⁓ But while we're on the subject of the Fed, guys, ⁓ and this is kind of tying right into our subject today is Dwight Millard: Yeah, yeah. Jon G. Sanchez, CEO: I've not seen anybody yet. I don't think anyone has the guts at this point, meaning major Wall Street firms to come out and really up their projections as far as an interest rate cut yesterday. And I can't remember which firm it was, said, look, we're going to be lucky to get one cut and it's probably going to be way down the road later in the year compared to before the conflict began, which was a cut in June and then another cut somewhere later, maybe in the fall. But I'm not seeing any projections at this point, guys, as far as what that's doing. ⁓ And again, I think many analysts are coming out and just ⁓ saying the same thing we're saying. mean, it doesn't matter how big or small or how smart or whatever. Everyone has the same opinion. No one has a clue where this whole thing is going because how can you, right? How can you when oil prices dictate what stock market's going to do, dictate what interest rates are going to do. And it all starts with what the president is feeling for that moment, what his comments are and what's going on. Dwight Millard: Mm-hmm. Yep. Yep. Jon G. Sanchez, CEO: Because we're not hearing anything as far as missiles flying anymore. He's really the one that's moving the market at this point. ⁓ Dwight Millard: When do you see, does the new chairman have to get appointed and confirmed? When does that process, when does that, yeah, okay. Jon G. Sanchez, CEO: Well, Trump appointed him. Yep, that happened over the weekend. ⁓ I don't know when the Senate hearing confirmation is going to begin. I imagine they're going to try to fast track that as much as possible because you are not hearing anything out of Jerome Powell or really anybody out of the Fed. like said, I've said this all along. I bet my bottom dollar that if it's not the day that he is sitting at Powell's desk, he's going to call a news conference and give a surprise quarter percent cut. just right out of the gate. got it. You got it. Just right out of the gate. Aaron Clark W Edge Realty: quid pro quo. All I know is we're getting our steak and lobster dinner from Dwight because I'm not seeing five reductions this year. Yes! Dwight Millard: Yeah, that's right. Well, yeah, that's right. Jon G. Sanchez, CEO: Hahaha! Dwight Millard: We need to have one next week to stay on track. Yeah. so Jon, what do you think? mean, if doesn't happen then a June 17th is right after the May confirmation. Jon G. Sanchez, CEO: There you go, yeah. But Dwight, let's remind everybody though, buddy. Let's remind everybody. They don't have to have a meeting for the Fed to do anything. Again, my gut tells me, once again, the minute he's sitting at that desk and he's officially the Federal Reserve Chairman of the United States of America, he's going to go, hey, guess what, guys? Let's have a press conference. know what? We just did an emergency rate cut ⁓ of the war in Iran, because of this, because he can find any reason in the world to do it. And as long as he gets the members to go along with him, then it's done. ⁓ Why? Aaron Clark W Edge Realty: Yeah, they could just do it. Dwight Millard: ⁓ That's... Yeah, okay. Is it a majority? Jon, is it a majority he needs? Okay, okay. Jon G. Sanchez, CEO: Yeah, yeah, they gotta have the majority. Yeah, they gotta have the majority. Aaron Clark W Edge Realty: Do you really think that if he does that though, it's gonna have that big of an impact? I think it's gonna go away the next day. Yeah. Jon G. Sanchez, CEO: psychologically, economically, no, cut or rate increase means nothing to this market, as we know, because of the bond traders. But do you not think that Trump would want to set the stage after everything, after all the jabbing he's done against Powell and ⁓ Cook, and he's got to prove him wrong? That's exactly right. I mean, there is no better opportunity. ⁓ once it'll really add fuel to the fire if we do to see some inflation kick up or something between now and June. Dwight Millard: Yeah, thank you a lot. Aaron Clark W Edge Realty: No. Yeah, he's gotta prove him wrong. Jon G. Sanchez, CEO: be even more reason so he find any reasons or he can just say we're doing it because we're doing it and you know Who's gonna argue? So that's my prediction so we will see happens there. I want to quickly before we take our break I want to mention Oracle they had a release after the close and man They had some great numbers ⁓ stock is really finish the regular session down two dollars and sixteen cents one point four three percent lost a 149 40 right now in the after hours It's up eleven dollars and thirty cents seven point five six percent gain to 160 70 All right, when we come back, we'll fall in oil, bring rate cuts and a housing boom. The boys will chime in on this one when we return to Stugger Road. Jack Saban, he's got news traffic with us. Hello Jack. back to the Jon Sanchez show on his talk 780 k oh with a doe white mullard of on cue home loans and of course Aaron Clark of edge really once again a wild ride today finished down 34 that's it nasdaq rose one s &p down 15 for the day time we move into our topic will falling oil rate cuts result in a housing boom let's go back to what we went over on Thursday because this is really important that you somewhat understand the cycle of how oil can influence the real estate side of things then we're going to get into some great details for you So what we ⁓ last week, guys, and that was really, really a great show, in my opinion, because it's so simple. When oil our transportation costs go up, meaning our groceries, everything goes up. Manufacturing costs increases. Everything goes up. What does that create? That creates inflation. What is the number one reason the Fed will not cut interest rates? High inflation. That's right. ⁓ So now we are. That's why we have now switched our topic from last week of, uh-oh, we have Aaron Clark W Edge Realty: inflation. Jon G. Sanchez, CEO: basically zero chance with what these oil prices are doing the Fed giving us an interest rate cut to say, wait a minute here, this thing has turned around awfully quick, maybe those cuts are in the horizon. ⁓ obviously it's just the opposite scenario. Fall in oil prices, reduce inflation, because remember, inflation is CPI that we're gonna get tomorrow, between four to 6 % of that calculation of the CPI are oil prices. Now just as a reminder, tomorrow's report is going to be February's report. nothing that we have seen these last two weeks is going to be reflective in that CPI report that obviously will come in March's number, if it even comes at all. It just depends upon, mean, this little blip, if we start ⁓ back to $70, $80 oil, you're not gonna see anything in there. but want to set the table straight on that. So falling oil prices can push mortgage rates lower because inflation expectations decline. All right, it's really that simple. So we touched on, know, could the Fed cut rates in June? Well, again, they absolutely can. ⁓ Do I don't want to take this opportunity for those that may be new to the show or maybe they're young listeners, they've never bought mortgages, break this misconception real quickly that the Fed does not set mortgage rates. How are mortgage rates determined? Why? Because we talk a lot about the Fed mortgage rates, but they're really apples and oranges. Dwight Millard: Yeah, it goes back to basic law of economic supply and demand. So you're actually got investors, traders buying mortgage backed securities and or treasuries in their portfolios. Massive amounts that you've described. That's what actually drives the mortgage rates down is the appetite hold or purchase more of those type of securities, mortgage backed or or treasuries. ⁓ And so the feds, ⁓ the feds kind of just maybe a little indicator of kind of what they're thinking. Jon G. Sanchez, CEO: the barometer. Dwight Millard: Yeah, but we've this up many times. When the feds drop rates, what are the interest rates normally do on mortgages? They go up, ⁓ Right. So the bond traders didn't like that or the mortgage backed securities didn't like that. Jon G. Sanchez, CEO: They've been going up. Yeah, it shouldn't be that way. Right. And that's the point we want to get across. It is the bond traders, folks, that determine mortgage rates. It's not the Fed, right? Big misconception always. is the bond traders. And Dwight, what makes those bond traders either buy bonds, driving the yields down, or sell bonds, driving the yields up? You got it. And economic activity and a million other indicators of if they got up on the wrong side of the bed that day. Dwight Millard: Yeah. In facin. Yeah, Jon G. Sanchez, CEO: There's a million different things that the bond traders can do, but they are the ones that are gonna determine housing boom bust, mortgage rate decline, mortgage rate increase, not the Fed, okay? Dwight Millard: Yeah, well, and Jon, to your point on the inflation, just go back 11 days earlier, you remember we talked about how did we were inside a six, 5.99, it didn't take but two or days later, once that uncertainty and the oil and all that, you know, to us to 6.13, I mean, that was almost a 15 basis point increase in rate, not cost, but in rate in four days, five days. So very sensitive, very sensitive. Yeah, yeah. Jon G. Sanchez, CEO: Yes. That's right. Yep. Right. Yep. In four days. Very, very sensitive. Everything is sensitive nowadays. Okay, Mr. Clark, let's bring you into the fold of the conversation at this point. Tell us what happens when lower interest rates happen. excuse me, let me rephrase that. Lower mortgage rates happen. And opinion now that we're in this kind of this new world, at least at this moment. Would these lower rates help the buyer, meaning bringing a big surge in new home buying and existing home buying opportunities? could we, all those people there that have been waiting go, ⁓ my God, that house that I looked at, let's see what's today, today, March 10th, that house I looked at ⁓ in now let's say it's April, has now gone up 50,000 because rates are lower, or you see my here. So tell the audience what happens now as far as home prices, demand. Aaron Clark W Edge Realty: I mean, immediate response, you're going to see probably more of the boom side of buyers being able to now afford some more stuff that they've been wanting. Because, you know, I mean, they meet with Dwight and his algorithm approves them and then they have a number and everyone wants more than what they can afford. Right. Like, kind of the bottom ⁓ of what people want. So with all this stuff happening. Jon G. Sanchez, CEO: it. Aaron Clark W Edge Realty: He's got to call them the next week and go, hey, sorry, but your pre-approval was based on X and now we're higher than that. So that brings your purchase price down. So rates coming back down is gonna increase their purchase price availability, but not so much so that we're gonna see huge dramatic reactions in pricing. We need a lot more entering the market for that to happen. So remember, I mean, basic economic supply and demand, right? So right now our supply and demand is. pretty equal to what's happening and how many buyers are out there purchasing. If we were to get substantial rate cuts, would put us in, you know, we've talked about, five and a half percent or five percent. You're going to have so many buyers entering the market that if the supply doesn't increase, then absolutely you're going to see housing prices go up 50 grand or a hundred grand. However, I believe, and a lot of other people agree with me on this, that we also have a lot of Jon G. Sanchez, CEO: Mm-hmm. Mm-hmm. Aaron Clark W Edge Realty: pent up sellers that are in those 3%, 4 % rates that right now they're going, I can't buy anything or get out of this or let this thing go because I'll be in a 6 % rate. That doesn't make sense for me right now. If we get into that 5 % number, we might see those people break loose, which would then increase inventory. And you might see housing prices increase a little bit overall. But if the supply increases with the demand as well, then, you know, I mean, Jon G. Sanchez, CEO: Mm-hmm. Aaron Clark W Edge Realty: there's going to be some good buying opportunity for people. Yeah. Jon G. Sanchez, CEO: So let's do a little poll between the three of us. I'm to start with myself and here's the question. With the clients you know or have known or have dealt with that have this 2 to 4 % 30-year mortgage, what percent do you think, to your point, Aaron, if rates drop to, let's be real aggressive here, 5.5 % would actually give up that 2%, 3%, or 4 % mortgage? Or, so what percent? Or? Aaron Clark W Edge Realty: Mm-hmm. Jon G. Sanchez, CEO: would they possibly look at renting that house and just going on to the new one? So I will tell you, I'll start the poll here. Every client that I know of that has that mortgage in that range, two to 4%, not one single one of them. Now I'm gonna give you a little caveat here. You gotta remember my clients are in or near retirement, so a little bit different life cycle than a young family. Yeah, exactly. Not one person has ever told me. Aaron Clark W Edge Realty: I was going to bring that up. Jon G. Sanchez, CEO: look at, dropped to five and a half, I'm out, I'm gonna give up that low mortgage and I'm gonna go buy something else. Everyone of them just said, I'm going nowhere. I'd say maybe five to 10 % have said, can we turn it into a rental? So that's just my world. Let's start with you, Aaron. Aaron Clark W Edge Realty: I mean, man, we could do a whole show just on this, honestly. But I think that our culture is moving so strongly right now and switching direction so quickly that the younger generation who got into the housing market in the last five to 10 years, they see opportunity and change as something that they desire. And with that rate being really low, they can't do it because it wouldn't make financial sense. If our rates come down, I think, yes, they'll let it go in a heartbeat because in their mind they're going, Jon G. Sanchez, CEO: Yes. Aaron Clark W Edge Realty: I can change the trajectory of everything and do this next business adventure idea or whatever, and I'm gonna increase payment by, I don't know, $500 a month, but I'm gonna pay all these other things off. I think they're looking for that quick move so that they can move on to the next thing. Jon G. Sanchez, CEO: Mm-hmm. Mm-hmm. Right, right, right. more of a business move than an emotional move. Aaron Clark W Edge Realty: Yeah, I think it's more of a business move. think it's like right now for somebody to do it even at 5 % I think is going to be more necessity. Like oops, I made some bad financial decisions and I need to fix them. If we get in that five, four, high fours, whatever percentage, I think you're going to see more people that are going to do it out of desire to expand their kingdom, if you will. Jon G. Sanchez, CEO: Mm-hmm. Mm-hmm. Mm-hmm. ⁓ of course, yeah, definitely. Yeah. Yeah, I mean, can't see anything better than five and a half over the next couple of years. ⁓ yeah. Yeah, yeah, exactly. Dwight, I need to have you hold poll ⁓ answer for a second. Let's get this break wrapped up with Kristen Stone, the Right Now Traffic Center. Hello, Kristen. Aaron Clark W Edge Realty: No, no, no. mean, just to exaggerate the point. Yeah, for sure. Jon G. Sanchez, CEO: Welcome back to the Jon Sanchez Show on Newstalk We've been talking with Dwight and with Aaron about again falling oil. If it happens, will it bring rates cuts which will then result in a estate boom. First let's get phone numbers going boys. Dwight you're up. Dwight Millard: Yeah, 240-2022. Jon G. Sanchez, CEO: Thank you, sir. Mr. Clark. Aaron Clark W Edge Realty: 673 6700. Jon G. Sanchez, CEO: Thank you, OK, Dwight, back to our polling question. Give me the answer. Dwight Millard: my best here's what I'm gonna caveat I think the sweetest spot you could find is about a five and a quarter 30 year fix the reason why I say that is these these sellers and Builders are getting very fatigued on these incentives They're a lot of money to incentivize the buyer to actually now take the lower rate ⁓ you somewhere to five and a quarter They don't have to come up with as much money Probably less half of what they're paying now ⁓ to get in the fours, which then I think psychologically you get 499, 4.875, you're gonna feel like you won. it's all about the perception. If you feel like you won, then I think that'll happen. So I think if you can get somewhere and that's gonna take a little bit of a push to get there, then think, you know, to Aaron's point, maybe some of these people that, you know, for life changes, they need a bigger house, they need this, they've got equity. Everybody's salivating over this equity, right? They've got it, they just, how do I get it? Well, one the ways is ⁓ to move so. Jon G. Sanchez, CEO: Mm-hmm. Right? Right. Right. Mm-hmm. Dwight Millard: If you can get a little bit more product on the street, know, for Aaron, I think you'll see, you know, maybe a balance, maybe. Jon G. Sanchez, CEO: Well, let's let the audience have a little insight into our conversation during the breaks. I wish we could have been recording that because we were talking about that where, again, it's very difficult. Aaron, you brought up some excellent points. I'll it the middle-aged family, right? Maybe they're that first home. They got maybe 100,000 2,000 equity. The family's growing or just want to move up. They're making more in their jobs, their business, et cetera. But they can't get that second home selling the first. They don't have enough cash. to be able to put down a substantial or even a decent down payment because the existing prices of new homes are so high, they need every dime they can to get out of that house. And so forget about the mortgage side of it. Your point is it really comes down to they've got to free up that equity. And so if they can't do that, and I were saying, look, we can say all day long, we can have 4 % mortgages, but if there's no inventory, what good does it do, right? So where's inventory gonna come from if those with little two, three, 4 % mortgages are not moving. We know the retirees probably aren't gonna do it. That's a big majority of them. I would love to see a stat on that. have to look that up. many two, three, 4 % mortgages are owned by the baby boomers in the country, right? That'd be an interesting one to tell us forever. We're see any reduction or increase in inventory. yeah, chime in on that point, Aaron. Aaron Clark W Edge Realty: I mean, I think you're gonna see more of a wash scenario if you were to have something like that happen because those young families coming in that bought, you know, they could afford at the time, they have some equity and they're gonna buy up, well, then they're gonna have to sell that home. So you're gonna bring a whole new level of new buyer that comes into the market. So you're gonna see a wash in that arena. I think people that have investment properties and things like that. Jon G. Sanchez, CEO: Mm-hmm. Aaron Clark W Edge Realty: and they've got those low rates, that's going to be the dam in the market that holds up inventory. Because why would you ever let that go? Like we were talking about on the break. mean, to buy an investment property right now, if you're not putting a substantial amount of cash down and you're borrowing a lot, you're taking a negative hit every month. I mean, there's no doubt about it with the current pricing that we're at. So if you already have something that might be in that same pricing category, but it's at a 2.5 % or 3 % rate, Jon G. Sanchez, CEO: Mm-hmm. Negative cash flow. Aaron Clark W Edge Realty: then you're still positive on your cashflow with today's current market rent. So you either need rents to increase significantly, rates to drop, decrease significantly, or housing prices to decrease for that to all work itself out. So they're not gonna get rid of those investment properties. Jon G. Sanchez, CEO: need a perfect storm in a good sense, which ⁓ luck on that one. ⁓ need. Yeah. Yeah. There you go. Don't say that. Yeah. Hmm. Yeah. ⁓ the real estate market wants it. Okay. That's the scenario. That's that's what we call the black swan event. Aaron Clark. That's what we call the black swan event. Dwight and I have lived through enough of those. That's for sure. The black will of it. Yeah. Good gosh. Exactly. Aaron Clark W Edge Realty: Yeah, yeah, you need a COVID. You need a COVID number two. Yeah. I don't want it, but that's the kind of like blind side you need to cause the market to get really shaken up. Dwight Millard: Yeah, Yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, ⁓ Yeah, What? Yeah, yeah. Yeah, yeah, yeah, yeah. Aaron Clark W Edge Realty: Yeah. Right now we're at the Black Whale event. Jon G. Sanchez, CEO: Dwight, what's your final advice right now? I know you it's probably locking in, right? Dwight Millard: Yeah, yeah, I think if you like it, you lock it in and to Aaron's point, it wash doesn't help us. So keep an eye on the market. Keep an eye on, keep listening to this show, some good ideas and just keep, just keep pushing I mean, know, don't give up. There's no reason to give up. So yeah. Jon G. Sanchez, CEO: Yeah. Aaron, 10 seconds. Wrap it up. Aaron Clark W Edge Realty: Yeah, I mean if you're shopping and you can afford stuff and you're ready to buy, do it because when rates do come down you can refinance that loan and make it even more comfortable. But don't stretch, you don't have to. Jon G. Sanchez, CEO: Yeah, exactly. more, yeah, there you go. I love that advice. job, fellows. That was a lot of fun talking about oil, mortgage rates, and housing prices. Who would've ever thought all three would be in the same sentence, but that's the world we live in. ⁓ care, boys. We'll see everybody tomorrow. God bless.