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When Affordability Breaks What Still Moves · The Ground Game

0:02
SPEAKER_00: Welcome to the ground game for mortgage professionals built for the fight.
0:09
SPEAKER_00: Hosted by Brian Lovell and Mark Mylan.
0:15
SPEAKER_00: All right.
0:16
SPEAKER_00: Hey, welcome to another episode of the Ground Game Podcast here with Mark Mylan.
0:20
SPEAKER_00: I am Brian.
0:21
SPEAKER_00: So, Mark.
0:25
SPEAKER_00: Today is September 13th.
0:27
SPEAKER_00: This podcast will come out this week.
0:29
SPEAKER_00: Or is today the 14th.
0:30
SPEAKER_00: Today's the 14th, I'm sorry, here on Monday.
0:33
SPEAKER_00: Um, it's been an exciting couple of days.
0:36
SPEAKER_01: Right.
0:37
SPEAKER_01: All of August, really.
0:38
SPEAKER_01: I mean, the entire month of August was this pretty sustained sell-off in bonds.
0:43
SPEAKER_01: And then as we hit September, especially over the past week, boy, it is just on steroids.
0:48
SPEAKER_01: Uh, you know, and we are now pricing, I mean, a solid, you know, half to three quarters of a point worse in rate than we were, you know, 45 days ago.
0:56
SPEAKER_01: Yeah.
0:56
SPEAKER_01: So it's a substantial amount of pricing power lost uh and affordability worsened on top of already, you know, not so great levels of affordability to begin with.
1:06
SPEAKER_01: So we find ourselves back to interest rate levels that we haven't seen since 2023.
1:10
SPEAKER_01: Yeah.
1:11
SPEAKER_01: And uh and the 10 year is even worse than that as far as where that goes.
1:14
SPEAKER_01: The the thing that's saving mortgage rates, at least in the present, is the spreads.
1:18
SPEAKER_01: Spreads.
1:19
SPEAKER_01: Yeah.
1:19
SPEAKER_01: Spreads are still pretty, pretty good.
1:21
SPEAKER_01: Yeah.
1:21
SPEAKER_00: Yeah.
1:22
SPEAKER_00: So it's been a tough couple of days in the market.
1:24
SPEAKER_00: I think we had a day last week where we lost seven over 70 basis points in mortgage-backed securities.
1:30
SPEAKER_00: I don't remember what that day ended up like on the 10 year, but we're in the four nines on the 10 year.
1:34
SPEAKER_00: We've got a Fed uh meeting this week and rate decision, which every everything's leaning towards.
1:41
SPEAKER_00: There's a hike.
1:42
SPEAKER_00: Yep.
1:43
SPEAKER_00: Um, 25 basis points, 50 basis points.
1:46
SPEAKER_01: I think it's 25, and I think it's actually needed personally.
1:49
SPEAKER_01: I'm hopeful that the hike, while you know, is it really is our problem really here a demand problem?
1:56
SPEAKER_01: And is is that, you know, can the Fed really influence it that much?
1:59
SPEAKER_01: I I do subscribe to the theory that the long end of the yield curve is looking somewhere for fiscal responsibility.
2:07
SPEAKER_01: Okay.
2:07
SPEAKER_01: Right.
2:08
SPEAKER_01: And we're not getting it from Congress, either side of the aisle.
2:10
SPEAKER_01: It's not like any Democrat is standing up and saying we're gonna cut social programs and there's no Republican standing up and saying we're gonna hike, you know, we're gonna raise taxes.
2:18
SPEAKER_01: So if we're not gonna cut spending, we're not gonna raise tax revenue, I think the bond market is desperately looking around, saying, almost panicking, say, saying, where is the fiscal responsibility?
2:30
SPEAKER_01: And if the Fed, which has allowed inflation to persist above 2% now for 65 consecutive months, a stretch that we haven't seen since the 1980s.
2:39
SPEAKER_01: Wow.
2:40
SPEAKER_01: If the Fed is going to uh, you know, say, well, we're just gonna wait and see on this, because if we trim out this and we don't look at energy and we don't look at food, it we're we're just gonna take a wait and see approach.
2:50
SPEAKER_01: Boy, I don't think that'll be good for us at all.
2:52
SPEAKER_01: I'm almost hoping that the Fed does hike, and I'm hopeful that the the long end of the yield curve will look at it as finally someone is doing something to, you know, uh about all of these factors that are influencing mortgage rates.
3:07
SPEAKER_00: Okay, um, so 25 basis points likely uh hike, right?
3:13
SPEAKER_00: Any argument for 50?
3:16
SPEAKER_01: I think you could make an argument for 50.
3:18
SPEAKER_01: Yeah.
3:18
SPEAKER_01: I I think uh, you know, the market likes to anticipate these things.
3:22
SPEAKER_01: And the one thing that Warsh has been, the Fed chairman has been very vocal about is that he doesn't want to give a lot of forward guidance, right?
3:27
SPEAKER_01: He doesn't want to turn the Fed into a trading utility, right?
3:31
SPEAKER_01: Like he felt like it got there under Jerome Powell, rightly or wrongly.
3:36
SPEAKER_01: Uh so but I think that there is a statement that could be made.
3:40
SPEAKER_01: Uh, my personal opinion, and uh I have several people that I respect who disagree with me on this, I think the Fed should have hiked last time.
3:47
SPEAKER_01: Uh I think waiting until now, now we're getting really close to the midterms, it puts the Fed in a position of being perceived as political to be hiking right before an important election cycle.
3:56
SPEAKER_01: Yeah.
3:57
SPEAKER_01: But from an economic standpoint, we're there are just so many factors negatively influencing the long end of the yield curve.
4:04
SPEAKER_01: And while this certainly affects mortgage and housing, it's not isolated to mortgage and housing.
4:08
SPEAKER_01: No.
4:09
SPEAKER_01: Um, and how many of these are within our control?
4:12
SPEAKER_01: We can't control what's happening with oil, right?
4:14
SPEAKER_01: That's that's not anything that's in the Fed's purview.
4:17
SPEAKER_01: Um, and that's just one factor.
4:18
SPEAKER_01: And we have obviously we have inflation, we have debt issuance, we have 40 trillion in national debt.
4:23
SPEAKER_01: Uh, there are so many different compounding factors.
4:27
SPEAKER_01: And even in we're uh maybe we'll get into this talking about oil, and it's not even just as simple as there's a conflict in the Middle East.
4:33
SPEAKER_01: It's it's more complex.
4:35
SPEAKER_00: And now it's getting wide.
4:36
SPEAKER_00: Yeah, yeah.
4:36
SPEAKER_00: No, yeah.
4:37
SPEAKER_00: Now it's starting to get wide.
4:38
SPEAKER_00: So um, you know, it's an interesting season that we're in because I think coming out of the summer, and you know, kind of I always kind of say Labor Day is like the official end of summer.
4:49
SPEAKER_00: Um, you know, real estate agents go back to work.
4:52
SPEAKER_00: We typically see like an increase in activity in our business in in home sales and obviously the the lending piece of it.
4:59
SPEAKER_00: Um, it it hasn't we haven't seen that spike um that we normally would see this time of the year.
5:06
SPEAKER_00: And I think a lot of that is uh because of the the market being rate driven.
5:11
SPEAKER_00: Um, what do you think overall is just kind of like the sentiment right now?
5:16
SPEAKER_01: Well, I'll I'll counteract you a little bit.
5:20
SPEAKER_01: So I I think for the month of August it was definitely muted.
5:23
SPEAKER_01: I have seen a pickup in the past week of activity.
5:27
SPEAKER_01: Uh now, obviously, this is a really small sample size.
5:30
SPEAKER_01: Yeah.
5:31
SPEAKER_01: Um, but it it's enough of it and it's different enough.
5:35
SPEAKER_01: Listen, that this industry is so wonderful.
5:38
SPEAKER_01: This stuff sells itself, right?
5:41
SPEAKER_01: People want homes.
5:42
SPEAKER_01: Yes.
5:42
SPEAKER_01: It's such a powerful thing to own a home.
5:45
SPEAKER_01: You got to pay for somewhere to live.
5:47
SPEAKER_01: Why not pay somewhere that's gonna create generational wealth for you?
5:50
SPEAKER_01: Yeah, and you'll have this power to make it your own and improve it and renovate and decorate all the stuff that you want to do.
5:57
SPEAKER_01: You really have to try hard to screw this industry up.
6:00
SPEAKER_01: And we've done it.
6:01
SPEAKER_01: You know, we've done it over the past 15 to 20 years.
6:05
SPEAKER_01: So I still think there's this inherent desire that people have to want to do this.
6:09
SPEAKER_01: And I feel it from first-time home buyers as well as move up buyers.
6:12
SPEAKER_01: Um, there no one's gonna love their rate.
6:15
SPEAKER_01: This is gonna cut down on volume.
6:17
SPEAKER_01: Yes, it's really gonna squeeze the 250 and under, the the 300,000 and under.
6:22
SPEAKER_01: And you just have to look at the NAR's existing home sales report from last week to see it.
6:26
SPEAKER_01: The disparity between over a million, over a million is still increasing.
6:31
SPEAKER_00: Crazy.
6:32
SPEAKER_01: Down at the low end, yeah, 350 and below.
6:35
SPEAKER_01: Boy, the drop-off is substantial.
6:36
SPEAKER_01: I think it's like down 9% year over year.
6:40
SPEAKER_00: It was almost double digits.
6:41
SPEAKER_00: Yeah.
6:41
SPEAKER_00: Yeah, which is crazy to think because like I go back to another similar time as this, like 08, 9, and 10, you know, that a tough market, different for different reasons, but that um higher end, that luxury buyer, yeah, those homes would sit on the market for 18 months, 24 months.
7:00
SPEAKER_00: Right.
7:00
SPEAKER_00: And now they're smoking off the market.
7:04
SPEAKER_00: It's just total opposite.
7:06
SPEAKER_01: Man, I had a great friend.
7:08
SPEAKER_01: He actually lived with me for a while before he moved out west and he's passed away since then.
7:11
SPEAKER_01: But had a great friend, he was the broker, a broker at Keller Williams.
7:15
SPEAKER_01: And he used to, because in that time period when luxury homes were sitting, he would go to the cellar and and the seller had vacated the home, home sitting empty, and he would say, I'll stage your home.
7:24
SPEAKER_01: I'll move all my furniture into it, I'll stage it, I'll pay all the utilities, but I'll live there for free because staged homes would sell faster.
7:32
SPEAKER_01: No kidding.
7:33
SPEAKER_01: And he would live for multi-million dollar homes in Buckhead in Atlanta years at a time.
7:39
SPEAKER_01: That's fantastic and basically just paid the utility.
7:41
SPEAKER_01: Now the utilities, it was like$2,000 a month just to cool the place.
7:44
SPEAKER_01: Yes.
7:45
SPEAKER_01: Yes, yeah.
7:46
SPEAKER_01: But it was such a fun.
7:47
SPEAKER_01: I went to many a wonderful party at these homes.
7:50
SPEAKER_00: What a what a fantastic idea.
7:51
SPEAKER_00: Yeah.
7:52
SPEAKER_00: Okay.
7:52
SPEAKER_00: So um we got the the we said we talked about the Fed meeting already.
7:56
SPEAKER_00: You you hinted a little bit at oil.
7:58
SPEAKER_00: All right.
7:58
SPEAKER_00: So um oil is obviously driven right now because of the conflict that we have going on.
8:04
SPEAKER_00: Sure.
8:05
SPEAKER_00: But there's some new dynamics that have come into play over the last couple of days and over the weekend, um, which also is gonna put more pressure on the U.S.'s strategic oil reserves.
8:16
SPEAKER_00: Obviously, oil is tied to inflation.
8:19
SPEAKER_00: Like, I guess what I'm gonna ask you is there any end in sight?
8:25
SPEAKER_01: Uh well, I you know, I don't think there's anybody that could realistically look at this conflict and say, you know, we knew 100% it was going to last this long.
8:34
SPEAKER_01: Right.
8:34
SPEAKER_01: You know, I'm certain the current administration didn't feel that way because they told us that it was gonna be over a lot faster than this.
8:40
SPEAKER_01: A couple of weeks.
8:40
SPEAKER_01: Yeah.
8:41
SPEAKER_01: And, you know, one way that we we mitigated the effects of the Ukrainian war, and this is under the prior administration, and one way we've mitigated the effects of the price of oil in this in this uh conflict in Iran is that we've been releasing some of our strategic petroleum reserves.
8:58
SPEAKER_01: And when I say some, I mean hundreds of millions of barrels of oil.
9:01
SPEAKER_01: And if you're not familiar, the strategic petroleum reserve was created in the 1980s when we came out of this energy supply shock and recognized we can't be so beholden or so you know powerless to control the price of oil.
9:16
SPEAKER_00: Need to be more dependent on our own oil.
9:18
SPEAKER_01: Exactly.
9:19
SPEAKER_01: And so I think a lot of people are aware we have a strategic petroleum reserve, but like if you're like me, you didn't really understand it until maybe this conflict.
9:28
SPEAKER_01: And so there are 60 or so salt caverns in Louisiana and Texas that house hundreds of millions of barrels of oil, and it's a particular type of oil, right?
9:39
SPEAKER_01: Uh uh that's a particular type of crude.
9:41
SPEAKER_01: It's not the same type of oil that maybe are in the in the mountains in Venezuela.
9:44
SPEAKER_01: Okay.
9:45
SPEAKER_01: And it has been drawn down over time, some by the Biden administration, and now most recently by the Trump administration.
9:53
SPEAKER_01: And there are there's not one absolute authority that says definitively this is what will happen when you hit this number.
10:01
SPEAKER_01: But below 300 million, it starts to get more difficult to pump it out.
10:05
SPEAKER_01: We're well below 300 million now.
10:06
SPEAKER_01: We're about 285 million.
10:08
SPEAKER_01: Okay.
10:08
SPEAKER_01: And if you hit 250 million, there are people who do this for a living and have been doing this for a living for many, many years who say you're starting to get into the integrity of the salt caverns when you start depleting it this much.
10:21
SPEAKER_01: Now, Trump administration officials will say we can fill it with water and water and oil, they don't mix with that.
10:27
SPEAKER_01: Um, but we're getting to the point now of how much of a shock absorber do we really have for the price of oil given how much we've drained our own reserves.
10:37
SPEAKER_00: Okay.
10:38
SPEAKER_00: So wow, I didn't understand.
10:39
SPEAKER_00: I guess I didn't realize that.
10:40
SPEAKER_00: When you said barrels of oil, I assume they were actual barrels, but we're just pumping oil into caverns.
10:47
SPEAKER_01: Salt caverns underground.
10:48
SPEAKER_00: And as it depletes, obviously there's probably some structural or integrity there.
10:53
SPEAKER_01: When you think about oil, there's two places that you can get it, right?
10:56
SPEAKER_01: You can get it from the well or you can get it from inventories.
10:59
SPEAKER_01: And we have been draining.
11:01
SPEAKER_01: Now, no one will tell you that just because we tap into six million barrels of oil in a week, that that you know is a game changer in the world.
11:09
SPEAKER_01: It's not.
11:10
SPEAKER_01: But it does relieve some supply pressure.
11:13
SPEAKER_01: And it's also this sort of perception of in markets and in markets perceptions a lot that the United States is doing what it can coordinated with other you know countries to mitigate what's happening there in the Strait of Hormuz and maybe the Saudi Arabian pipeline that we saw got it get attacked over the weekend.
11:31
SPEAKER_01: But you can only do that for so long.
11:33
SPEAKER_01: There's only so much inventory, and we're getting now to these critical thresholds.
11:38
SPEAKER_01: In fact, we've been averaging about four to five million barrels of oil being drawn out of the reserves per week now for a while.
11:45
SPEAKER_01: Last week was 1.2 million.
11:47
SPEAKER_01: So really cut down.
11:49
SPEAKER_01: Now, what's the reason for that?
11:50
SPEAKER_01: Are we getting to the point where it's harder to get it out, harder to pump it out?
11:54
SPEAKER_01: Are we getting to the point where we're concerned about the structural integrity?
11:57
SPEAKER_01: Maybe, maybe not.
11:58
SPEAKER_01: Maybe this is just contract timing.
12:00
SPEAKER_01: We'll find out this week when we get the most updated report.
12:03
SPEAKER_02: Yeah.
12:03
SPEAKER_01: For mortgages, it's not like the price of oil drives mortgage rates, but you hit the nail on the head when you said oil, the price of oil is incredibly inflationary.
12:12
SPEAKER_01: It's oil's in everything, it's in the asphalt, it's in our clothes, it's in our shoes, it's not just what goes in our cars and our airplanes.
12:19
SPEAKER_00: Just ask the landman.
12:20
SPEAKER_00: That's right.
12:21
SPEAKER_00: And he'll tell you.
12:22
SPEAKER_01: That's right.
12:23
SPEAKER_01: And so as inflation goes up, we know that's bad for bonds, that's bad for mortgage rates.
12:27
SPEAKER_01: It's yet another headwind for us.
12:29
SPEAKER_00: Yeah.
12:30
SPEAKER_00: So, I mean, you you've always got an opinion.
12:33
SPEAKER_00: So I I mean, obviously, you, you know, there's nothing we can do to stop the conflict, right?
12:38
SPEAKER_00: Right.
12:39
SPEAKER_00: But what are some things that we could do to maybe help the situation?
12:44
SPEAKER_00: Or is this just the new normal for a period of time?
12:47
SPEAKER_00: And I when I say new normal, like rates in the sevens, right?
12:50
SPEAKER_00: Are we just we camped here for a while?
12:52
SPEAKER_01: Uh I think I when I look out at the landscape and I look at the next six months, I ask myself, what's realistically going to change?
13:00
SPEAKER_01: Um, and I don't see a lot there.
13:03
SPEAKER_01: Matter of fact, I see some levers that we're not going to be able to pull anymore, like tapping into the strategic petroleum reserves.
13:09
SPEAKER_01: Um, I think the Fed raising the Fed funds rate is a good sign.
13:13
SPEAKER_01: I think the market will welcome that.
13:15
SPEAKER_01: I wouldn't be opposed to seeing a half-point Fed funds rate hike.
13:19
SPEAKER_01: I think the market might respond possibly to that as well.
13:21
SPEAKER_01: We'll have to wait and see.
13:23
SPEAKER_01: There are some who would argue that, you know, that the Fed is creating its own inflation by keeping borrowing costs high.
13:32
SPEAKER_01: I think until you get like one of your mandates is price stability.
13:36
SPEAKER_01: Until you get price stability, you haven't gotten it.
13:39
SPEAKER_01: I'm a big believer that until something happens, it hasn't happened.
13:43
SPEAKER_01: And what next month will be 66 consecutive months.
13:46
SPEAKER_01: That's a really long time to not do your job.
13:48
SPEAKER_01: Yeah.
13:48
SPEAKER_01: How many of us out there could not do our job if we had two jobs and you didn't do one of them for 66 consecutive months, would that be considered successful?
13:56
SPEAKER_01: Yeah.
13:57
SPEAKER_01: Uh but back to your question of where's the relief or are we going to be in the sevens?
14:02
SPEAKER_01: Unfortunately, I think this is our new normal, at least, you know, for the next, you know, foreseeable future.
14:09
SPEAKER_01: Okay.
14:10
SPEAKER_01: Now, if Iran cries uncle and it's over there, or if we simply decide there are only two paths forward boots on the ground that the American people are not going to tolerate, or we're just going to have to take the off-ramp and call this Vietnam part two, then maybe that changes things too.
14:28
SPEAKER_01: Um, but I tend to look at these things not politically.
14:30
SPEAKER_01: I look at them through the lens of housing.
14:32
SPEAKER_01: If there's a party that I belong to, it's the housing party.
14:35
SPEAKER_00: Yes, yeah, me, I'm with you.
14:36
SPEAKER_00: Yeah.
14:36
SPEAKER_00: When I look at interest rates in the sevens, and we feel like we're going to be here for a period of time.
14:42
SPEAKER_00: Listen, we've been through difficult seasons in our industry before in real estate and in and in mortgage.
14:49
SPEAKER_00: But the last time we went through this, which I'm going to equate to like 08, 9, and 10, we had really good rates.
14:56
SPEAKER_00: Right.
14:57
SPEAKER_00: What what should we expect different out of that season?
15:00
SPEAKER_00: I feel like this one's lasted longer, first of all.
15:02
SPEAKER_00: Right.
15:03
SPEAKER_00: And it looks like it'll continue to.
15:05
SPEAKER_00: Um, but two totally different markets, but both equally as tough.
15:08
SPEAKER_01: Well, I think the difference now, and you hit the nail on the head, we're not in a recession.
15:14
SPEAKER_02: Yeah.
15:14
SPEAKER_01: Um, the the United States economy is not really in a perilous place.
15:19
SPEAKER_01: When you look at jobless claims, pretty low.
15:22
SPEAKER_01: Look at unemployment, we're 4.1% unemployment.
15:25
SPEAKER_01: Now, yeah, we could our labor force participation rate could be better, um, you know, but but GDP's still growing.
15:31
SPEAKER_01: Obviously, the stock market's not the economy, but the stock market is certainly doing fine.
15:36
SPEAKER_01: I think that there's this element of things that can be changed that could improve the prospects for housing, but they're gonna require us to make some changes.
15:48
SPEAKER_01: And and I'll we'll point to let's go back to that existing home sales report.
15:51
SPEAKER_01: Okay.
15:52
SPEAKER_01: When you look at the low end, right, uh, the the first-time home buyer region of zero to 350 or 400,000, these people are getting crushed.
16:01
SPEAKER_01: Yes.
16:02
SPEAKER_01: And I post this on LinkedIn every month when it comes out because I I and I tag the FHFA and I tag FHA in it.
16:10
SPEAKER_01: And I say, tell me your affordable home programs aren't working without telling me your affordable home programs aren't working.
16:17
SPEAKER_01: Yes.
16:17
SPEAKER_01: They're not working.
16:19
SPEAKER_01: They don't hit the nail on the head and they need to be remedied because there are things that we can do to help that segment of home buyers that we're just not doing.
16:29
SPEAKER_01: And I don't know if it's a lack of knowledge or if it's a lack of will.
16:33
SPEAKER_01: Either way, it's unacceptable.
16:35
SPEAKER_01: Yeah.
16:35
SPEAKER_01: Either way.
16:36
SPEAKER_00: Yeah.
16:36
SPEAKER_00: Yeah.
16:36
SPEAKER_00: I think that goes back to we've had this conversation on previous episodes where we've talked about the difference between the haves and the have nots, right?
16:44
SPEAKER_00: And that there's this degrading of the middle class in our country.
16:47
SPEAKER_00: You know, one of the things I always look at from like a recessionary standpoint or an inflation standpoint, and this is this is Brian level economics, which holds no bearing.
16:56
SPEAKER_00: So here's what it is.
16:58
SPEAKER_00: When I want to go to dinner on any given night, how long do I have to wait for a table?
17:04
SPEAKER_00: If I'm showing up to a restaurant and there's a wait for a table, most of us are probably doing pretty good.
17:12
SPEAKER_00: But when I start to show up at restaurants and I can walk out, right, especially on like a Friday night or Saturday night and get a table, I start to use that as a measure of how is the economy doing.
17:23
SPEAKER_01: Yeah.
17:24
SPEAKER_00: And I'm starting to be able to walk into restaurants on a Friday and Saturday night and eat wherever I want without a weight.
17:30
SPEAKER_01: This is the real danger.
17:32
SPEAKER_01: What you're getting to is I think something that doesn't get talked about enough.
17:36
SPEAKER_01: This is the real danger of allowing to inflation to of allowing inflation to persist as long as we have.
17:41
SPEAKER_01: The most recent report on uh PCE is like 3.4%, right?
17:46
SPEAKER_01: 3.4% year over year.
17:48
SPEAKER_01: Wage growth, hourly earnings, wage growth, 3.1%.
17:52
SPEAKER_01: If you adjust nominal wage growth for inflation, we're going backwards.
17:56
SPEAKER_01: We're losing purchasing power.
17:58
SPEAKER_01: Yeah.
17:58
SPEAKER_01: And inflation does that.
17:59
SPEAKER_01: Inflation erodes a consumer or a citizen's ability to feel like they're getting anywhere.
18:05
SPEAKER_01: Like they're getting ahead.
18:06
SPEAKER_01: And this sense of hopelessness starts to set in.
18:08
SPEAKER_01: Yeah, right.
18:09
SPEAKER_01: Of why try?
18:10
SPEAKER_01: The why try.
18:11
SPEAKER_01: You want to know one of the reasons why I think the labor force participation rate is the same level it was in 1976?
18:15
SPEAKER_01: Is because I think there's this degree of hopelessness out there about it.
18:19
SPEAKER_01: It's not the only reason, but I think it is a reason.
18:22
SPEAKER_01: This is why the Fed has to get this is what we do have to do.
18:24
SPEAKER_00: That's the feeling of I'm making more money, I'm getting raises, but I'm still struggling or still can't afford to still can't get over the next hump or whatever it is.
18:34
SPEAKER_01: I can't afford that home.
18:34
SPEAKER_01: I can't afford that new car.
18:36
SPEAKER_01: The price of goods has to get stabilized, and that is the Fed's domain.
18:40
SPEAKER_01: Uh, and certainly, you know, the Fed has a dual mandate: price stability and maximum employment.
18:45
SPEAKER_01: 4.1% unemployment, you're at maximum employment.
18:49
SPEAKER_01: The Fed needs to do what it needs to do to get price stability there.
18:53
SPEAKER_01: And not just if we trim out energy and not just if we trim out food, and not like if I exclude this or exclude that, I think it's get there for one month, then two months, then three months.
19:05
SPEAKER_01: Let consumers feel like they're getting ahead.
19:08
SPEAKER_01: And and not just lip service, let them get ahead, right?
19:11
SPEAKER_01: Let them catch up.
19:12
SPEAKER_00: Yeah.
19:12
SPEAKER_00: All right.
19:12
SPEAKER_00: So let me shift gears a little bit.
19:14
SPEAKER_00: And we've kind of talked about what's happening, how it's happening, why it's happening.
19:19
SPEAKER_00: Let's talk a little bit about what do we do now.
19:22
SPEAKER_00: And I mean from the standpoint of, you know, you you we're in we're lenders, right?
19:26
SPEAKER_00: And um, so not from a comp from a what should lenders as companies be doing?
19:33
SPEAKER_00: What should loan officers be doing to put themselves in a position to have the success that they continue to want to have, knowing that the headwinds are as strong as they are.
19:42
SPEAKER_01: Right.
19:43
SPEAKER_01: Well, it's going to be fiercely competitive.
19:45
SPEAKER_01: We know there's going to be a lot of margin compression.
19:47
SPEAKER_01: You're going to have to have policies in place that allow you some flexibility on that.
19:53
SPEAKER_01: Um, I'll let you let lenders interpret that on their own.
19:56
SPEAKER_01: I don't think um lenders are any different than individuals.
20:00
SPEAKER_01: And what I've always subscribed to as a hundred percent commissioned salesperson is 12 months of living expenses, all living expenses sitting in a savings account somewhere.
20:09
SPEAKER_01: Just so you can put your head on the pillow at night and be comfortable.
20:12
SPEAKER_01: Okay.
20:13
SPEAKER_01: If if you haven't gotten there, you got to make it a point to get there because it protects you in times like these when you might have a stinker or two coming along the tracks for you.
20:22
SPEAKER_01: We're about to, I mean, next month is Q4.
20:24
SPEAKER_01: We're going to be in Q4.
20:26
SPEAKER_01: We know what happens in housing in Q4.
20:27
SPEAKER_00: Slows down and it gets even worse in Q1.
20:29
SPEAKER_00: That's right.
20:30
SPEAKER_00: So one of the one of the things that I would say to I think LO's and knowing the headwinds that we're facing and what a couple of months are ahead of us is, you know, you probably ought to look at your personal spending as well.
20:40
SPEAKER_01: Sure.
20:40
SPEAKER_00: Right.
20:40
SPEAKER_00: As being a hundred percent commissioned salespeople like we are, we're going to make less.
20:46
SPEAKER_00: You know, hopefully you've built in enough margin in your budget that you're not living paycheck to paycheck as it is.
20:52
SPEAKER_00: But you need to be mindful of what your spending is going to look like over the next five or six months to get through this season.
20:59
SPEAKER_01: Man, I say this from an individual perspective for me and my household and the people that I love and that are my family.
21:06
SPEAKER_01: I say this from a company perspective, and I say this from an industry and even a United States perspective.
21:14
SPEAKER_01: It is always, always uh a good time to be fiscally disciplined.
21:19
SPEAKER_01: There's never a time where you go, you know what, we shouldn't be fiscally disciplined.
21:24
SPEAKER_01: Because being fiscally disciplined in the good times helps you survive the downtimes.
21:29
SPEAKER_01: Yeah.
21:30
SPEAKER_01: And we are in a downtime, and I fear we are going to stay in one more than likely for the balance of 2026.
21:35
SPEAKER_01: And so having that cushion, having that ability to go, man, if I only do two loans next month or three loans next month, it's okay.
21:44
SPEAKER_01: You know, I knew this was coming.
21:45
SPEAKER_01: I planned for it.
21:46
SPEAKER_01: We set this money aside.
21:48
SPEAKER_01: Yeah.
21:48
SPEAKER_01: And I might have to tap into it.
21:50
SPEAKER_01: Or maybe you don't.
21:51
SPEAKER_01: Maybe you you're able to just make it work, but at least you know you've got it if you need it.
21:56
SPEAKER_00: No.
21:56
SPEAKER_00: I think that's I mean, that's strong advice.
21:58
SPEAKER_00: And I one of the things I want to be careful of is like, Not, I don't want to instill fear out there in the marketplace because I certainly don't think it's that dire.
22:05
SPEAKER_00: Yeah, but I think there's to your point, there's a time to be responsible.
22:09
SPEAKER_00: It's really all of the time, maybe just being a little bit more re fiscally responsible, you know, right now.
22:15
SPEAKER_00: Um, let me ask you this from like a marketing perspective, yeah.
22:19
SPEAKER_00: Right.
22:19
SPEAKER_00: So I I just brought up, hey, like LOs, maybe you should take a look at watching your shekels for a little bit of time.
22:25
SPEAKER_00: Should I also make the same distinction in my marketing dollars or my marketing spin?
22:31
SPEAKER_00: Do you think it's it's better right now to maybe hold back a little bit or to throttle a little bit?
22:37
SPEAKER_01: Well, a lot depends.
22:38
SPEAKER_01: If you have saved and you do have the nest egg set aside, man, this might be a time for market share for you.
22:43
SPEAKER_01: Right.
22:43
SPEAKER_01: I mean, uh, this is the back to the Warren Buffett thing.
22:46
SPEAKER_01: You're buying when everyone else is selling.
22:47
SPEAKER_01: Sure.
22:47
SPEAKER_01: And that's a that's a nice opportunity for you.
22:50
SPEAKER_01: If you didn't put yourself in that position, then yeah, you can't be speculative with your marketing dollars.
22:54
SPEAKER_01: You're gonna have to go tried and true.
22:56
SPEAKER_01: Uh, in other words, if you're dealing with one of your best referral partners and they want you to spot, yeah, you got to do that thing.
23:01
SPEAKER_01: Yeah.
23:02
SPEAKER_01: If it's I'm gonna take a flyer on a brand new piece of you know, marketing technology that I've never tried before, well, then maybe that one will have to be the one that you set aside.
23:10
SPEAKER_01: Yeah.
23:11
SPEAKER_01: But like anything, if you prepared for it, now might be a time for you to actually make hay.
23:18
SPEAKER_00: Yeah.
23:18
SPEAKER_00: Yeah.
23:18
SPEAKER_00: Yeah, I think so too.
23:19
SPEAKER_00: I I think there's a good opportunity here to pick up market share.
23:23
SPEAKER_00: When you look at it over the history of our business, if I looked at the last 20, 25 years, on a down market is typically when either loan originators or companies have grown the most.
23:36
SPEAKER_00: Right.
23:36
SPEAKER_00: So meaning like they've had their largest increase in sales during some of those most some of those most challenging times.
23:43
SPEAKER_00: I think it's just looking at the business a little bit different.
23:46
SPEAKER_00: There are some that are going to hold completely back, and there are some that, hey, let's make sure we're using our um our resources the right way.
23:54
SPEAKER_00: And it's not just finances, I think it's your your time as well, right?
23:58
SPEAKER_01: There's a there's a thing here, I didn't mean to step on you, but there's a there's a thing here to think about as a business owner, particularly in the IMB space, but really all mortgage lenders.
24:07
SPEAKER_01: Number one, no one moves when their pipeline is full.
24:10
SPEAKER_01: So we know a lot of pipelines are low.
24:13
SPEAKER_01: There's probably going to be some opportunities to recruit if you're looking to grow.
24:16
SPEAKER_01: 100%.
24:16
SPEAKER_01: So you can get some good organic growth by going after the right producers because maybe they're a little more apt to being picked off right now or to being lured over right now, particularly heading into the slower months.
24:28
SPEAKER_01: But you better have your technology stack wired up tight and it better be something that stands out in the marketplace.
24:35
SPEAKER_01: You don't want some jankety pieces of software that don't communicate well with each other when you're sitting down at that recruiting meeting.
24:41
SPEAKER_01: It better be elegant, it better be mobile, optimized, but they better look at it and go, I haven't seen that anywhere else.
24:47
SPEAKER_00: Yeah.
24:47
SPEAKER_00: Yeah.
24:47
SPEAKER_00: Yeah.
24:48
SPEAKER_00: Cause I think in that space, you're looking, how do I make people's lives easier?
24:51
SPEAKER_00: Right.
24:52
SPEAKER_00: Um, when a lot of things around them feels harder.
24:56
SPEAKER_00: Right.
24:56
SPEAKER_00: I think there's a perception of that.
24:58
SPEAKER_00: It may not always be reality, but if you can show them, hey, listen, what what we have is going to make your life just a little bit simpler than what maybe you have right now.
25:08
SPEAKER_00: I think Mark, we talked about this too, kind of on the ride over here is um now is also the time to make sure that you're investing in the folks that you have because attrition could be really real in a market like this too.
25:20
SPEAKER_01: 100%.
25:20
SPEAKER_01: Yeah.
25:20
SPEAKER_01: There's that whole, you know, you're looking out there thinking there's opportunity, but you better be minding your own store.
25:25
SPEAKER_01: Yeah.
25:26
SPEAKER_00: Yeah.
25:26
SPEAKER_00: Yeah.
25:26
SPEAKER_00: It's the uh you know the old saying, like you got to put a hedge of protection around what you have while also being very intentional about, you know, growth during the season.
25:34
SPEAKER_00: And I think for a lot of companies and a lot of people, this could be very exciting, even though it feels like there's a lot of headwinds in in front of us.
25:42
SPEAKER_01: Yeah.
25:42
SPEAKER_01: It is uh so you know, the first house I ever bought, well, I uh I was at seven and seven eighths was my rate.
25:49
SPEAKER_01: And there was not one conversation about rate.
25:51
SPEAKER_01: There wasn't one conversation about shopping or any of that.
25:54
SPEAKER_01: And I know the price of homes has gone up over the years.
25:56
SPEAKER_01: Yeah.
25:56
SPEAKER_01: We all, all of us, loan originators too, me, I do.
26:00
SPEAKER_01: Uh certainly the my customers and my clients and my referral partners, everybody remembers the 14-year window of 2008 to 2022 and how good it was for how long it was.
26:11
SPEAKER_01: Interest rates are certainly higher than anybody would like, but they're they're not so high that it means that the market is gonna be dead.
26:19
SPEAKER_01: There's going to be people buying for sure.
26:22
SPEAKER_01: Um we have to look at it and go who's getting squeezed out and who's gonna be buying, and then position yourself accordingly.
26:27
SPEAKER_01: This is where the bridge loan program, the move up buyer, yeah, becomes a big focus for us.
26:32
SPEAKER_01: Unfortunately, that lower end buyer is gonna get squeezed out.
26:34
SPEAKER_01: So man, any other thoughts on uh you know what I would say to anyone looking at this market is now whenever you get slow in something and you know that's still your passion and you you still want to pursue it, now's the time to refine and improve.
26:54
SPEAKER_01: Right.
26:55
SPEAKER_01: How are you quoting your clients?
26:56
SPEAKER_01: Could you improve that process?
26:58
SPEAKER_01: How are you how's your follow-up?
26:59
SPEAKER_01: Could you improve that process?
27:00
SPEAKER_01: Because you have time now.
27:02
SPEAKER_01: You have time to really get objective.
27:03
SPEAKER_01: I think I sent you last week, I think it was Friday.
27:06
SPEAKER_01: Yeah, I sent you last week.
27:07
SPEAKER_01: Here's how I'm quoting my clients.
27:09
SPEAKER_01: Yes.
27:10
SPEAKER_01: Be my critic.
27:11
SPEAKER_01: Don't affirm me.
27:12
SPEAKER_01: Tell me where I could do it better, right?
27:15
SPEAKER_01: When and you got into the whole thing about the paying the points or not paying the points, spend a little bit more time there, talk them through that, right?
27:21
SPEAKER_01: Yeah.
27:21
SPEAKER_01: And I think that's a great exercise for anybody in sales.
27:25
SPEAKER_01: Go ahead and use this time to make your machinery of how you do things to make it even cleaner, even better.
27:31
SPEAKER_00: Yeah, I think for that I've always said, like, when you're winning at a high level, you're not growing a lot of times.
27:37
SPEAKER_00: Because like think think about that time in 2020, 2021 where like you could go to lunch and come back and have five loans, right?
27:44
SPEAKER_00: Like you weren't doing anything special.
27:46
SPEAKER_00: I wasn't doing anything special.
27:48
SPEAKER_00: We were just, man, we were just trying to take advantage of the market that we're in.
27:51
SPEAKER_00: Right.
27:52
SPEAKER_00: Because it was so easy, we weren't getting better at what we do.
27:56
SPEAKER_00: Yep.
27:56
SPEAKER_00: But to your point, when it gets a little bit more challenging, now I'm now I'm more likely to get a little bit more critical of my own business and figure out, hey, where can I get better?
28:08
SPEAKER_00: Yeah, where can I improve?
28:09
SPEAKER_00: When things are going swimmingly, we don't look at it like that.
28:12
SPEAKER_01: Right.
28:12
SPEAKER_01: We don't.
28:13
SPEAKER_01: I'm gonna I'll we're we're gonna sign off here in a minute, but I want to leave you with a little ray of sunshine.
28:17
SPEAKER_01: I don't normally do that.
28:18
SPEAKER_01: I love it.
28:18
SPEAKER_01: I'm not normally the ray of sunshine guy.
28:20
SPEAKER_01: Come on, come on, but I'm gonna hit you with it.
28:22
SPEAKER_01: Some of not some, almost all of the most wonderful things that have ever happened to me in my life happened as a result of something that I perceived at the time was absolutely terrible.
28:33
SPEAKER_01: Yes, 9-11.
28:34
SPEAKER_01: Which was absolutely terrible.
28:35
SPEAKER_01: And we just lived through the end of the year.
28:36
SPEAKER_00: Yeah, we just lived through it.
28:37
SPEAKER_01: But had not, had not, I'm probably still an airline pilot, had 9-11 not happened.
28:42
SPEAKER_01: 9-11 stripped away a lot of the reasons why I wanted to be an airline pilot.
28:47
SPEAKER_01: Yeah.
28:48
SPEAKER_01: And so it you know, catapulted me into this industry that I have loved and has been so good to me over this this time period.
28:55
SPEAKER_01: Even I'll go, I'll go personal.
28:57
SPEAKER_01: Uh, you know, was unable to have children with my my with my first wife, and we wound up having to go through this in vitro process that was so emotionally taxing.
29:07
SPEAKER_01: But out of that, I get my twins and who are you know, I love more than life itself.
29:12
SPEAKER_01: These things that we go through throughout the course of our lives and our careers, at the time that we perceive them, we perceive them one way, either positively or negatively, it almost is never quite as we perceive them.
29:22
SPEAKER_01: And this time won't be any different than that.
29:24
SPEAKER_00: Yeah, man, I can totally agree with that.
29:26
SPEAKER_00: I think for me, I got into this industry, something similar.
29:28
SPEAKER_00: Like I was in a different industry before, something not awesome happened, and I land here and I'm like, wow, this is the greatest business ever.
29:38
SPEAKER_00: I absolutely love it.
29:39
SPEAKER_00: Um, I've said I've said it on this podcast before.
29:41
SPEAKER_00: I we you and I don't even get an opportunity to meet if I didn't go through a challenging period, you know, a little over than three and a half years ago.
29:48
SPEAKER_02: Sure.
29:48
SPEAKER_00: So at the time, that felt absolutely like this is the worst thing ever.
29:53
SPEAKER_00: And on the flip side of that, three years later, um, man, I couldn't be happier.
29:58
SPEAKER_01: The hard stuff puts you in the crucible.
30:00
SPEAKER_01: Yes.
30:00
SPEAKER_01: And the crucible is uncomfortable.
30:02
SPEAKER_01: Crucible is where change happens, it's where metamorphosis happens.
30:06
SPEAKER_01: And it it is never a comforting time to be in the crucible.
30:09
SPEAKER_01: And you always exit out of it a different human being than you were when you went into it.
30:14
SPEAKER_01: Yeah.
30:14
SPEAKER_01: That's what the opportunity is in this time.
30:16
SPEAKER_00: And I remember looking through that period of time, um, you know, three and a half, about three and a half years ago is when I when I lost my job at another lender.
30:23
SPEAKER_00: And I looked at a lot of things in my life.
30:24
SPEAKER_00: Um, and it wasn't like, hey, what could I do better in the role that I served in that company because I would knew I would serve in a similar role in the next one.
30:32
SPEAKER_00: So it was a time for me to look back and be like, what did I do well?
30:36
SPEAKER_00: What didn't I do well?
30:37
SPEAKER_00: What are you going to do different this time?
30:39
SPEAKER_00: Right.
30:39
SPEAKER_00: Um, I looked at the way I spent money.
30:41
SPEAKER_01: Yeah.
30:42
SPEAKER_00: Um, you know, because I was also at a point where now income isn't coming in.
30:46
SPEAKER_00: Um, I looked at, you know, uh my health.
30:49
SPEAKER_00: Like, hey, dude, were you really taking care of yourself or were you just grinding it all out all of the time?
30:54
SPEAKER_00: Right.
30:54
SPEAKER_00: You know, I think those periods of time in your life are perfect for really stopping and saying, hey, what's what can I refine?
31:02
SPEAKER_00: What can I make just a little bit better to not just get me through the season, but on the flip side of it, man, I'm just gonna be ready to ready to go.
31:09
SPEAKER_01: And who knows, maybe we'll start like hair club for men, like the week.
31:12
SPEAKER_01: That would be, yeah.
31:13
SPEAKER_00: That, you know.
31:14
SPEAKER_00: Well, listen, thanks for tuning in into another episode of the Ground Game Podcast.
31:18
SPEAKER_00: Uh, listen, we would we'd love your comments.
31:21
SPEAKER_00: Um, if you've got an idea of a future episode that you may like us to talk about, put that in the comments too.
31:27
SPEAKER_00: And hey, if we use your idea, maybe we even have a little gift for you.