260 final audio
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[00:00:00] Welcome back to the What's Your 1 More. I'm your host, Quinton Harris. You dialed in for episode 260. It is great to be back in the studio after taking last week off. Uh, sometimes you take like one week off. It feels like an eternity, but nonetheless, glad to be back. So, hey, in this episode, no government, no employment data.
No problem. Hey, we're gonna take a different approach to today's podcast. Take a look back at the eighties and see what history shows us about today's housing insight, all that and more in this episode of What's your 1 more.
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Alright, so welcome back. Yeah. So let's talk a little bit about what we're seeing happening in the market right now from the eighties moving forward.
And the reason I wanna say is take a look back at the eighties, right? Because there's a different trend going on. At that time, we had higher rates, it's starting to sound familiar, a little elevated inflation. coming off of that, the reaction of the markets and the Federal Reserve. But I wanna take a.
Big look at America's homeowners and how I think they're more locked in now than they've been since the 1980s. Now, I'm not stumbling upon any revolutionary thought process here. We know that, right? We've talked about the lock-in effect.
and if you go back to some of those episodes, it wasn't just one. It wasn't just two. It was five episodes. [00:01:00] I've been talking about the lock-in effect, and it had the whole pinwheel on there. And how many mortgages were locked in it? 3%, 4, 5, 6.
You get the picture. We've started putting 7% on there because there's some trade-offs that happened. We started looking at trends where people were. Basically refinancing their 3% mortgages and putting 'em at six point half, 7%. We see there's demand in the market right now as far as pent up buyer demand.
We've shown significant data sets that suggest that, but the market is in this stagnant moment right now where it's almost like who's gonna blink first, the seller or the buyer? Meaning is the price a little elevated? Is the seller gonna come down? Is the buyer going to pay that price? Are rates going to come down to allow 'em to afford that?
are we gonna get more closing costs? Contributions from sellers? Like, what is it? Someone's gonna blink, something's gonna happen. One of those factors are, but where we are right now is that in this lock in effect moment that we're in. There are people that are just, are stuck in their homes. You know, one reasons Americans are moving less obviously is due to the rise in mortgage interest rates.
And you know, and as we've seen these rates [00:02:00] kind of go up, the trend's gotten worse. But after a decade of non-zero rates, though today's level still feel like there's like a shock in the system, they're lower than traditionally Worth selling now would mean trading your low monthly payment for something far pricier.
And so the result. As a market freeze, and that's what we have right now. I, it really is looking to who's gonna blink first. The market freeze is buyers wait for rates to cool down. Um. And sellers remain anchored in their old mortgages and a little stubborn, if you may, let's call it what it is.
They're stubborn in that old mortgage rate. You know, it's very comfortable in these twos, threes, fours, and even fives. You get comfortable in that payment. And as we know, the job market is not drastically improving. Some could say it's deteriorating. I wouldn't say it's a landslide yet, but it's not improving.
It's not getting better. Now we have no new data to suggest that, but there's a lot of trends that are suggesting that. Right. So we're kind of hypothetically speaking. But with the job market where it is, people are very comfortable in their payments and they don't wanna change. So that's creating this freeze that's going on there.
And then last year, the existing home sales, they hit some of their slowest paces that [00:03:00] they've seen in nearly, you know. Three decades, right? don't get me wrong, the market's still moving, but it suggests the trend that I'm talking about. And so we've got a graph on our, YouTube channel. And if you're not a YouTube subscriber, please go in and check us out at What's your 1 more with the number 1 subscribe, smash up the like button.
We'd love to have you guys on our channel. More importantly, love the feedback you guys give us. Love the questions. The q and a, you guys do a great job about throwing stuff at us and we greatly appreciate it. But if you're listening to this on Apple or you're listening to it on Spotify, transition over to this graph.
My producer's gonna put in the screen here, but. It is significant when you look at this lock-in pressure. So in the graph the red represents like these higher lock-in pressures that are taking place, and then the blue shows where people have basically refinanced or upgraded their home, but they took advantage of the low lock-in pressure.
Right. And I think homeowners are likely to move and, refinanced those lower rates, which is what you're seeing right here. Whereas they get stubborn, these higher ones, then they kind of get a little worried and they hold on and it's not, for me,it's not ironic that the job market. Is a delayed reaction of stubborn rates and a delayed reaction of higher, rates, which are tightening a fiscal policy.
And you kind of see this [00:04:00] pattern happen here. So if you look back at the eighties, specifically 78 to 83, this massive lock in pressure, far greater than what we're dealing with right now, longer term, also a significant more amount of people and the rates were higher, right? Rates are, in this case, we're up in the, you know, the high eights, right?
But if you take a look over here where we are hanging out and the things that were going on in some cases are 18% mortgages back in the 72. But it shows the population and it shows the stubbornness taken in plaque tear. It's a great graph. and for me, the source from Freddie Mac on here suggests that history might be repeating itself, and I don't think that comes as any type of epiphany, right.
But what I do wanna point out is look what happened after 83. Look at that land. Look at that. That huge, you could call it a two to one ratio of people refinancing or buying another property, getting outta their mortgage and getting into a new mortgage on a new property. Look at this from 83 all the way to really, I mean, you could argue 1998, 2000 ish, I mean, my goodness, that's before the.com bubble.
You literally [00:05:00] almost had a 15 years, 17 year run, a very good transaction is taking place and it's not even close. So then I asked myself, could that be what's in the forecast? Could we be on the horizon of that? I think we are. We've been talking about that for some time now, and I think when I saw this graph, I was like, whoa, this is exactly what we've been forecasting and predicting and it's already happened, and it looks like it's about to happen again.
Can I say the next 60 days? I don't know. 90. I don't know. A lot of this is dependent on the Federal Reserve policy. A lot of it's dependent on job data that we're not getting right. We need to see where that is, but I will say this, regardless of any of that. You are going to see this happen because in 83, 84, 85, 86, all the way through 98, the job market, it was up and down, right?
It was. It wasn't consistently awesome during that time. But where I'm going with that is inflation also was consistently consistent during that time. You didn't have crazy runs of that during there. 'cause you're coming off those high ends of it where you're trying to impact it with federal reserve tightening policy.
But the result was a [00:06:00] tremendous amount of home ownership taking place. A tremendous amount of refinancing. You're refinancing your debt down and then buying and upgrading homes and properties. We've been saying this is going to happen when that cycle hits. here's a 15, 17 year proof that it's going to happen.
I think this is very interesting and I think this is things to come. I also think that we've got buyers sitting on the sidelines that are going, ah, I'm just waiting for lower rates. I'm waiting for, you know, these prices to come down. Now we've done way too many episodes on the ideology of why those prices aren't gonna come down.
At least crashes as people say. But what you're seeing is an opportunity of this pent up buyer thought process that's gonna happen. Population now is far greater than it was during that time. And the actual homeowners themselves, if you look at the housing, you know, population as a whole is significantly higher and we don't have the inventory to.
Basically supply that, right? There's not enough inventory there to fuel that appetite. What does that look like when these buyers get to the start line and say, I'm ready to go now? What does that look like with home prices? Do you think they stay where [00:07:00] they are, or do you think they're gonna go up, let's just say they go up 2%.
They're still 2% higher than what they would be today. So if I'm a buyer, I'm gonna think about today's market and I'm gonna think about how I can get ahead of the curve. That's something we talk about in real estate all the time, being ahead of the curve, not pricing to the curve, meaning that if you could be ahead of the market rush, you're not paying.
The curve prices as they go up. And that's something to consider on here. And again, this graph does a wonderful job of illustrating that and putting it right in layman's terms for you.
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Alright, the second thing I wanna talk about on this podcast, let's talk about something that I thought was really interesting here.
What about the s and p 500 right now? Now, I don't claim to be any type of financial advisor or guru of this, but I know. Math. Right. And I do understand the principles of the stock market as well as s and p 500. And when you look at the percentage of increase over the last 10 years of the s and p 500, it's astonishing, right?
we're seeing gains and roars in the market that, you know, we've never seen before. And I'm gonna put another graph in our YouTube channel again, at what's your 1 more with the number 1, but man. this one jumps off the page. So if we go back to this 10 year [00:09:00] run for the s and p 500, literally going back to 10 years ago, it's almost a 250% increase in the s and p 500.
that is, it is incredible. We take a look at this okay, so here's the thing. When you look at the sales per share, they're up 79%. When you look at the dividends per share, they're up 85%. If you look at the earnings per share, they're up 156%, but the actual index is up 250%.
That it's far exceeding all of those fundamental reasons for it to increase. I'm not saying there's a bubble there. I'm not saying that it's going to crash. I'm just saying that when you look at that, when I hear people. Worry about real estate and I use these two things in correlation together because you have the equities market and the housing market, right.
You could throw the crypto market in there as well, right? As far as the markets themselves, and we could do a whole nother one on crypto and what's going on over there. if you're into that, man, kudos to you. You're seeing a great run right now. But a lot of these two runs go hand in hand. I think the equity market and the crypto market, as far as the bullish run that's taking place right now, it isn't always like that, [00:10:00] but right now it seems to be trending the same way.
And so. There's been a lot of government favor regulation in crypto, so you're seeing the windfalls of that. You're seeing a lot of AI jump into the equities market, and on the NASDAQ side, you're seeing the winds there. But let's take a look at this. I say the following things when people talk to me about the concern of real estate.
Going up and that it needs to come down. It's mind-boggling to me. We're not entering the same thing with these contexts of the equity market. I mean, to me, I think there's a bigger concern of the equity market rising with no fundamentals to support it at the rate in which it's rising, more so than I am housing.
At least with housing, you know, you're seeing moderate gains. These are significant, unprecedented gains we're seeing in this market. So I say this. If you're in your 401k, you're probably excited as can be, and you're like, this is great. I'm winning. Why don't you wanna be winning in real estate? Why don't you wanna be winning in the housing market?
Get into that. Get involved because you're going to see run-ups happen. As we come off the backside of this [00:11:00] lock-in moment that we've been in. The history showed has happened again in the eighties for almost a 17 year run. We're gonna see another run here coming out of this. And get ahead of the curve.
You know, beat the market, beat the curve, get ahead of it. It's a win that you can take advantage of right now that quite frankly, most people tend not to look at and, just wait until the curve's here and they're buying at higher price points, comp, you know, complaining about that. So take a look at that again, go to our YouTube channel, check out this stuff that Charlie's putting on there.
Alright, final thing I wanna talk about. Speaking of mortgages, right? My wheelhouse right here. Recently there was a lawsuit filed in the state of Tennessee claiming that companies are data sharing through a platform called Optimal Blue. Now, for our lenders that listen, you know exactly what that is, but for our subscribers that, listen, they're not familiar with the lending world, whether you're a real estate agent, this may be a new term to you or just a consumer guy, but Optimal Blue is a pricing engine.
It's an engine that most every lender uses. Now there's competitors, right? There's other people that use pricing engines that are not optimal blue. But anyway, you look at it, lenders use a pricing engine because [00:12:00] there's so many data sets and factors that go into pricing out an interest rate for a borrower.
You kind of need some sort of collective system that filters all of the rate sheets in all the loan level price adjustments, credit score adjustments. You get the picture. There's a lot of adjustments that take place. So the largest one, the nation's largest one, is owned by Ice Black Knight, if you may.
and we're all familiar with who Black Knight is. but Optimal Blue is one of the largest. And so there was recently a lawsuit filed on October 3rd in a US district court in the middle district of Tennessee against Optimal Blue and 26th of the largest. US mortgage lenders in the country. Now, again, there's more than 26 lenders that use this platform, but the lawsuit claims that because there's data sharing going on in this platform, meaning that lenders can subscribe to a piece of optimal blue that shares.
Interest rate information and what it shares is market pricing of your competitors. Now, it doesn't tell you that competitor A is pricing at this, and competitor B is pricing at [00:13:00] that C, you get the point. That's not what it's doing. It doesn't tell you all 26 of these guys, or who each 26 person are pricing at.
So what it tells you is. Where they're pricing, right? So you may get an anonymous report with 26 people on there, and it's a lot more, by the way, but you may get it with 26 and you can get it down to your area. You can get it down, in this case, into Tennessee. You can get it in Jacksonville where I'm broadcasting from, or you can get it nationwide.
But these reports are to keep lenders in line with one another so that you're not way out of the market in pricing versus another lender now. Anybody could go online and look this up. Like I could go to Rocket, look up their rates right now, go to Navy Fed, look up their rates, list goes on. You get the point, like I could go Wells Fargo, I could go to a lot of these lenders and look 'em up.
But what this claims is that the data sharing since 2019 was enabling these 26 lenders to orchestrate a price fixing scheme. So think about what I'm saying here. This lawsuit is suggesting. That people that purchased homes and refinanced homes from [00:14:00] 2019 moving forward. Claim that their costs were impacted by this alleged conspiracy of data sharing, and that the plaintiffs are seeking undisclosed damages and punitive injunctive relief to dismantle the alleged price fixing scheme.
Due to the nature of residential mortgage markets, there are likely millions of people impacted this lawsuit. States now. I don't disagree. There's millions of people that refinanced and purchased during that time impacted. Eh, I think this might be a little bit of a reach here. I'm not saying there's no merit involved in this, right.
I think that if someone could get into the weeds of this and suggest that of these 26 lenders, lemme just kinda read you who they are. they're big time lenders here. Wells Fargo, United Wholesalers. Talk about them a little bit. Rocket. JP Morgan Chase, loan Depot, bank of America. I mean, the list goes on and on.
US Bank, we're picking the rule of deep of pockets here. That's what we're doing. We're going off the rule of deep, deepest pockets. You got cross country mortgage, penny Mag, you know, movement Mortgage, CMG, you know, like I said, Citibank List goes on Flagstar Bank. It goes on and on on. But basically, essentially saying that their price fixing, meaning [00:15:00] this lawsuit's claiming that they were able to maximize the amount of profit they made on each loan.
By sharing interest rate data of what they're doing amongst their competitors, right, amongst the other people. So by gauging the fact that if I knew lender A, B, and C were charging the borrower X amount of dollars or putting in a margin of X amount of dollars, I too could do that. And then my service would win the battle, not necessarily my rates, and I could maximize profit.
To me, that's just business. I don't understand how you, I don't understand how that's a, a significant punitive injunction relief damages list goes on and on. You know, this is, this seems a little a little ambulance chasing. I hate to say it like that, but I mean, essentially saying that the spreads on the mortgage were nine points, six basis points higher.
Than the baseline. Lemme put that in perspective for you. This is how frivolous this kind of sounds to me, is that 10 basis points is 0.1 of a percent, and that's not to the interest rate, that's to the profitability on the back of the loan. So if you're doing a, let's say, [00:16:00] heck, I'm trying to give an example here.
Let's say you're doing a hundred thousand dollars loan. We're literally talking about a hundred bucks here. We're not talking about thousands of dollars. Now, you could multiply that tons of millions of people, but the reality is lenders give more in credits than that 9.68. That lenders reduce their margins by more than that every single day just to make a deal work.
This seems like a very, frivolous and very,ambulance chasing scheme here. I don't see how this impacts anything on here, and I think once it gets to the court of law, they'll figure it out, but it does bring to light this, here's what comes from this. Is data sharing a bad idea when it comes to the fact of increasing profitability?
If it's at the risk of consumer harm, that I do believe, I believe that in a world where margins could go, you know, back up to 125 is finding a way to get those to 150, which is basically one, one and a half. Well, yeah, that's far different than 0.1, right? But in a world right now where margins are compressed and lenders during a lot of that time, were laying people off and trying to find a way to maintain keeping [00:17:00] people employed, and in some cases still doing that today.
I don't think that's a bad idea. I actually think that's pretty smart. And at the end of the day, what this lawsuit shows is I think the consumer actually wins. The consumer's actually winning.There's nothing harmful about it.
It's pretty insignificant the amount of money there at a hundred dollars in that example versus these millions of dollars that they're frivolously throwing out here. So, just thought I'd share that. This is sometimes where lenders get a black eye. This is sometimes where this stuff can kind of get blown outta proportion.
'cause at the end of the day, this stuff happens all the time. There's nothing regulatory wrong about doing it. There was no, no personal information shared. It was really business. Insight shared amongst lenders anonymously. I can't stress that enough. Anonymously. That's very important. And I don't even know, they just chose 26 lenders, right?
I just think they picked lenders outta the air that did the most mortgages during that time and threw 'em in here. I don't think there's any rhyme or reason as to why they're doing that 'cause. OB service, excuse me, optimal Blue Services, over 3,500 lenders. So I thought that's pretty interesting to only choose 26.
Again, rule of deepest pockets. So that being said, guys, it's great being back in the studio. Look forward to the next episode of What's Your, one More. If you aren't subscribed to our YouTube channel, please check it out. what's your, one [00:18:00] more with the number 1. And also if you're listener and you don't like visual stuff, go to Apple, go to Spotify.
We're on both platforms. We'd love to have you as an avid listener to our show. Till next time, we'll see you at What's your 1 more.
I got one more shot. I'm gonna make it one more chance. I'm.
