The Accunet Mortgage and Realty Show

The Accunet Mortgage and Realty Show 5-2-2021

May 04, 2021 Accunet Mortgage
The Accunet Mortgage and Realty Show
The Accunet Mortgage and Realty Show 5-2-2021
Show Notes Transcript

This Week’s Highlights:

  • Home buying mortgage rates see a slight decline
  • Refinancing rates saw the opposite fate
  • What’s up with luxury condo new builds?
Speaker 1:

The Accunet mortgage and Realty show is sponsored by Accunet mortgage, an equal housing lender and MLS 82 five five three six eight, and Accunet Realty advisors, which is a separate company from, but still affiliated with Accunet mortgage.

Speaker 2:

Welcome to the Accunet mortgage and Realty show getting you inside information on buying, selling, and financing your home with expert advice from Accunet mortgage and Realty. And now here's Brian and David Wickert. Good morning. I'm Brian Wickert from majority owner of Accunet mortgage and

Speaker 1:

Accunet Realty advisors, along with my son, David who's our chief client experience officer over at Accunet mortgage. If you've got a question or a comment you can call or text us on the Accunet, mortgage talk and Textline, which is(855) 616-1620. Don't forget. You can grab the podcast of today's show or any of our other previous shows wherever you normally get your podcasts. All right, well, David, I got up early this morning and thought I'd take a flash, look a quick look at April home shales, endless things. And I figure, you know, what the listings have gotta be up to date. I think there'll still be some more sales. That'll be dribbling in, you know, over the next few days from a data input standpoint. But I mean, either you're listed or you're not right, not late getting that data. Right. And this is, uh, for, uh, courtesy of the greater Milwaukee association of realtors MLS system and for the five County Metro area, uh, looking at both condos and single family detached. If I was a rookie uninformed journalist or editorial headline writer, I could rate the following headline single-family and condo listing skyrocket 27% in April with 2,365 new listings hitting the market 504 more than the same period last year. And what could you arrest me for David?

Speaker 3:

Well, that you're comparing it to the, the getting into the teeth of the lockdown last year, April of 2020, everyone was hunkered down. And so when you shared those numbers with me to start, I was like, that's awesome. And then I was like, Oh, wait, last year was April of 2020. So you said you wanted to do some analysis compared to 2019, maybe as a better way, not year over year, but maybe reality over reality.

Speaker 1:

That is correct. So if we can pair, if we compare 21, I'm sorry, Isaac. You say something. All right. Anyway, uh, so, uh, compared to April of 2019, uh, last months listings were down almost 16%. There were 438 fewer listings coming on the market. Again, this is in the five County Milwaukee Metro area in April. We had 28 Oh three, uh, this April only 2,305. So down 438 listings, if you want to look at sales though, closed sales, uh, facilitated by a member of the national association of realtors, which is how you get into the MLS year to date in 2021, the number of single family condo sales is down just 1.6% compared to 2020, uh, at 5,658. And it's actually up 1.7% compared to the more normal 2019, uh, median sales price so far this year. Uh, this is again blending condos and single family. Detached homes together is 245,000. That's up 6.5% compared to, um, 2020 and out$15,000 in dollars. It's up 35 grand or 16.7% compared to 2017. That means folks that if you bought or not, even if you bought, you got more equity in your home now, and we talked about that on last week show David, what can you do with that more equity you've got in your home? What,

Speaker 3:

Well, it's either likely, uh, a lot of, uh, first time home buyers, uh don't or can't get to that 20% down. So may you were sticking with what I think is an awesome thing, private mortgage insurance, but Hey, if now, you know, you put 10% down, you've paid down a little bit on your mortgage and your house has gone up in value a little bit, not only we might be able to do. I think you described it last week, that one, two punch, maybe lower your interest rate a little bit from a previous year or two or three years ago, but also possibly remove or reduce as you noted, reduce or remove that PMI, thanks to your home value. Continuing to rock is that's the win win when we can make it happen, lower that rate and possibly remove PMI.

Speaker 1:

That's right. So it's every 5%, uh, of equity that you have in your home. And it's at the thresholds of, um, you know, if 80% or I'm sorry, if you've got 20% equity, you don't pay any PMI. If you have 15% equity, um, it's cheaper, uh, in between, uh, 85 or 15 and 10%, then it's more expensive. Uh, once you get to between 10 and 5%, it's a little more expensive for the PMI. So if we can move you, let's say you bought with 5% down. If we can move you down to having 15% equity, that is a huge savings in the PMI. If we can lower your rate at the same time, even better. Of course, also for people who've been in their homes longer, an opportunity to do a cash out refinance. All right, when we come back, I've got a little bit more data on just how fast homes are selling once they hit the market. You're listening to the Accunet mortgage and Realty show on am six 20 WTMJ whole advice from[inaudible] Noah Best. This is the Accunet

Speaker 2:

Mortgage and Realty show with Brian Wickert on WTMJ. All right. So I said, we can talk about just how fast our home selling. So I dug into

Speaker 1:

The MLS database today this morning, and I found that there are a 2,886 current active single family, detached listings in the five County areas. So not talking condos now, just single family detached. What, what percent David do you think already have accepted offers? Uh, 77%. All right. The answer is 66%, but that's a lot. So to the herds of the listings out there have accepted offer. So, uh, then I drill down and I said, 1,908 of the active listings have accepted offers and have never had the offer fall through because I didn't want that to taint the, my data. Okay. And so looking at homes selling in three days or less, so this is the listed on Thursday, right? Routine. Yeah. Hold open houses or, you know, visitations or whatever on Friday, Saturday and Sunday. And then you pick the winner on Sunday 31% of the home of the 1,908 homes. Okay. Now, if you go all the way out to a week, so those selling in four to seven days, another 31% home sell in seven. So that's 62% of listings are selling in less than seven days. Then you, you go out to two weeks, you pick up another 14. So there we are at a set there's your 76% number. Uh, if you go all the way up to three weeks, you pick up another 6%. So homes are selling fast, only fast, 4%, only 4% of the listings took more than 60 days to get an accepted offer of those listings in the five County area that currently have accepted offer. That's fast. Yeah. So you've got to have your track shoes on, uh, when you're getting ready to go out there and buy what a couple of other nuggets, you know, I, I S I just said in the first segment, the average selling prices up 6.5%. Well, this last week, uh, that's uh, Fannie Mae and Freddie Mac's regulator, the federal housing finance agency. They came out and published their numbers for the month of February. So this was, and this is a little more precise. Uh, they use the home price index, which takes into account the size number of bedrooms and so on and so forth. Whereas the median sales price is just a very blunt instrument because it doesn't take into account the size of the homes and all that kind of stuff. So FHF came out and said, home prices were up 12.2%, um, year over year, uh, in February. And then everybody thinks naturally will that applies to me? Well, wait a minute. Of course not, maybe not because then they break it down by region. So this is a monthly report, which they don't break down by state or municipality, but by region. So the mountain region, you know, which would include Colorado, Idaho, um, up 15.4, we are in the West, North central, or maybe we're in the East, North central. Well, I'm going to go, I'll, I'll find that. I'll let you know. Later West, North central is up 10.5 and East, North central is up 11.8. So we're pretty good. Um, a couple of other nuggets there that I thought were interesting. If you look at where we were, the previous high for home values was April of Oh seven. So they got this nifty chart that says, Oh yeah, you know what home values did dip about 20% from those highs. And that Nader in that, uh, graph is 2011, 2012, meaning the lowest point. And then it shoots up. What do you think? Just take a wild guess in, in tens of percents, what do you think home values are today compared to 2,700, 120% as my guests. Wow. All right. You are, uh, wildly optimistic. The answer is 42%. Wait, what do you mean? Okay, well, you just said triple that number, but that's okay. Up 42% and just one other quick nugget. Um, why do I, why you said that you met as a percentage, if, if the high of Oh seven was a hundred percent of value, where is today as a percentage of that number? Not in role. It is 140. Okay. You crazy? Yeah. All right. All right. So in other words, if a hundred, if the house was worth a hundred thousand, now it's worth 142,000 just to make it plain and simple. All right. All right. And you were saying one 20. All right. Why don't we come back? I've got a story about a first time home buyer going for his sixth offer and how to take this hot market and turning it into a winning formula. You're listening to the Accunet mortgage and Realty show on am six 20. WTMJ getting you into the home of your dreams. Here's more of an Accunet mortgage and Realty show with Brian Wickert on WTMJ. All right. So let's pretend you're a first time home buyer and you're out there in this hot, hot market where homes are selling, you know, in seven days or less. So the 62% of the, uh, homes that are out there right now have taken that little amount of time to get their offers. So the heck do you come out on top? Well, we're working with buyers and real estate agents because the key, if you're offering more than the asking price, Oh, I didn't tell you that. I'm looking at those with accepted offers right now. David, do I have it here? The percentage cash buyers were 20% and they only paid 0.2% more than the asking price, a hundred houses on the dollar. No, no point to not, not, not 2%, but 0.2. So like we're literally only$600 more than the price I got ya. Uh, two thirds of people, uh, 65% used conventional mortgages to finance their home. And they did pay 2% more, which is about$5,500 more than the asking price. And by the way, they average was$308,000 cash buyers were 317,000 a FHA, just in case you're curious, 7% of the market, uh, VA 3%. Um, so this idea of paying more, I thought that it was going to be greater than the six$5,500 that I'm seeing in the data right now. But remember it's an average. And so some are higher than that, obviously in summer lower. Um, and so we're, I'm working with a, um, first time home buyers started back in January and his first idea was I'd like to buy a duplex, which, uh, many, a home buyer has started out doing right, for sure. And then you have to, you have to live in it for a year before you can move out and make it a rental. But it just about that time, uh, Freddie Mac, who used to offer 5% down on duplexes, switched gears, and they said, we're going to be just like our cousins across Washington DC here. And we're going to make you put 15% down and have reserves equal to six months. So the principal interest taxes and insurance, can you explain what reserves are quickly, David? Well, yeah, reserves are.

Speaker 3:

So if your monthly payment on that, duplex is$2,000 a month, principal interest taxes, insurance, PMI. If you're putting that 15% down, we got to make sure, in addition to your down payment, we have to make sure you've got some scratches they say to make ends meet. If let's, cause let's say, you know, you're buying that duplex. You're hoping for that renters a rent payment. Well, we want to make sure that you can make that payment in case you're between renters. And so six months at 2000 bucks is 12,000, you know, extra dollars you just got laying around. Right. Um, and it's hard. I mean, down payments by itself, don't payment by itself as hard to come by, let alone what's that thing you called it again. Reserves. Yeah, I don't, I'm just trying to put my down payment together here brand. Right. So sorry. And don't forget

Speaker 1:

About closing costs too, because you got to front some money for your homeowners insurance. You know, our closing costs without any points are typically$1,234. Although sometimes you can chip in and help you cover that. Uh, and then you got to put money away for taxes. So that is a bridge too far, so, okay, great. He's looking at single family homes. Now he's written five offers and lost. So he's got a new one in his sights, uh, listed for one 69 nine. And the question that every home shopper wants to know, uh, is okay, how much can I afford? He actually knows. He, he emailed, um, on Friday and said, Hey, I want to offer one 82, which I think is a great number for one 6,909, because it's two digits, right? I'm not in the one seventies, that's the next set of digits. I'm going all the way into the low one eighties. So that looks good. Yeah. And so now the question becomes, can he swing that and how should he write that offer? All right. So guess what is coming up on the news here in just a couple seconds after the news, I'm going to tell you how I'm working with his, uh, buyer's agent and how I recommended he structured this offer. And some of the other interesting details that I hope people will find helpful. Uh, when we come back also after the news, uh, let's do a little, uh, rate Roundup and, and also a look at how inflation, uh, which is the enemy of interest rates is really starting to rear its ugly head. Right now, we'll hand it over to the 24 hour news.

Speaker 2:

Don't break the bank to get into a house back to the Accunet mortgage and Realty show with Brian Wickert on WTMJ our ride. I like to get back music, I think, is that, uh, dire straits or something like that.

Speaker 1:

Anyway, uh, so talking about a first time home buyer or working with a, this will be offer number six, uh, the listing price is one 69 nine. And the question is, Hey, can I, can I go ahead and offer one 80 to$182,000 and get this house, you know, can I afford to do that? Well, first of all, thank God that we're working with, that he's working with us. And he he's the son of, of one of our past customers. That that's how I ended up being the point person on this, you know, could you help my son? Sure. Okay. So the fact of the matter is you cannot do this, um, standing in the open house, on your smartphone, like Ooh,

Speaker 3:

Largest mortgage lender would like you to believe it. Yeah, yeah, you can. But you're going to end up with a broken heart is what's going to happen. Cause you're, you're, you're hoping that your math in the living room is better than the professional mortgage bankers math, which probably is not true.

Speaker 1:

And this is tricky because a lot of these folks like this first time home buyer, we're walking right up to the edge of how much home can I afford. Right. And the answer to whether he could afford to pay one 82 is yes, you can actually pay one 82, five, uh, for this house at one 69 nine, and then what we've been helping first time home buyers understand and then put into action and they're rock solid preapproval is, and it's right there. A nice, bright yellow highlight. Hey, you're pre-approved to buy a house up to one 82, five that has$3,800 in property taxes on a 30 year fixed rate mortgage. And it can appraise as low as one 69 nine, the asking price. Okay. That is powerful stuff because you're communicating to the seller, Hey, I'm offering more than what you're asking, but I can still follow through. Accunet says and guarantees. I can still follow through on this offer at one 82, five, as long as it appraises out at one 69 nine, you're doing the math for them. This is, and, and standing behind it with a$2,000 guarantee. Right? Yeah. Now the other interesting thing since January, when we started is he saved a little bit more money. He's now got$13,000 in the bank instead of 11, he's getting a$10,000 gift from his parents. So he's got 23 grants. So I'm working up the math this weekend. And I say, you know what? I think you should offer one 82, five and put in the financing contingency 10% down. Okay. Why am I suggesting? Because by the way, the math, the down payments, 18,300, but then with everything else, putting aside money for taxes and homeowners insurance, he needs$22,300 22, three, he's got 23,000. So why am I suggesting you write the offer, David with 10% down?

Speaker 3:

Well, 10% down, obviously stronger, but, but you are anticipating that maybe the home that he's writing on might not appraise out to the dollar to match his offer. And so you are the way that I've phrased this. You're going to try to absorb some of that low appraised value into the equity. I'm going to say, cause he's going to end up going from putting 10% down to, Hey, I can put 3% down and then I'm going to cover the other 7% in my cash. Yes. He won't have that yet. You won't have it as equity per se, but he's got the means to make that happen from the assets that you've taken.

Speaker 1:

Yeah. You nailed it. And the reason I'm seeing right. The offer, and even though we could do 2.99, my other advice was use the rate of 3.125. Why? Because it just looks more realistic. Sorry. I really kind of go through pine and cut. First time home buyer. I got 2.9 because this is all about instilling confidence in the, uh, seller. But that is the reason why I'm suggesting 10% down, 10% down is better than 5% down. Five is better than three and three's the minimum. Okay. So then though, in reality, now I'm showing them, here's what it would look like in dollars and cents. If you offered the one 82 five with the wiggle room on the appraisal, which is the most important thing in the world and smart agents agree with me, you're going to have to come with 20 1007 50 because we will be lending him, uh, 97% of that lower appraised value. That's a rule in mortgage lending. Folks, lenders will land off the lower of the purchase price or the appraised value. So if you get lucky and the appraisal comes in above the purchase price, congratulations, you just don't get any benefit from that in terms of the mortgage. All right. So they're going to write that off for, with the wiggle room. And I want to tell you one other detail about this and why you can't do it on your smartphone while you're standing in the open house. When we come back along with another followup from one of our other first time home buyers, when we come back, you're listening to the Accunet mortgage and Realty show on the biggest stick in the state am six 20. WTMJ

Speaker 4:

Find a place to call home without the headache. This is the Accunet mortgage and Realty show with Brian Wickert on w TMJ.

Speaker 1:

All right, so we're talking about this a first time home buyer we're hoping is going to give them set that offer today because we were helping them write an offer at one 82 five on a house that's listed for one 69 nine, and giving that seller wiggle room by saying, Hey, I'll still pay you one to five. As long as it appraises out at one 69, nine or higher. And David, you had something you wanted to say about that.

Speaker 3:

Well, I just think what is important, uh, as you've been doing with buyers and buyers, agents is pointing out or helping to put a game plan together that talks about I'm calling it the pliability of the purchase price, because let's say our client writes that offer at one 82, five, and very likely is going to be competing against other home. Shoppers. Let's say someone writes an offer at one 84. Oh, that's more than I was willing to offer, but if they have a regular vanilla boring, dangerous appraisal contingency, that's not, that's not, um, a true high. And this was true. Cause you've told this story when Tim and grace sold their house in Wauwatosa, they, you got multiple offers. One of them included an offer that was higher than the one that you took, but it had a full, regular, old appraisal contingency with no wiggle room. And so it's, I, uh, I take from the book of hyperbole because it's like, okay, if our client wrote an offer at one 82, five, and someone else wrote an offer at$400,000 for the same with an appraisal contingency, the seller would be like, this, this offer is useless. Like I am not even going to consider this. And so I, and so the, that, um, flexibility pliability, you wanted to use the word manageability is that yeah, malleability,

Speaker 1:

That'd be like a metal malleable metal

Speaker 3:

Is, is huge, um, to, to help a seller. And as you note, do the math on the preapproval so that they don't have to like sit down and remember eighth grade calculus on like, okay, yeah. Let's back our way into what the minimum appraise value. It's like, no, no, no, no. We're going to show you what the minimum grades to be. Yeah. So that's, we're going to

Speaker 1:

Say it and put it in writing and guarantee it. Now what's really tricky about this though, is when you see this person happens to have fabulous credit, the best credit, but in modern mortgage lending. So to answer the question, how much home can I buy? Uh, the answer is based on, we're either going to run out of income or we're going to run out of money for down payment and closing costs. So it's a multi-factor equation. And it just so happens that now in modern mortgage lending in 2021, um, the down payment in relation to how much of your income are using to service all your monthly debts, that's called the debt to income ratio. Or I like to call it your financial blood pressure. If we're over 45%, uh, you gotta be putting at least 5% down in this guy's case. If they get to 5% down and what, so once we go to 4.9% down or what I'm planning to give him the most wiggle room is to go to 3% down. We have to keep his blood pressure, his financial blood pressure under 45%. The moment it goes to 45.01, boom, the loan doesn't get approved even with excellent credit. Sure. So it's really a tricky, you know, especially when all working at the edges like this, I can't where I'm really trying to help you maximize your purchase price. And so in my email to him, I said, this is a rock solid pre-approval, but we are on the Razor's edge, you know? And I complimented him because, you know, we checked his credit in January. Now I just checked his credit again this weekend and it's still excellent. And he hasn't taken on any more debt, but God forbid, if he went out and bought a sofa, you know, it's, it could create her the deal. So I said, keep being a good risk fiscally home buyer, uh, because it's, it's just not, it's not easy when you're working on the edges and we gotta be a real coordinated team and help everybody understand where those edges are. So we don't all of a sudden walk over them. Hey, when we come back, we've got another first time home buyer who employed this strategy of writing an offer well above the purchase price and giving even more latitude than we're talking about. We're going to tell you how that's turning out. When we come back, you're listening to the Accunet mortgage and Realty show on Wisconsin's radio station am six 20 WTMJ

Speaker 2:

WTMJ W2, 77 CV and WK T I HD to Milwaukee from the annex wealth management studio. This is news radio. WTMJ getting you through the home buying process. Welcome back to the Accunet mortgage and Realty show with Brian Wichert on WTMJ. All right. So a couple of weeks ago,

Speaker 1:

Um, actually it was on April late April, where we got the accepted offer. Similarly situated, a home shopper who had lost out on several offers, comes across a new listing at three 40 and says, we're going to offer three 90 the grand over the asking that's a lot over. So we were doing the math, you know, with the buyer's agent and, and the buyers and saying, okay, you know, at first they were thinking about given 20 grand, a wiggle room three 70, but then I said, well, here here's that three 70. Um, and how much extra money you'd bring to closing. And here it is a three 65, which happened to be halfway, right? It's$25,000 over the asking and$25,000 under the offer. And so that's where they set, set the Mark, um, for the wiggle room on the appraisal. And the buyer's agent was competent that, you know, it would appraise for at least three 65 and probably somewhere in between. Um, we just got the appraisal back on Friday and lo and behold, it is in between. They made it. So, um, that is extraordinarily good news in my opinion, uh, helping first time home buyer. So we hope that happens to the buyer who's writing the offer today. And, um, so that's just the ma I'm very pleased and excited about that. Uh, the other thing though, that people don't know is appraisals get rated by Fannie Mae's automated underwriting system called collateral underwriter. Do you want to explain that David,

Speaker 3:

Um, briefly, it's just, it takes all the components of the appraisal report and gives it, it's kinda like going to high school math that gives it a grade and that grade carries weight, uh, when it goes through underwriting then. So the, the detail what's the scale, the scale is one through five and one is the most off them. And five is dangerous and almost worthless appraisal. And so a score of 2.5 or lower. So you want to be in the one to 2.5, uh, range is what we like to call it, Accunet Bulletproof when it goes through underwriting. And if you are at 2.5, one up to five, you might get some scrutiny, uh, or a second. Usually when eyeball,

Speaker 1:

Yeah. Yeah. When you're over four is when most Fannie seller servicers underwriters start to take a really hard look. And so the good news on this appraisal, it was 2.2. So that is Bulletproof, which is great news. All right, let's talk a little bit about, uh, interest rates. And what's been in the news this week. The economic news that came out was that the gross domestic product of the United States economy went up by how much on an annualized basis, David

Speaker 3:

6.4% in the first quarter, annualized,

Speaker 1:

That is a blistering pace and, and is within one. So the size of the economy now at the end of March 31st is, is within 1%, uh, where it was at the end of 2019 pre pandemic. So that is pretty awesome, but inflation is on the rise, the cost of things. Um, mom came home with a big, uh, thing of bounty, uh, you know, paper towel,$23 for a big package of bounty paper towel. I don't know what it used to be, but I gotta guarantee you, it's not it wasn't 23. Um, and, and so when, when inflation, when the cost of things, obviously we're talking about home prices are up 12.2%. I mean, that's a big component of home buyers, budgets, uh, cars are in short supply, you know, nobody's given deals on much of anything. And, and so when inflation goes up, that is the enemy of interest rates, because as you pointed out last week, you know, if we're lending you money at 2.9, 9% on a 30 year mortgage, and if inflation goes to three, well, the person who's getting paid the interest on your mortgage loan, isn't making anything right. You know, that's, that's uh, so, um, and I noticed yesterday, uh, Warren buffet, who is the Oracle of Omaha and founder of Berkshire Hathaway's was talking at his annual shareholder meeting about inflation is here folks. And we don't think it's going away. Uh, the federal reserve is okay with, uh, inflation being a little hot, but a lot of go to 3% before they start raising rates. That's how they control inflation. Is they Jack up interest rates and that cools off the economy because it becomes expensive to borrow and buy things. And that would have a downward pressure on inflation. But the bottom line is right now, interest rates have dipped in the last two weeks. We can offer on a$250,000, 30 year fixed rate with 25% equity and all the other rights stuff. And this is on a refi. You can get 2.99 that has an APR of 3.036, and you would have to pay 0.3 of the mortgage amount in points to get that trophy rate,$1,984, the 15 year fixed, uh, two and a half that's with no points and$995 of loan costs. The APR is 2.52. I offered somebody who had a 2.8, seven five rate this week. Uh, I said, you know, I can give you two and a half now. And, uh, that'll lower your mandatory monthly payment,$109 a month. Uh, I need to think about it. Oh, and that was with no loan costs in his particular loan scenario because his loan amount was bigger. So you can two eight 75 for two and a half, no cost. All right. So if you'd like to find out about, but you can save, uh, on a low cost refi, you can click on the blue button@econet.com and get your very own credit score, accurate, um, re quote. And that's also where you'll find the other blue button to get started on your rock. Solid, guaranteed. Pre-approval. Bye. That's all we ever heard this week. We'll see you next week. At the same time, you've been listening to the Accunet mortgage and Realty show on am six 20 WTMJ. The proceeding was a paid program. Advice and opinions expressed during the accurate mortgage and Realty show are solely that of the hosts or guests of Accunet mortgage and accurate Realty advisors and not WTMJ radio or good karma brands, Milwaukee LLC.