Mortgage rates and home inventories are returning to normal, but what does that look like and what does it mean for your wallet? Consumers mortgage experts David Pendley and Josh Summerfield join Lynne on this episode of Money, I’m Home to discuss what the future holds for the world of home loans.

 

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0:00:06.4 Lynne Jarman-Johnson (LJJ): Money, I’m Home. Welcome in. I’m Lynne Jarman-Johnson with Consumers Credit Union. From finance to fitness, we have it all, and right now, you know what we’re going to talk about? We’re talking about returning back to normal. We’re talking about houses, the housing market. I know you’re seeing those headlines. They are all over the place on what is happening in the mortgage world, but I’ll tell you what, we’ve got the two experts that can help us out. Whether you’re buying, selling or just thinking about property, we’ve got it. David Pendley is our Vice President of Mortgages here at Consumers Credit Union, and Josh Summerfield is our Mortgage Sales Manager. Thank you both for joining us today.

0:00:45.4 David Pendley (PD): Glad to be here.

0:00:47.9 Josh Summerfield (JS): Thanks, Lynne.

0:00:48.5 LJJ: Hey, you know, here’s what I love, I’m going to start with you, Josh, every single month we get together and we just kind of set the lay of the land and what’s going on. It has been such… Well, the headlines say it’s been just drastically up and down with the mortgage industry. What are you seeing out there?

0:01:03.1 JS: Yeah, depending on which headline you look at, we’re going up and the next headline we’re going down, and it’s all over the place. Now’s the time that you got to educate yourself a little bit and really pay attention to what’s going on out there, to prepare yourself if you’re looking at buying a new home, which is the most of the loans we’re doing right now is new home purchases, refinances here and there. But yeah, it’s just about preparation and paying attention to what’s going on out there, surrounding yourself with the knowledgeable people that can help guide you through the whole process. That’s your lender and your realtor, and just having trusted advisors around you really.

0:01:39.6 LJJ: Now, David, you are constantly looking at the national headlines that are happening, but locally in West Michigan, let’s talk about really what’s going on here. We hear the word recession, we hear that, “Oh, my gosh, the rates are going to be higher than ever.” I remember back years ago when 12%, 13%, 14% was nothing, and now you’re like, “Wow, it’s getting up to seven.”

0:02:04.1 DP: Yeah, it’s interesting when you see the national headlines about property values backing up 30% or 40%, that’s really… When I really dove into those statistics, that’s California and Florida and Colorado and certain markets. Where we land in Michigan, it’s fairly stable, and there’s still a tremendous housing shortage for affordable homes. That’s probably under the half a million dollar mark, which is the bulk of consumers’ business. So, I think we’re in great shape, but some of the good things with these increased mortgage rates, there’s actually inventory on the market. You can actually peacefully look at a home and maybe think about it for a day or two before you write the offer. There might not be six or seven offers that you have to compete with. You might not have to be a cash buyer anymore. You don’t have to be a cash buyer anymore. It allows first-time home buyers and 3% down buyers and zero-down buyers and things like that to actually compete. You don’t have to waive your home inspection and things like that. And basically we’ve kind of titled this podcast, Return to Normal. Things are returning back to normal.

0:03:10.9 DP: Now, there’s pain in that. We had to take higher interest rates to kind of slow things down, but the good news is, is you’re not paying 10% higher than the house is worth to win the house, so net, you kind of win. But nobody likes these higher interest rates, but the federal government is committed to get this inflation under control.

0:03:29.3 LJJ: Now Josh, when you hear that the interest rates are going up, what starts to happen on the street? Are people saying to you, “I’m going to wait”? Are they saying, “No, let’s dive in and maybe re-finance later”?

0:03:43.2 JS: Yeah, so then that’s a great question. Naturally, people are thinking, “I got to get in, I got to got to get in, got to get in right now,” or, “Hey, it’s too late, I missed it.” You didn’t miss it. You can still get in. We’re talking about historically; these are still not bad rates. It’s just something we’re not used to, and there’s going to be a lot of opportunities in the future to refinance. So if you’ve found the house you like, like David said, you’ve got a little bit of time to think about it now, and now you’ve got that house that you want to get into and you can count on at some point being able to getting a lower rate. So you should have some peace of mind to knowing you’re not going to be stuck in that rate forever. You may not like the 7, 7.5% or whatever it is at the time, but you’re going to have some opportunities.

0:04:28.8 LJJ: You know, Josh just brought up a good point, David, and that is that buyers’ remorse. I have read more articles on people who are trying to get into that house, or selling their house when they didn’t have another house to go to, and they ended up with a property they just didn’t love, and isn’t it the most important thing to love your home?

0:04:48.7 DP: Yeah, it’s something you don’t want to be doing every year, so take your time. We always tell first-time homebuyers and new buyers to this market, don’t get caught up in the euphoria. It’s okay to rent, God forbid, for a year if you had to or whatever, but find your dream house. We just did a young couple, a young college professor, first-time homebuyer here in Holland, Michigan, and I loved her attitude. She said, “I am not going to compromise.” She knew the three or four things that she wanted in a house, and they got… The realtors were trying to squeeze them into something else, and she’s like, “No,” and it finally came about. She found the home or they found a home that they’re going to be happy in hopefully for the next 10 years or so, but we’ve seen that. The end game the last couple of years was, “My offer got accepted,” but sometimes they said, “I don’t even like this house.”

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0:05:37.4 JS: That’s part of a game. It was just trying to win, win anything you could at the time.

0:05:42.3 LJJ: And then you wake up and you go, “Oh, that really wasn’t a win.” Yeah. Josh, what’s going on as far as our mortgage loan officers and the realtor connection? There’s got to be a lot of conversations happening right now. When interest rates go up, some people pull back.

0:06:00.1 JS: Yeah, they do. I mean, it’s loan officers and their realtors are out there working together, just trying to get people into the right fit, and again, talk about going back to the right fit for each individual person, maybe now isn’t the right time, and that’s having that team around you to tell you, “You know what, maybe you do need to hold off for six months and get some of these other affairs in order to better prepare yourself.” Our lenders here at Consumers do a fantastic job of working with their agents and having our members’ best interests in mind all the time. It’s not just to write a loan. That’s not our goal. It’s to get our members in the right position in their housing situation.

0:06:37.7 LJJ: Okay, David, wrap up here. We have heard the words recession. We’ve heard the fact that property values, “Oh my gosh, they’re not what they used to be.” Well, wait a minute, they were so high that they’re returning back to normal, so what do you think about for the next few months?

0:06:52.0 DP: I would say for probably the next year, what happens… I’ve done this forever, for three decades. Whenever there’s a big increase of rates, and initially the consumer completely freezes for two or three months, and they’re like, “Stop, hold the presses. I’m going to wait this out,” and then pretty soon, a 7% interest rate is not so bad, especially since you’re not paying $30,000 more than the house is worth, and then they come back and they go, “Why do we really want to buy a house? Oh, we need a house, we need a smaller house, we need a larger house, we need to move geographically,” whatever the reason. The traditional reasons why people buy houses comes back, and they buy the house, and then eight months later, or two years later, their mortgage loan officer calls them and says, “Hey, we’re down to 4% again, can we refinance you?” And ultimately, it was a great decision, but when things are in transition, it tends to freeze the market, but I think we’re going to see a very normative spring market in 2023.

0:07:53.9 LJJ: Okay, so next month, let’s hit the nail on the head and talk about how to prepare for that spring market, how to get yourself ready, and again, don’t panic with the things that you might read in the news, right, Josh?

0:08:07.7 JS: Absolutely, don’t panic. Just educate yourself, see what’s going on and know what your situation is.

0:08:13.7 LJJ: Let’s say a big thank you to David and Josh. Thank you for listening, too. Next month again we are going to focus on how to prepare yourself for that spring market, so listen in. Hey, everybody I just want you to have a great week. Lynne Jarman-Johnson, Consumers Credit Union, Money, I’m Home.

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