Ep. 245: Scary Mortgage Rates


Consumers podcast graphic with image of a skeleton holding a balancing house and percentage sign.

Housing rates are still high, but our Consumers mortgage experts David Pendley and Josh Summerfield are starting to see right-sizing of some inventory in the area as they discuss the latest trends with Money, I’m Home host Lynne Jarman-Johnson.



0:00:06.6 Lynne Jarman-Johnson: Money, I’m Home. Welcome in. I’m Lynne Jarman-Johnson with Consumers Credit Union. From finance to fitness, we have it all. Today we got a little bit of a fright to talk about. It is October, as you know, and Halloween is just around the corner. Well, guess what, there are some scary things to talk about, but you know what, Halloween’s also fun. After it’s all done, you realize, holy cow, we got through it, and, yeah, we got a lot of candy, too. That might just happen with your mortgage. Hey, joining us today is our experts here at Consumers Credit Union, David Pendley and Josh Summerfield. David, thank you so much for joining us. We always start our program here about the industry in general. So, before we get to the scary rates, tell us a little bit what’s going on in the industry.

0:00:52.6 David Pendley: Yeah, right now … I was talking to somebody yesterday, and the industry is in flux. It’s in change. That creates tons of anxiety. What’s happening? Yeah, and we’re seeing escalation in rates. We’ll talk about that, but we’re also seeing homes actually starting to sit for a little while on the market. We’re actually seeing prices … right-sizing in price, maybe even coming down. If you do a Zillow search, “show me the houses that have decreased in price” you’ll see many, many homes that have actually come down in price.

0:01:24.3 LJJ: Now that’s interesting. I didn’t realize you could do a search like that. You can actually showcase maybe even in the region you are? You can do that?

0:01:31.1 DP: Yeah, right in Zillow, you can put all sorts of different parameters. The two things I do every day is, “show me everything that’s come on to the market in the last 24 hours.” It shows me all the inventory, and then also “show me the price reductions,” [to determine] what’s happening in the market.

0:01:45.3 LJJ: And you’ve been … I would think pleasantly surprised that it’s right-sizing a bit.

0:01:49.6 DP: It’s so exciting right now. There’s some pain points for sure, and we’ll talk about that, but inventory. Inventory right now is flooding the market. It’s allowing people to actually be in the game as far as buying a house.

0:02:01.9 LJJ: Josh, you were telling us in other podcasts. Is it still true that people are sitting a little bit before they want to even put their house on the market because they’re worried about finding the right spot where they go next?

0:02:14.2 Josh Summerfield: Yeah, that’s a big piece of it. They’re concerned that they’re not going to be able to get an offer accepted, because it is really competitive out there, it has been for quite a while. So with the inventory coming on the market, as David mentioned, it eases that pressure just a little bit to know, hey, I can maybe list my house and there are going to be some homes for me to go find and buy.

0:02:33.4 LJJ: That sure does feel great. West Michigan, tell us a little bit of what’s happening in our market itself.

0:02:39.3 DP: Yeah, West Michigan, in that price point, maybe sub $500,000, that’s where we’re starting to see some right-sizing of the pricing. It was somewhat euphoric. Houses would come on at $250,000, and they’d sell for $279,000 with nine offers. We’re starting to see them come on at $250,000 and maybe selling for around $250,000. But good houses are still hot as a rocket. There’s no doubt about it, but we are seeing an influx for inventory, and I like the fact that they’re being priced right.

0:03:09.0 LJJ: I read this week that rates may go up one more time, if not, maybe two or three. I would hate to think that, but when that happens, that’s when all of a sudden, especially those variable rates, everybody gets really nervous. What do you think on that scale?

0:03:27.0 DP: We are hitting some yearly highs as far as rates, and right away for a loan officers, that’s a gut punch. It’s hard to watch rates go up. But conversely, when you see prices start to come down, I’d rather pay 7-7.50% now and get my house for $30,000 less, and then refinance later than to pay something that’s … buy a house that’s overpriced.

0:03:57.8 LJJ: Josh, when people say, “Hey, I’m scared of those rates. I’m scared of moving forward on such a big investment,” what are you telling our team, our mortgage lenders or realtor partners?

0:04:09.7 JS: As David kind of alluded to it, that rates are … that’s temporary, right? The price is kind of more important at this point. We want to get that house at the right price that we feel comfortable at. The rate, while it might be a little scary right now, just like when you go through the hunted house, that ends at some point, right? So, rates, when you get to the end of that point, you’re going to have the opportunity to refinance and bring that overall payment down. And it’s important to have the conversations of, what’s it look like now? What could it look like if rates drop 1%, what could it look like if rates drop 2%? So, you’re kind of prepared for the long-term.

0:04:45.0 LJJ: I do love the fact that you’re constantly saying, “Hey, as a homeowner, let’s really look at your budget.” Next month we’re going to talk about, what if you all of a sudden did get over your head and you’re having troubles? We’ll talk about that. But how important is it right at the beginning to look and see what truly is involved in what a house costs, not only to purchase it, but to run it?

0:05:09.1 DP: Yeah, that’s the beauty of sitting down with a mortgage loan officer. Sometimes we call them mortgage planners ’cause we handle the debt side of your comprehensive financial plan, but what does it cost to do landscaping? What does it cost to maintain a roof? What does it cost to pay the extra utilities and so forth? And so, a good loan officer like I feel we have a Consumers Credit Union, we have your interests at heart, and we want to set you up for success.

0:05:35.9 LJJ: Josh, one of the things that I think can happen is you just mentioned, okay, you get in your house, and all of a sudden, you … the roof isn’t what you thought it was. Oh, it probably has 10 years left, but, oops, it really didn’t. Those kind of things that are emergencies that happen. It really is then more comprehensive about budget, isn’t it? It’s not just about, here’s your house mortgage payment.

0:06:02.2 JS: Yeah, there’s so much more that goes into really buying a home. You have to think about the things that may go wrong. You also have to think about utilities and what those costs are going to be. You have to think about the property taxes. There are so many factors that go into it. So those conversations need to happen. It’s important for you to have an advisor in your corner to talk through it with you. Now we just had one the other day where we really talked through with the borrower, our member on, “Hey, is this the right house for you?” Because it overall the housing payment was a pretty big chunk of their overall gross income, and it was just maybe a little bit out of their range, and after that conversation, they kind of went back to the drawing board and found something that was a much better fit for them.

0:06:45.3 LJJ: Now, that is so exciting to hear. You must hear those stories every day, David.

0:06:49.5 DP: I do. I do. I know a house is emotional purchase. People go and on Friday, and we’re just going to casually look … They call us on Monday morning, “I found the only house that will ever make me happy, and it’s got a bad roof, there’s some mold in the basement, but we can fix that. It’s going to be great. We can do it ourselves,” and things like that. That’s where just kind of talking them back a little bit and almost invariably we hear, “Oh, I’m so glad I let that one go. Or I’m so glad a better house came on, but something about a house grabs you, and you think that’s the only house for me …

0:07:21.3 LJJ: Yeah, it is absolutely true. And you’ll do silly things, don’t you? [laughter]

0:07:26.9 JS: Absolutely.

0:07:27.3 LJJ: Tell us how does the loan officer partnership work, Josh, because you had mentioned planner. It also sounds like almost a counselor in some respects.

0:07:35.6 JS: Yeah, absolutely. You’re really walking that whole journey with our member right from the start when they first talk about, “Hey, what’s it look like when I’m going to buy?” Then you really start to bring all the other players in with the realtor and try to figure out what’s the best fit and long-term needs for that particular borrower and that member.

0:07:52.8 LJJ: Well, thank you guys so much for joining us this month. Next month, we truly are going to look at a little bit of a deeper dive into what happens if you do find yourself in a pinch, your mortgage is coming up and you’re feeling a little scared. That’s next month on Money, I’m Home, with Consumers Credit Union.


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