Video Closed Captioning:
good morning good afternoon good evening
folks Michael Zuber one rental at a time
back with the one and only Jonathan from
convey Home Loans how you doing buddy
Convoy Convoy sorry they’re always just
if Dustin’s not here we got a different
thing going on yeah
Convoy home loads anyways I know I feel
it that’s uh what I want to talk about
today Jonathan it’s really fun because
yesterday I got to talk to Matt the
mortgage guy before the FED release uh
obviously you and I are talking about
the day after and uh we’re seeing a lot
of churn in the uh 10-year treasury
market I don’t know that I’ve ever seen
it move this much
uh in the morning right it’s moved I
think it moved 20 basis points or
something yeah pretty crazy
it’s crazy it’s bad I mean you know
yesterday was leading up to the meeting
was bad too we thought you know it was
going to be the kind of hopefully do
what it did in June Peak up and then
kind of tip back down it looked like it
was going to do that but at the end of
the day it didn’t end up
doing that it started getting worse so
yeah this morning right now uh last time
I checked the tenure was at 3.71
okay we’re at 3.68 right now okay all
right so there you go so but still we’ve
we’ve clearly busted the psychological
three and a half level
uh which was very sticky for a long time
but what I wanted to talk to you about
today because again like Matt you’re in
the mortgage industry you see lots of
deals you see lots of clients
um I think Jerome Powell is clearly
coming after the housing market right uh
we are in a leveraged business uh we are
in a business that’s built on debt loans
are debt
fixed or you know variable whatever it
is it’s debt uh what I took from
yesterday and I wanted to get your
opinion is uh the Federal Reserve and
Jerome Powell is going to take the
federal funds rate higher than the
market expect he is going to take it
faster than the market expect and he’s
going to leave it there longer than the
market expect so that’s what I heard
yesterday did you hear anything
different
no I think I heard almost the exact same
things I mean his main comment I think
that kind of Spun everything in a
whirlwind too is he said housing should
have a correction yeah right so it’s
never really you know positive great
Good Feeling sign when you know the guy
that we look to to kind of do all these
funds probably he probably had a bad
morning probably woke up on the wrong
side of the bed because that’s usually
what it is and um so I think that that
and also I mean we I was reading
obviously every everyone’s speculating
now where will the 10-year treasury go
you know obviously because that’s a lot
of what mortgage rates are really well
it’s gonna go it has to go to four
percent right if the FED funds rate gets
over four which is the front end the
10-year has to I mean can you imagine a
I don’t know that this ever happened I
mean we haven’t inverted yield curve
today twos and tens uh it is very likely
that we may have a yield in version of
90 day and ten year which is a sure sign
of a recession I don’t know if I’ve ever
seen fed funds rate and tenure inverted
I that can’t happen I can’t imagine
that’s ever happened
um I I read somewhere or someone told me
some Bloomberg or something was like you
know they expect the the 10-year
treasury to be at five at the end of the
year yeah someone said it and I was like
that’s scary that’s like apps that’s
scary that’s really scary yeah because
play it out right let’s again we’re not
making any calls yeah but if fed funds
rate or I’m sorry so they’re the 10-year
treasury five percent so that’s up a
point roughly a point and a half from
today yep a point 1.3
um
so you just add that on the the 30-year
mortgage rate today
uh what do you get you get like seven
and a half or something I mean crazy I
mean on a primary on a primary yeah yeah
if you’re talking about Investments it’s
definitely I mean it could be God you’re
you’re in the nines you’re getting into
the nines so it’s yeah it’s bad it’s bad
yeah so the one thing that I do hold out
hope for again because I’ve studied this
for so long is historically speaking and
to say we’re in normal times is grossly
overvalued so take this with that ever
grain of salt you want but historically
speaking the Delta between the 10-year
and the 30-year mortgage fixed mortgage
rate owner Rock best qualified is 1.5
percent
today it’s 300. now a lot of that extra
Gap is because Banks
are leading the race right right they
expect the FED to do what the FED said
they’re going to do that’s why the FED
raised 75 bases yesterday and rates got
three bips better now they’re not better
today but they did yesterday got three
bips better yesterday
uh because again it’s not a one-to-one
relationship yeah um so I do hold out
hope that you know the FED does what it
does it gets the FED funds rate to four
four and a quarter this year I don’t
know that we see a huge run up in
mortgages but maybe it certainly I mean
who knows at this point but we do have a
larger than normal spread between
10-year and 30 year that’s like one
piece of hope I have yeah and I mean I
was talking to a lot of my like you know
Private Client banking friends and their
you know rates are up too and this is
just this is for people with a lot of
money right so
um I think it’s across the board people
are kind of raising rates preemptively
and we kind of saw this back in I guess
June June July August when conventional
rates kind of took a little bit of a dip
um and non-qm rates continue to stay
where they were or go higher yeah they
had a larger Gap yeah but but now
looking back at it that was probably a
good move because imagine if
non-cuminates also went down the same
way that conventional rates down then
we’d have the same same issue we had in
like February March April where it was
all of a sudden it was a bunch of
non-cam loans being retraded that would
have been the same thing that happened
this time so obviously they’ve learned
from their mistakes but I think rates
they I think they have room to run up I
do too yeah I’ve actually said uh and I
see no reason to change my opinion that
I think the 30-year mortgage owner Rock
might see a seven on it this year
you think’s this year this year like you
know the next three months basically wow
and we started the year at like three
eight three seven so that would almost
be a double that’s a fast run yeah uh so
you haven’t said you mentioned the word
retrade I wasn’t going to go here before
but we should right there’s a lot of
people in deals today this is mainly for
investors I guess it applies to owner it
does it actually applies to both people
if you’re in a deal today and you’ve run
the numbers and you have your yield
calculation and you get to closing and
your Mortgage Debt is higher than you
expected
um there’s a lot of people that will go
back and retrade that right get a lower
price or or some kind of more maybe
mortgage buy down that’s definitely
something you should do if your owner
occupant get points to have to have the
seller pay points I just talked to a big
syndicator right we’re talking 100 units
and above and he’s like he’s like deals
are getting retraded left right and
Center
uh because of what’s going on so uh
realize what’s happening to the big boys
it can happen to us right you’re in
contract for a four Plex get a better
price you’re in contract for a a duplex
uh get the seller to pay points right
the if you’re a buyer today
you have more power
than any year I’ve ever seen except
2010.
use it you please use it to your
advantage for most of you you’re gonna
buy one property
for a long time right a year or two
years make it the best deal you can what
do you think of that I love it I love it
and and on top of that just a real life
example A lot of my clients right now
that have had deals that were like you
know the there’s always going to be
pressure right the agents always want to
close of course like right they get paid
at the end exactly so they they’ve been
really like pushing pushing because
we’re gonna cancel We’re Gonna Cancel
you know as these things keep coming up
they’re like we’re gonna cancel we’re
gonna cancel and then
every single time that I’ve seen they
haven’t it’s all been Bluffs they
haven’t actually canceled so what does
that tell us it’s like what you said you
know the buyers have the power right now
if they walk away the property has to be
re-listed and they know the chances of
it selling with a re-list at the same
price so the appraisal coming back
there’s just so many variables that they
have every incentive to close the deal
as is or even if you get a little bit of
a discount or a little bit of a credit
it’s going to allow you to purchase the
property at a better deal and also give
you more time you’re going to have more
time right now yeah yeah this is this is
uh it’s very interesting time again
um we are going through a very
interesting moment in real estate real
estate investing debt debt doubling in a
year the cost of capital doubling in a
year is unusual I’ve never seen it in my
22 years uh I would use it and I am
using it to get better pricing because
again to me I don’t care if the cost of
capital is nine or ten as an investor uh
because again I just put that in my
spreadsheet and I need I need to get a
great yield for for me today that’s
north of nine percent if my cost of
capital goes to nine believe me I will
raise my yield calculation higher
because I want a positive spread I don’t
want negative gearing but yeah it is
it’s it’s um I’m excited for what’s
coming because again as as rates go up
more and more buyers will back away get
scared which just makes it easier for me
to find those motivated sellers so I’m
excited at the micro level right the
Mike Zuber level at the macro level it’s
it’s uh it can be kind of scary I guess
yeah and um obviously there’s a
repetition of what we’ve always said but
this isn’t the time to be afraid this is
the time to like you know like you keep
preaching but it’s it’s the time to be
like dancing for joy because yeah you’re
you have the power again right only do
great deals folks only great deals
exactly if they wanted to reach out to
Convoy and see what the cost of capital
is with you 40-year loans IO we’re going
to talk about one in the next section uh
how would they do that uh reach out to
Private Client at convoyhomeloans.com
um and please let us know that you came
for more at so Dustin or myself can
reach out to you yeah the key here is
you telling me came from oret you get
the two principles to work with you
which I greatly appreciate thanks buddy
yeah thank you