How will inflation affect your Homes Value?

Announcer  0:05  

Advisors Mortgage Group is proud to present in these real estate gurus hosted by Rick Ripma, the hard working mortgage guy, please contact Rick for all of your mortgage needs at hardworking mortgage guy.com That's hardworking mortgage guy.com. Now, here's the hard working mortgage guy, Rick Ripma.

Rick Ripma  0:32  

Welcome, and thank you for joining us. This is Rick Ripma, your hard work and mortgage guy, and this is Ian Arnold with Advisors Mortgage Group, we hope you're having a great weekend. And again, we appreciate you joining us, we want to go over first I'd like to go over the numbers kind of go over what's going on in the market Ian and let people know, you know what, what they should be expecting. You know, we can't specifically talk about rates, but mortgage rates for the last week have pretty much stayed steady mortgage backed securities, which is you know, I'll explain it real briefly. mortgage backed security bonds are where the mortgages are traded. So when you hear that your, your, your money, your your loan is a Freddie Mac or Fannie Mae loan will just take those conventional mortgage, and it's traded on the market. And it's traded as so investors buy these. And they're traded as mortgage bonds. And as mortgage bonds go up, mortgage rates go down, and vice versa. So the mortgage mortgage bonds were mostly down this week, we are down a little bit, we're down quite a bit that we came back up, you know, last week we were up and then we went down. But it's kind of like a roller coaster, you know, we start and then you go up and down and up and down and up and down. And at the end of the week, you come in, and you're pretty much where you started from. So rates have been pretty much the same. And it looks like that's probably going to stay some of that may be due to, you know, all of the information that's out there. You know, inflation is a real big negative to mortgage backed security bonds and more in interest rates. And, you know, there's some reports that they think that inflation is going to be really under control. And the feds are coming out saying, you know, well, we think inflation is going to be fine. Well, I don't really agree with what the feds are saying. Believe it

Ian Arnold  2:20  

or not, really, I mean, it's one they're wrong quite a bit too. So that doesn't help their case.

Rick Ripma  2:28  

Yeah, I never know if they're wrong or just lie. So I'm not sure. You know, are they telling 5050 I mean, you don't know you don't know, there's an agenda every every, you know, group has an agenda. But let's look at the inflation just very briefly, because inflation definitely affects mortgage rates. In June, last year, in June 2021, the inflation peaked at point nine for the month. So that means in June of 2022, when we get those numbers, which we'll get in July, if it's lower than point nine for the month, the inflation year over year number will go down. If it's higher, it will go up. If the same, it'll stay the same. And so most people and you're hearing a lot of them say we're hitting the the max of inflation, this is it. And that's because of that number, a lot of them think because of that number. But you can't just stop there, you got to look forward. If you look a little bit farther, now you're talking in July. So instead of point nine, we're at point five in July of 2021. For over that number, inflation goes up, guess what happens in August pointing three. So now there's a high likelihood we're going to see a higher number. And if it came in at point six, then inflation goes up by point three, that came in at point nine, it's going to go up by point six. September, it's point four. So the next June is a big number, July, August, September are low numbers, and then October hits a big number again, and then it starts to really go off. And that's at point nine. So we expect inflation. I expect inflation you and I've talked about it, I think you feel the same way that we're going to see inflation numbers get hotter, maybe not in June, but certainly July's number, August number September numbers. And when they for those months, that's a next month they come out. So we're expecting inflation to go up and when inflation goes up, what happens to rates? They're gonna go up, they tend to go up, don't they? And then when inflation is back under control. Now along with these numbers, you have the Feds raising the federal funds rate a lot of people I have talked to customers all the time and they're saying, you know, the federal funds rates going up, rates are going up rates are going up. That's because they don't understand the fundamentals of the market. When the Feds raise the federal funds rate, they're raising the overnight rate. member banks loan each other money to very short term. But when they raise that rate, what does it do? due to inflation,

Ian Arnold  5:00  

it's going to decrease it. Right?

Rick Ripma  5:02  

It's going to get it under control, and it's going to help decrease it. Does it do it right away?

Ian Arnold  5:05  

No, it takes time. Right? I mean, just, I mean, just look at what you said. I mean, you got to look at a full year. So if like you just said, our June right now, or June last was point nine. We won't know it. No, June, the new June, and then that point nine falls off. So everything you see is gonna be the last for a year,

Rick Ripma  5:23  

right? Yeah. lasts for a year and you don't see it in June, you don't see those numbers. Don't see him till July. And that's part of the the issue and when the Feds raise the federal funds rate, it doesn't immediately affect things it takes, it takes a while to filter into the economy. So it's going to take some time. But we believe and the reason we believe it is if you look back at history, every time in history when the feds have done this, the REITs come back that rates come down. So we're that's what we're expecting. I also believe that we're already in a recession. But a lot of people say we're going to be in a recession, either one. I think it's inevitable. I think we're there, but I think it's inevitable.

Ian Arnold  6:04  

You're on the cusp of it. Yeah. We're about to go down deep down. So yeah. All right. So you got the NBA Finals starting, or started this week. So I got a couple quick

Rick Ripma  6:15  

questions. NBA? Oh,

Ian Arnold  6:17  

I know, you know, big sports guy, National Baseball Association, National Basketball Association. But so I know you're a big sports guy. So let's turn this into mortgages. So what do you think in Indianapolis just give us a round of ballpark? Adjust? Indianapolis? What do you think the average house prices? Are value Indianapolis in the surrounding counties? Just Indianapolis? So Marion,

Rick Ripma  6:42  

I've never looked at that number. That's amazing. We do so much in the surrounding counties. I've never actually looked at the Indianapolis number. I would guess it's around 220 to 25.

Ian Arnold  6:54  

You are correct to 20. Oh, really? Yep. Wow. All right. And just so you know, I did not show him any of these numbers before. So to solve topics, so he actually did pretty well with that one. Alright, so now let's see. So in the east, you have Boston. So what do you think the average house price in Boston, Massachusetts is?

Rick Ripma  7:13  

That's gonna be a whole whole lot higher, let's say 497 39.

Ian Arnold  7:16  

It's such a different market. Yeah. Well, in all these numbers presented by Zillow, so if you didn't want to argue with them, call them. Okay. All right. And the other team is Golden State, which is based out of San Francisco. So what do you think San Francisco's 1,000,002 million, 6 million say?

Rick Ripma  7:36  

I was? I was going on. Could you imagine 1,000,006 for indie houses, that would be crazy. They gotta have higher income. That's true cost of living. That is a lot higher there than here.

Ian Arnold  7:49  

I mean, but I just thought it was neat little thing. I was curious. And so I looked it up. I was like, million six for average home. That's

Rick Ripma  7:57  

crazy. Yeah, we're 220. Yeah. So Boston is

Ian Arnold  8:03  

739. Basically, Sam Doherty,

Rick Ripma  8:05  

almost three and a half times more than us. Yeah. And San Francisco.

Ian Arnold  8:10  

Yep. 1600 or 1,000,006. Golden states from San Francisco. Yep.

Rick Ripma  8:16  

I didn't know that Bay Area.

Ian Arnold  8:17  

I just thought it was interesting. I was just like, oh, what's the average price, but I was like, Oh, my goodness, I thought it would I knew it'd be higher. I didn't

Rick Ripma  8:25  

think it'd be that much. That's that's, that's shocking. High. So when they

Ian Arnold  8:30  

talk about pricing out of people out of their budgets, that when you're talking about San Francisco, I go, Yeah, you priced me out pretty darn quick.

Rick Ripma  8:36  

I think the key there is don't retire from Indianapolis to San Francisco. If you retire from San Francisco and Annapolis, and you sold your house, you're going to be looking ready. Yes. Very nice. And you know, it's funny, because I think that's one of the things that created this increase in values as we have a lot of influx of people from places like California,

Ian Arnold  8:58  

as a whole don't have to work at the office anymore, right? I mean, if you can work from home, where does it matter where you live?

Rick Ripma  9:05  

And if you have a house that you just sold in California and San Francisco for 1.7 million. Yep. And you come here, how much can you offer over that price? Interesting. Did you even look at what those houses look like for one pass? You know, I'll bet they aren't much better than our $500,000 house now. You know, that's really would be a tale that'd be interesting to look at. But I'll bet they aren't that much better. So yeah, that's, that's interesting. That's really interesting, I think.

Ian Arnold  9:31  

So one other thing I saw Redfin actually announced today, that 20% of homes reduce their price last month, that's the highest since October 2019.

Rick Ripma  9:43  

Yeah, so what they're saying is, I want to make sure I understand and it makes sure it's clear, clear. So what they're saying is if somebody came in and they put their house on the market for $500,000 26% of those people said, We, or 20% 20% of those people said, well, we probably listed at too high We need to, we need to lower our list price, correct? Yeah. Cuz that you don't want people looking at that and saying no, you know what that means that prices are falling that because that's not what that means. Many people in the market like we're in over price their home? Because they think,

Ian Arnold  10:18  

why not? Why not? They take it. If you're going fishing, you throw out the big you throw out your bait and get the biggest fish also. But if you get a small one, you're still going to be happy. Yeah, but you know what, here's

Rick Ripma  10:28  

what I think the problem is with that. I think that people it's hard to adjust to the market that is completely different than what you've ever done before the old market, you listed your house and that was this today. It's the same thing. It's the it's the starting price. Correct. The difference is is back just two years ago, three years ago, and before the starting price, the offers came in below starting price. So you listed high and and then you got priced. You got you know, offers below that today. You list it, and you get offers above that. Yeah. So you know, it's it's an interesting thing. I think it shows that maybe the market is softening but it also could just be people who are getting thinking, oh, you know, if I can sell my house for this amount, I'm gonna sell my house, because they know the markets hot. So it's gonna be interesting to see how it actually affects our market.

Ian Arnold  11:22  

Now I know I've seen this. You've been in the bond market a lot longer than I have been. So do you normally see around let's say this June, July time? Do you normally see more price reductions in homes than you do throughout the year?

Rick Ripma  11:38  

Or? That's a great question. You know what we're running up against the break. So we're gonna take our break, and we'll talk about that after the

Unknown Speaker  11:47  

advisors, mortgage brokers licensed by Indiana Department of Financial Institution equal housing opportunity. NMLS 33041 Rick Ripma NMLS 66489 Hi, I'm

Rick Ripma  11:56  

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Ian Arnold  12:08  

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Rick Ripma  12:38  

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Brought to you by advisors Mortgage Group, where we believe the more you know about financing a home, the less stressful buying and refinancing will be.

Rick Ripma  13:04  

Welcome back and thank you for joining us. I'm Rick Ripma, the hard working mortgage guy.

Ian Arnold  13:09  

And I'm Ian Arnold with advisors mortgage and he's asleep over there. Got to save some time.

Rick Ripma  13:15  

If you need to get a hold of us you have any mortgage questions you want to talk to us for any reason, go online to hard working mortgage guys.com. That's hard working mortgage guys.com. And we're going to talk a little bit about the spring market. But before we do that, let's go to Question of the week.

Unknown Speaker  13:30  

 Now it's time for questions with the gurus.

Ian Arnold  13:38  

Question of the week is brought to you by Debt Crusher mortgage improving your life by relieving the stress of debt.

Rick Ripma  13:45  

And that's us, by the way, though, yes, your mortgage is off

Ian Arnold  13:48  

it is. I mean, it is incredible how much especially how much people have increased in debt, especially recently with people not putting as much in savings accounts and putting on charge cards, we were able to reduce quite a bit of people with that Debt Crusher mortgage

Rick Ripma  14:05  

and with the additional increase in equities that we've seen higher values of homes it's made a huge difference and lots of people people's lives it can be a it's really life changing. It's kind of a really fun mortgage to do for somebody because it actually completely changes their life correct

Ian Arnold  14:22  

easily. Alright, so the question last week was, I am an odd number, take away a letter and I become even. What number am I? It's seven. If you take away the s, you become even. Alright, so the new one for next week. What can you hold in your right hand but never in your left hand?

Rick Ripma  14:49  

You come up with some great questions. You're really good at searching.

Ian Arnold  14:53  

I gotta tell you, if I memorize them, I got two young kids I can use these on all the time.

Rick Ripma  15:00  

Let's get back to the spring market, you'd ask the question about, you know, the spring market what what exactly?

Ian Arnold  15:07  

So, with you've been in the business as long as you have, do you normally see a price reduction and homes for sale around this time? And or is this just not common?

Rick Ripma  15:19  

It's actually very, very common, I actually have some graphs. So one of them's reasonably a part of what you're talking about. The other one gives you, I think, some really great insight into into why it happens. But, you know, they're the percentage. The first one is the percentage of properties with recent price reductions. And if you look at this, if you had this in front of you would see, every year, we see the the reductions, and prices start to go up. So like this year, it's gone up. In fact, for the week, it says were up 23.1%. So 23.1% of the homes have had a price reduction. Now in 2021, it was a little bit different market back then. And we didn't we only had 15.8%, which was very, very low. Other than that, everybody every other year that's on here, 2018, it was, it was almost 30%, you know, 2020, it was 25%. So all the other years, as you look at them, and all these other years, they're all, you know, 2017 16. They're all higher than that. So they all saw more more price reductions on houses, up in most of them all in about the 30% range. But if you look at another chart that I'm looking at, it's it's, it's to me, it's very interesting, it's showing the market and shows that every single year and I this is really about what you're hearing on the news, and they're like, Oh, the houses aren't selling as quickly as they were and there's this and that. And there's more on the market and all this. Well, there's a reason for that. It happens every single year. Every year. If you look at the chart every year, the the the the new new purchases or the new homes on the market are down in the in the very beginning of the year, late last late in the in the year, November, December, right. Not many people put their homes on the market November, December, January, they're still it's winter. It's still a little slow. It starts to pick up in February, and March, April, May June, you see a huge increase in the houses being listed. And when you get more houses, you have more inventory. So you there yeah, you're more competition. Yep. changes. And so this is not an unusual situation. It's it's kind of what happens every year. i It's not to me, it's not surprising. What is what is irritating to me is that the way that the news media wants to present it because they never want to. They always want to sensationalize everything. Act like it's such a disaster. And that's never never supposed to you know, it's never happened in the in the in the past, and yet it has in fact, I don't remember the Lady, do you remember who it is that came out and said that's in the last decade. We haven't seen some number. I can't even remember what it was. And she was flat out wrong. We'd seen it twice in the last 10 years. So they really do try to scare us if I can come up with that. I'll bring it up, but I just can't remember right now.

Ian Arnold  18:37  

One other interesting thing that I saw when I was researching a little bit was Redfin actually also said that 13% of people left 13%, less people search the term homes for sell on Google last month, which I thought 13% less. It's not a huge number, but it's just like, in my mind, I'm thinking you'd see a lot more being that springtime. And let's be honest, I as we talked before my kids just got out of school. So if I'm going to start looking, that would be the time to really start looking. So I just thought it was like, Oh, that's interesting. So I don't know, it might be some people are a little worried about the interest rates. I mean, some people may not want may have seen so many people bid over that they just want to take a break too, because that would basically sometimes be me is alright, I don't want to try to buy five or 10 houses and then have to bid 10 or 12 grand higher and not knowing if I'm gonna get it or not or that type of deal. So I can see some people stepping out for taking a break.

Rick Ripma  19:44  

Yeah, I think I think that as prices increase and as mortgage rates increased, you're going to see some people moving out of the markets stop looking. Okay, that's going to happen, but even that 13 per that decrease. When you look at the numbers, there's still a, there's still many more people looking to buy homes, their homes on the market. So it's not it. You know, if you have an I don't know the numbers, but if you have 100 homes, just we're gonna make the you have 100 homes on the market. And you have 90 people out shopping for homes. Okay, yeah. Then there's then you can negotiate, you know, all 100 aren't going to sell there's only 90 People look, right, right. Yep. And if you have a big reduction, and people looking at that point, then that's going to hurt, right. But if you have, which is the market, we've had, you have 100 homes on the market, and you have 200 people looking for homes. And then that 66 or 216% drop out, you still have 160 Something people looking for 100 homes that are on the market. And I think that's the big it's, it's if you can look at individual numbers, and you can say, Oh, this is bad. But when you look at the entire picture, it's not now I will say May, from everybody I've talked to I've talked to several real estate agents, top producers, big producers, and they've talked to friends of theirs, who are also big producers been in the business forever. May was a very odd month, there were home selling like crazy. But I don't even know how to explain it. But some of the market just kind of stopped for a few weeks. I think there was something else going on. I don't know what it was. I don't know why. But I already see it's totally back. Yeah. I mean, it's like June hit. And we got and all of a sudden, well, yeah, I guess it just hit a few days ago. But even before that maybe we got through Memorial Day, weekend, whatever got through it. And all of a sudden, the calls are coming in again, people are out looking, I'm getting lots of pre approvals again. And it's just that it was just the last two weeks of May. Oh, you

Ian Arnold  22:05  

have all that happen. You have all the graduations you have all that stuff. I mean, especially if your kids did sports that's always like, let's say play out section or division or playoffs or wherever you want to call. So I can see somewhat dying down because you just you got too much going on. sort of deal. But yeah,

Rick Ripma  22:24  

and you know, that that can happen. People can be there. And they're, you know, they're they're worried about a lot of other things. And especially maybe what maybe this is all part of it. You were talked about when it's hard to get a house? Yeah. Okay, I got other things to do. And I really don't have time to go Shop for a home because I gotta go do all these other things. And I'm not going to get a home anyway. Because I'm not My offer is never going to be accepted. I understand that thinking and I would I'd probably be the same, you know, but once it once you get past that. The reality is this, I am seeing people get offers accepted. And you know, the thing I think one of the biggest things I think that's dropped out is the the the institutional buyers, the companies buying homes, we're not seeing as much of that the people paying the cash, buying homes that are that are buying them to fix them up and sell them or rent them or whatever they're going to do with them that they've really ruined our market really hurt the housing market. All in all, that seems to have gone away. Yeah. Have you seen that?

Ian Arnold  23:27  

I mean, you see it quite a bit. Well, you're also going to see a lot of the investment people and the people who buy the homes just to rent them out. Once when the rates were so low, it was it was smart to do that. But now as rates have gone up, it hit your hit your pocketbook a little bit more. So you're gonna you're gonna see a lot of those more people drop out of that. So that allows more single families to buy their homes instead of people turn it into rentals. Okay. But so we got a few minutes left. So I know we always cut this off for the last so I figured we talk a little bit more about this, the demographics for age. So it says that the average age of somebody buying a house is usually about 33 first-time homebuyers first time or sorry, first-time homebuyers. So do you think that number will change with the higher price of houses?

Rick Ripma  24:18  

I do not. And the reason I don't think it's going to change is if you look at history, it's never changed. We've always had price increases houses, houses today are considerably more expensive than they were 33 years ago. In fact, as an example, I bought my house about 33 years ago. Okay, I've lived there just over 30 years. All right. And in that time it's gone up two and a half times. But so then comes Yes.

Ian Arnold  24:53  

And I think that's when you hear about it on the radio or the news and are they I think that is what a lot of people are missing. So, I did a little research. So let's say you bought a house in 1973. The average price of a house then was about $45,000. Okay, so now if you say people can, people could afford that, but how much were you making? You are making close to what they're making now. So, and then in 1995, it was close to 150,000. Okay, does that sound bad? No, it's, it's just a progression of that's the way it's going. Well, guess what, when you worked at, even when I got when I was in high school when I first came out of work, I made about $7.25 an hour, I worked at Blockbuster, that tells you how old I am. So, $7.25. Now, if you go to McDonald's right now, and you want to work, how much do you make, it's 15 $17 an hour. I go, they'll give you anything you want just to get you to work. There I go. Okay, so that's almost double what I was making. So the price of living, I mean, the price, your income has changed. And I think that's not what a lot of people are hitting on

Rick Ripma  26:13  

minimum wage. And truthfully, I don't remember what it was. But I believe that back in when I would have been doing that. So I graduated in, you know, the late 70s. So let's say in the late 70s, or early 80s. I think it was around that time, we could look it up, but somewhere around $3 for some reason. $3.10 sticks in my mind. And what's minimum wage today?

Ian Arnold  26:36  

and your gas price was probably about 50 cents or 25 cents.

Rick Ripma  26:39  

Wasn't 25. But it was pretty close. I mean, it was a big eye-opener when gas went over $1 Yeah. All right. That was a big eye-opener. So you're right, incomes have gone up, which has made homes much, much more affordable. Okay, so I got one question. I know we're getting late in the game. One question. When did the when does the NBA finals

Ian Arnold  27:02  

start? Or have they already started? They started on Thursday. So

Rick Ripma  27:07  

they already started? Yeah,

Ian Arnold  27:09  

so you're a little bit behind there. And

Rick Ripma  27:11  

I I've just because I you know, I don't really watch any of this. But I'm guessing Golden State's the favorite? Yes. Only because he has. Has they have Steph Curry in it. Yeah, they won like the last 20 in a row or some

Ian Arnold  27:23  

reason that muddy. But that may put them better, Michael. All right. So before we wrap up, I do want to mention to Rick, Rick has not said anything. We do have a Father's Day special coming up here soon in a few weeks, on the Saturday before Father's Day. So if you do have young kids, or even if grandkids and you want to just easy conversation, talk about credit and stuff like that. Definitely tune in for that. Yep, we'll go

Rick Ripma  27:51  

over how to handle money. Thank you very much for joining us go to hard working mortgage guys.com That's hardworking mortgage guys.com. And on there, you can in the top, left or right corner you think no more left from my right. You can put all your information in there, and we'll be able to follow up with you. Thanks a lot and have a great day.

Announcer  28:10  

Branch NMLS number 33041. Recruitment NMLS number 664589. Ian Arnold's NMLS number is 1995469 equal housing opportunity, some restrictions apply?

Unknown Speaker  28:20  

Well, first off, thank you for joining us, Danielle. I appreciate it. And I just was curious, how did you come to find out about Rick Ripma and advisors mortgage,

Unknown Speaker  28:28  

oh, I was looking for a mortgage for myself for a brand new home that I was building. And I wasn't sure the direction to go, I didn't have anybody in mind. So I kind of just spoke to whoever I could speak to, I got their number. And everything seemed to be exactly what I was looking for. So I went with them. The thing I liked the most about Rick and his advisors mortgage is that I could go and upload things online. And I didn't have to always be on the phone with them or sending them documents or trying to look for certain things that I needed to get the process going. Which was really great for me, I had a processor named Mark Coleman, who really helped me out in making sure I had everything I needed because I didn't know the first thing about having a mortgage. So it was awesome to have so much help. I think probably what I've benefited from the most is really just the understanding that sometimes I would get busy and maybe I forgot to upload a document or I forgot to do a certain part of the process in a timely manner. And they would get right back with me and it wasn't like a hey, we really need this right now. It was always Hey, just wanted to make sure you still remember that we need this. Well, you

Unknown Speaker  29:41  

don't get that too much. In this day and age. It seems like most people are either, you know, very demanding of something they need from you and they need it right now. And, and I agree I've seen that in Rick's attitude with us over over the last 10 years that he's very patient but also helpful to get the right things he needs. So exactly. In conclusion is is Rick Ripma and advisors mortgage somebody that you would use in the future and or tell your friends and family about?

Unknown Speaker  30:06  

Absolutely. And I just want to thank them for all the effort they put in to help me find my dream home.

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Ranch NMLS number 33041 Rick Ripma is NMLS number 664589 equal housing opportunity, some restrictions apply.

Rick Ripma  30:18  

I'm Rick Ripma You can go to hard work your mortgage guys.com