It's Now or Never for Many Homebuyer

Branch NMLS number 33041 requirements NMLS number 664589 equal housing lender some restrictions apply

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 hard working mortgage guy.com. Now, here's the hard working mortgage guy, Rick Ripma.

Rick Ripma  0:37  

Good afternoon, and thank you for joining us. I'm Rick Ripma. And I am joined by loan officer and co-host

Ian Arnold  0:43  

Ian Arnold with Advisors, Mortgage, my NMLS NUMBER 1995469.

Rick Ripma  0:51  

Ian and I want to talk about a variety of things. But the first thing or at least part of what we want to talk about is having you been dreaming about buying a home or maybe selling your current home and moving to a more exciting home moving up moving, you know, moving sideways, moving down, just something different than what you have today, one that fits your lifestyle better. There are a lot of folks in that boat in that same boat with you. And we are going to discuss what we can expect from this market. But before we do, let's talk about the mortgage market, and what the Fed rate hikes should mean for mortgage rates and home sales. You know, on that note I had in this market, I had a customer I was talking to and they are going to have they were planning on retiring this year. And because of what's happened in the market, not so much the mortgage market, but the REIT market, but in the stock market, the stocks have dropped so much that now they've they're gonna have to put off retiring because of that market. And that's all that is tied into what we're doing. You know, the Dow Jones lost 4.91% While the s&p lost 500 dropped 8.8% NASDAQ or the Composite Index fell 13.26%. That is one of those things that, you know, it's tough on the market, but I've seen it. I mean, it's pretty incredible, is I'm in the market and the drop, and you're in very good solid stocks, good solid companies, and the drop that we've seen. It's just been a very, very big challenge. Now along with that, to get that, you know, what the rate hikes mean? You know, the feds are looking at a rate hike. And their rate hikes are in response to

Ian Arnold  2:47  

the inflation. They're trying to get that under control.

Rick Ripma  2:50  

Yep. And I don't know, do you remember the inflation rate? I think it's 8.5%. Yeah. Right. Right, year over year. And, and I think that's the fastest pace since 1981. It may be a little higher than that. I know. It's the fastest pace in 40 years. It's easily Yeah, it's unbelievable. And I have to admit, I remember it back in 19.

Ian Arnold  3:12  

I wasn't born yet.

Rick Ripma  3:13  

You weren't born yet. And I was not old yet. But, you know, I think I was. I was in my 20s. And it was you know, it was major. And it had a huge effect. I remember, I think before that the lines at the gas pump, you know, gas prices were up you couldn't get enough gas, it was somewhat rationed. And it was a different time. And it was due to this hot inflation. So, the feds are reacting to the inflation. And in what are they what do you think they're going to do? What are the feds? You know, that what's our latest rate increase? And how's that gonna affect our, our borrowers? And how is that going to affect the economy?

Ian Arnold  4:00  

I mean, the last increase is like, the half point was at point five, which is half. But what it means is, that it's going to raise the rates on what we're trading on. So if you're looking at getting the house, your rate is gonna be a little bit higher than it was three or four months ago. I mean, is it a big deal? Not necessarily, because when they come down, most people just refinance and get the lower rate. But if you're just looking at getting some quick, you're gonna pay a little bit more over the long run or over the short term.

Rick Ripma  4:36  

Yeah, you're gonna pay more over the short term, and it again, just so everybody remembers the federal fund when the Feds raise the federal funds rate, that's the overnight rate banks loan each other money and when they and so that's a very, very short-term rate. When they raise the federal funds rate, the instant reaction may be a little higher mortgage rate. But most of the time, especially if they do this a couple of times, we're gonna see mortgage rates come back down. So even though rates are higher today, we expect rates to go down. Now it may take, it takes a little time for these rate increases to take effect, the reason they raised they raise the federal funds rate is to slow down the economy, and slow down inflation. I believe it's 100%, we're going into a recession in the next six months to a year, it may not take that long and may take a little longer, but I believe for sure, I have no doubt we are going into a recession. And when we go into a recession, interest rates,

Ian Arnold  5:39  

they'll go down, they always go down because they want you to spend more money then.

Rick Ripma  5:44  

Right? There's the economy slowed down, and they've gotten because of these rate increases. Okay, that should help slow the economy down, that should help lower, you know, slow down the inflation. Now the inflation rate, you know, we've talked about year over year. So, what you have to do is look at what was it last year, in that month? And what is it going to be? And so, I've heard a lot of the news talk about inflation is going to be continuing to rise. And we've kind of hit the top the worst case. But I don't believe that's the case. You and I both have seen those graphs.

Ian Arnold  6:22  

Yeah. I mean, until you start to see it, I mean, all they're doing is predicting. So I mean, I can predict that it's going to go up, up, up. But guess what, then tomorrow, something can happen. It drops,

Rick Ripma  6:33  

right? Yeah. And the graphs are showing, you know, maize numbers, point nine, so most likely, inflation is going to stay about the same. That's a high number, it increased a year ago at point nine. But when that number falls off, and the next number comes in, okay, the next number I think is point four, that's significantly less, that's the June number. So, if our inflation comes in hotter than that, our inflation numbers going to go up, right, it's gonna go for at 8.5, it may go to 8.8, point nine, depending on where it comes in. Then the next month is at point three, and the next month, it's at point four. So those three months, I think you're gonna see hotter inflation, I think we're gonna see hotter inflation, and probably until the best case, October, once we get that October number, because it's back up to point nine, I think that's the September number comes out in October. That's when I believe that's why I believe we'll start to see the inflation numbers drop, I think we'll probably see rates stay where they're at, I don't know, through summer, maybe even go up a little bit, maybe go down a little bit, probably go up a little bit. And then I think, you know, maybe we'll start to see him go down late summer, early fall, my opinion. Nobody knows the future. And then I think we'll see, you know, then we'll be able to see what's going to happen. I believe that that's we're going to be starting to see a real slowdown in the markets, we've seen so much that shows that we're going into a recession that it just seems like a foregone conclusion. You know, based on that I also talked about they're looking at, you know, they raise the federal funds rate, as you said, point 550 basis points. And the next increase, you know, they're thinking is going to be another 50 basis points, the one after that, they're thinking that's going to be 50 basis points to 25 basis 25 to 50 basis points, I think it's going to be 2050 basis points. And that doesn't again, that's going to probably help mortgage rates in the long run. What it does hit is your prime rate. So if you have any credit cards, if you have anything on short-term financing, that's going to be what's affected. The federal funds rate is 3% above prime right now is point seven, five to one. I know it's weird, it's a spread. And when they say that it's they take one they never take point seven, five have never seen any price from the lower one, they always price it from a higher one. So it's 3%. So right now prime is four still very good, not quite where it was. But, you know, with that, that's what we're looking at least that's what we're looking at, in our opinion. The feds another thing they're looking at is reducing the balance sheet. And that's something that's kind of probably that will hurt rates for a little while. Depends on how they do it. I don't think they're going to have a lot of on that I think there'll be a little leery to do too much of that. You know, after the break, we're going to talk about several things but one of the things we're going to talk about is the dream of homeownership. Is it worth the effort? At advisors Mortgage Group, we have been coming alongside and helping families with their mortgage needs for years. Hello, this is Rick Ripma your hard working mortgage guy you've heard me on freedom 95 for nearly a decade now we believe there are already enough hassles and headaches that come with the moving process. So let my team and I handle your mortgage for you. We have a proven track record of helping fans At least to make the mortgage process as seamless as possible, call me at 317215 7600 or visit hard working mortgage guy.com. That's 317215 7600.

Announcer  10:15  

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  10:27  

Welcome back, and thank you so much for joining us. We truly appreciate it. I'm Rick Ripma, your hard working mortgage guy and I'm Ian Arna with Advisors Mortgage. And we really do appreciate you joining us today. If you have any questions on mortgages, please let us know go too hard working mortgage guy.com That's hard working mortgage guy.com. From there you can email you can call, you can send a message, and either I will in or I will get back to you. And we'll be able to you know hopefully answer your questions and give you some good guidance and information. You know, and with that, it's time for our question of the week.

Ian Arnold  11:09  

Yeah, the question of the week is sponsored by Debt Crusher Mortgage, relieving the financial stress that comes with life. If you have a mortgage or own or own your own home, contact the experts at duck Crusher mortgage.com To have them put together a free savings report for you. So last week's question was the container without hinges lock or a key yet has golden treasure lying inside? What am I? Did you have any? I know a couple of people put in suggestions but I don't think anybody got it right. But the answer is an egg

Rick Ripma  11:43  

and egg. All right. Yeah, that's a good one.

Ian Arnold  11:47  

All right. So question for this week. And again, we will not give you the answer. Until next week, I can fly. But I have no wings. I can cry. But I have no eyes. Wherever I go, darkness follows what am I? And again, if you have, if you want to answer quickly, just go to hardworking mortgage guys.com and put it in there? And we'll tell you if you got it right.

Rick Ripma  12:10  

Yep. That's a great question. And that now let's talk about the dream of homeownership. Is it worth the effort?

Ian Arnold  12:16  

And that's what we get a lot of times is people who've never owned a house, what is the question? Is it worth it? And my whole thing is always, I think it is, and we'll go through some of those reasons why. The first one is homeownership can contribute significantly to your financial wealth. I mean, so for instance, you are if you're not, if you don't own your home, you're paying rent. So let if you put in $1,000 a month to rent think about this. After one year, that's $1,200 that you just gave him 1000 12,000, not 1200. But $12,000, you just basically threw away. Now when you play now apply that to a mortgage, someone's gonna go to your principal interest, someone who's gonna go your escrow and stuff, but overall is going to your principal is going to drop, right. So, what you owed on the house, not only that is your, your equity in your house is going to usually always increase year over year. So when you're looking at-bat, you are if you have a $200,000 house, and last year equity increased 19%, then you're looking at your in one year your house went, You gained equity of 38,000. That's so if you were to sell your house right then and you got that you'd sell for 238. So you just made almost 40 grand, I'm sorry. So financial, well, it's there.

Rick Ripma  13:52  

It's definitely there. You know, when you look at that, let's just say on that, if they had a mortgage at $100 a month, or $1,000 a month, and 100 of that was the principal and interest, or the principal going towards principal, everything else principal, interest and prepaids, that type of thing. Let's just say that's what it was. They you look at that, and you go well, I only gained $1,200 in equity that way. But when you use your example, you made $38,000 on the increase in the appreciation of the house, and $1,200 So now you're at now now you're at 939 to $39,200. Now, of course you got some expenses to sell the house, things like that, but you're still way ahead, and that's just year one correct. And we can expect 19% every year. That's not That's not reasonable. But every year you're gonna pay more principal so you're low, you're gonna lower the balance. So, you're gonna have more equity that way and you're going to continue that appreciation. I read where the and I'm going to have the numbers a little off but the average homeowner has 500 $100,000 More net worth than the average renter? I mean, it is significant.

Ian Arnold  15:08  

Yeah, I mean, I don't think people realize how much it grows over time. If, if you look at it as a house as a stock, think about it as that term, don't think of it as a place, you're just living, think of it as a stock. So it's gonna go up and it's gonna go up, but mostly, it's going to go up over time. So if you look at it, that way, you can see how it's going to keep increasing. And you look at that as a source of income. I mean, that's, that's where you want to look at it.

Rick Ripma  15:39  

Right is it'll make a huge difference. A couple of ways that matter. So you buy it, you're buying your first home. One of the first things you need to look at, it's not the only thing when you're buying your first home. Most of the time, it's not your dream home, it's you it's a stepping stone starter, home to starter home, it's a stepping stone. What matters, one of the things that matter greatly when you're doing that is the anticipated appreciation you're going to receive. Because the more appreciation you get for that home, the more money you have to take to your next home. So you can afford a nicer bigger home more towards your dream home. Still, maybe not be your dream home, but it may be your dream home. All right. So it really does matter. And a lot of people don't I think they put that kind of in the background. They look at we look at all the niceties the, you know how big the bathrooms are things like that. You know everything else. But those you know, where you buy has to work for you. But also look at the quality of the investment. One of the great ways and I think this is what you did, it's certainly what I did, I bought the lowest end in my neighborhood. You know, I bought at the low end, when you're the lower-priced home, you tend to do much better definitely than the highest-priced home. Yeah, they

Ian Arnold  17:07  

tell you not to buy the highest price. Especially if you're looking at it as an investment. Because you buy the highest one, everybody else has to come up before you start going up. If you buy middle to low, you're gonna go up because as soon as those the bigger ones go up, you're automatically gonna start shooting up.

Rick Ripma  17:27  

Right? Yeah, it makes a huge difference. And it's, there are so many things there that matter to that. So you just have to make sure that you know, that's something that that that you're looking at, you know, what's the next point on?

Ian Arnold  17:39  

So the next thing is, let's not just talk about finances, let's talk about emotions. I don't know how many times Rick probably got it and it'll hit home. As soon as somebody closes on their first house, and they've never owned a home. I've gotten several calls afterward because I do the follow-up call and all that. And they'll be like I can't, my wife, as soon as she got in the car, she just started crying. And when you first hear that, you're like, Oh, my goodness, that's not good. But it's the cry of joy, that they never thought they could have homeownership, that they're no longer paying their landlord to live in a place. I mean, it's so I don't care how long you've been doing this, it always hits you in the right spot, you're like, Oh, that's nice to hear that we were able to help them.

Rick Ripma  18:25  

Yes, it makes a huge difference. It's a driver, of why we're in the business. Correct. And it doesn't matter doesn't even have to be the first time the first time is very exciting for people. But that second home, you know, five, six years later, 10 years later, 20 years later, or a year and a half later, whenever it happens to be has a very similar effect. It's something that people care about. Correct. You know,

Ian Arnold  18:51  

I mean, it's not just that I mean, usually, the first home you sacrifice some of your on your wish list, your second home, your third home, you get a lot more of your wish list. And that even hits an indifferent spot. I mean, the things that you always dreamed of, but we're not able to get until now. So that's the nice thing and the emotional for me it's just the whole emotional thing of it is yours. And I think is the biggest thing is it's especially in this type of society we live in today it's more emotion-based and stuff like that. And I mean back in Rick's day people try to not show as much emotion now it's more people show a little bit more so by thinking about it that way, there's a huge emotional aspect to owning a home and living in your own home.

Rick Ripma  19:50  

Yes, but you know, on the emotion piece, I'm not sure it's I have no people want to put it on ages. You know this, this group, but I do really believe that there's its personality more than anything. Now, there may be more people that show emotion. But I know, you know, on my, on my mom's side they're English and the English are known for not showing emotion. You know,

Ian Arnold  20:15  

The battle there goes all of our English listeners, but my

Rick Ripma  20:19  

mom who was, 100% English, was very emotional. My dad, on the other hand, was from Norway, Norway, that area. Okay, Holland, that area, that's where his family came from. And he was not very emotional at all. So everybody's different. And I, you know, I'm not a highly emotional person. It's not it's not my, my nature. So, but it doesn't mean thanks. You know, somebody who doesn't show emotion doesn't mean they don't have emotion. I think that's something that also gets correct, you know, kind of, kind of, they miss that. So the bottom line is, that homeownership can be hugely beneficial, especially the first time and it's a great stepping stone. Is there anything else that you wanted to discuss?

Ian Arnold  21:12  

I mean, those are the two major points. I mean, the I mean, again, the financial thing is where most people, especially if you're looking at later in life, especially if you're younger, the mid-30s, mid-40s, that's where you're looking, you're looking financially than anything. Now, as you get older and stuff, a lot of times, you've already had the house, when you're 5060, you're most likely not looking at moving up, you might look at downsizing, which I know several of our clients have done, once a kids move out, you don't need the six bedrooms, four bath with two people living in it, you know, so you got that opportunity to sell and then downgrade a little bit. So

Rick Ripma  21:55  

yeah, you know, it's a hard thing to do that, that you think that you're downsizing. And when you're thinking about downsizing, this is kind of it may not be 100% accurate, but it's kind of what I've seen over time. Downsizing means you're changing the size of your home, changing maybe you know where you live, but you're not necessarily changing the value of the property. It is because of how houses have increased. Many, if you downsize, you may times have a smaller home with the same value and maybe even more expensive. So it's not when somebody's looking to downsize, I've had so many people who you know, we want to downsize and they're looking at it, partly because they want to lower their payments, or they want some cash, you know, they own their house free and clear, they want some have a little cash. And then they find out. It doesn't help them any downsizing doesn't do what they were hoping it would do, which is lower the amount of cash they either have out or the mortgage size that they have. So, it's just one of those things to remember. The other thing I noticed this is from spending 11 years with a new home builder. You'll get people who come in and want to downsize. And so, they're in a four or 5000-square-foot home, maybe a 3000-square-foot home and they walk through an 1800-square-foot home. And what do you think they're saying,

Ian Arnold  23:21  

Oh, this feels like a garage. It doesn't feel like there's a thing.

Rick Ripma  23:25  

It's, well, this room isn't big enough? Yeah, well, this room is big, you can't downsize and have the same size room. Correct. Okay, and all the same rooms, you can't do that, that that isn't possible. But that's that is the difficulty in it. It's, it sounds good in our heads, but it's not always the easiest thing to do. I had some friends do it. And they did, they ended up going from a probably a 5500 square foot home to a maybe 2000 square foot home. And they did it and they are very happy. But they really didn't change the value very much. They just had to go to a different location bought a newer home. And, and it's and they love it. And they're very happy. But it was difficult because there's so much you have to get rid of when you have when you're losing two 3000 square feet. I'm sorry, you're losing a lot of your stuff. Yeah. And maybe we all have too much stuff. Well, you know, it may be now or never for spring homebuyers, you know, as they look at the spring market, you know, we got rising prices and higher mortgage rates, you know, so what does that mean? You know, with these increases, what does it mean? And, you know, is the housing landscape is it shaping up to be more of the same?

Ian Arnold  24:41  

It'll you're going to increase and how they're projecting an increase in houses for sale here soon. But the rates Yeah, as we talked earlier, the rates are gonna go up for a little bit and before they start dropping, but also the supply and demand. So that's the whole thing when you're talking about houses for sale. So, with the supply, so low demand is gonna be right now is so high, the prices of houses aren't dropping anytime soon. I mean, it's just not the way. So, people, when there are 100 people shopping for a house and there are only 10 houses out there, the prices aren't coming down. So especially if you're looking now you're going to have to bid. If the house is just listed, you're going to be right on it right away. And I'm saying in the first couple of days, you and your realtor need me out of that house immediately. And then put an offer and don't go home and say let me think about it for a few days. Because by the time you go to put yours in, they'll say it's pending.

Rick Ripma  25:43  

Yeah, you don't. And I've heard other markets are slowing a little bit. I have not seen that in the Indianapolis market. And I saw a report a couple of days ago that said that the volume of homes coming into the market is dropped. So, we're getting fewer homes coming in. So there are fewer homes to buy, which is heating up the market because there just isn't enough inventory out there. And I think you're exactly right. It's one of those things where, you know, the prices aren't going to be dropping, I think what's going to happen is the amount of appreciation is going to go down. We can't continue at 19%.

Ian Arnold  26:22  

So do you think it'll actually go the appreciation and go negative? Or do you think like with MMA, I think it's going to stay where you might go for a few years, maybe two 3% increase, but it won't be a drastic increase?

Rick Ripma  26:35  

I think it's going to slow down. So, I don't think we're going to be at 19%. I think we're going to be it's hard to say I think we're going to drop this year, a little bit. I mean, right now it's hot. Right now, we're still seeing that 19%. So, unless it's I think the market is going to slow down a little bit. But that may not happen. So, I think this year is still going to be a good year, it's going to be 10 12%. So it's going to be a good year. Well, Ian, it looks like we're running out of time. So, I do want to thank everybody for joining us today. We truly appreciate it. We hope you have a great Saturday. And if you would like to talk to us about mortgages, please get with us hard working mortgage guys.com That's hard working mortgage guys.com. Thanks again, and have a great weekend. Hi, this is Rick Ripma, your hard work and mortgage guide advisors Mortgage Group. You've heard me on the radio for nearly a decade now speaking to a loyal audience about mortgages in my industry for a sustained period of time has allowed me to partner with and save money for so many people. The industry is always changing. And so are the do's and don'ts for the first-time and repeat homebuyers because I believe in helping and educating. I also host my own show right here on freedom 95 I'd love it if you join me every Saturday at 330 will dive deep into the trends of the ever-fluid mortgage world. And as always, I'd love to talk and see how I could save your family money and stress. Please call me at 317215 7600 or visit hard working mortgage guy.com That's Rick Ripma Your hard work and mortgage guy at advisors Mortgage Group call me 317-215-7600.

Announcer  28:17  

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