[00:00:11] Good afternoon. I don’t know if it’s afternoon where you are. I saw this article and I wanted to go over it because it’s odd. Now It came out in the middle of the week and I’m just getting to it now, but it’s just me catching up on stuff off. Let’s get to it here it says weekly mortgage demand increases driven by a strange surge in refinancing.

[00:00:35] And so what you’ll typically see if you’re a lender, what you kind of want, you kind of want a market where there’s high interest rates. So let’s just say like 5%, 6%, and then that’s where you get all your new purchases. And then what you’d like is the mortgage rates then to come down while the equity in the home goes up. The value of the home goes up for a few years and say about four or five years later, the interest rates down at like 3%. Well, then you take all your clients that you worked with at the 5% range and you call them all up and you say, “hey, great news, we can refinance your payment on your house.”

[00:01:17] That’s the ideal. That’s what you want. Now it gets a little tricky when you get into a situation like we’ve had now, where you’ve had historically low rates and now we’re up at 7%. And so in theory, not many people are going to be refinancing from a 2% mortgage up to a 7% mortgage. That doesn’t make a lot of sense or financial sense. So this article is strange because it says that there was a demand increase driven by a strange surge in refinancing. Now why in the world who’s refinancing a mortgage from 2% to 7%?

[00:01:56] Okay? And throughout this whole problem, what I’ve called a problem the last couple of years in real estate where prices are just exploding and interest rates have gotten out of hand, based on what I see, we’re about 7.39%. So we’re not doing great.

[00:02:16] It’s not a good situation because right now refinancing into 7% makes no sense. Also, if the value of the home prices go down and people have bought at 7%, you got to bring money to the table. I had a fly go by, I’m sorry, and I’m not taking it out. So people are going to be in a negative equity situation. They’re certainly not going to want to refinance. So let’s get into just it’s not a very long article. I just wanted to see a couple of things. It said it may be that borrowers are concerned rates could go even higher and so they’re jumping in. Now, it may also be that the number of refinances are so small right now that any minor change results in a big percentage move.

[00:03:02] So that’s probably what it is.

[00:03:08] It’s probably because there’s literally not that many people out there even getting mortgages to start with. So the refinance rate, it looks high as a percentage, but it’s because there’s very little volume volume on mortgages 29% lower than the same week one year ago. That’s not good.

[00:03:35] It’s just so weird. This market has been weird for all kinds of reasons. One, why would you pay over asking at 7% on a house? Like in the market in St. Louis is still super strong.

[00:03:50] Where does this all end? I have no idea. I tell my buyers that, look, if you want to buy a house now, just pre prepared that there’s probably going to be a loss in value in the future and then hope to keep your house long enough that you can overcome that.

[00:04:13] A lot of people like to say that buyers are stupid because they’re buying houses now and why don’t you just wait? And they don’t seem to understand that people get their families, people get married, people get divorced, people have kids and want to move into a new school district. I mean people die. I mean there’s all kinds of things that go on in the real estate market from a time basis or time perspective. It really doesn’t matter what the market is doing because you need shelter. Now you may say, well John, you should just rent if you’ve seen the rent levels I mean now these will probably go down soon but right mean the rent levels have been astronomical as well. So your chances of renting isn’t going to help you either.

[00:05:01] But I did think that was interesting and I did want to point it out because there are odd anomalies in the marketplace.

[00:05:09] It’s strange to see refinancing.

[00:05:14] My fear and this wasn’t in the article and I could be wrong my fear is that with the student loan repayments coming back online in October, my concern is that people are strapped for cash. Okay? I mean if you look at the credit card debt, if you look at like energy, gas is going up, prices are going up, inflation is rampant. My concern is people that bought in just two years ago are looking to cash out equity in their home even if it’s at these higher numbers because they’re struggling. Now I can’t prove this, okay?

[00:06:06] It’s my worry.

[00:06:11] I don’t want that to be the case. If it is, we’re in a lot more trouble than we need. But anyway, I just thought that was interesting. Wanted to bring it to your attention. Mortgage rates high 7.3% ish on a 30 year fixed refinancing now. Doesn’t seem to make a lot of sense but yet some people are doing it.

[00:06:36] That’s all. Hope you have a great day. I’ll catch you the next one.