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good afternoon I'm John Schink from Deerwood Realty and I just flubbed that intro really bad I started deciding I was gonna I was supposed to announce my presence like you don't know who I am you're just random people out there um but it didn't go well I could have like hey guys it's John but I don't know that that would have helped like you don't know who John is but anyway I'm practicing and and that's that's what we're doing so um wanted to go over this uh this thing that I saw so if you or I like do something wrong um or we want change we could write a letter but no one would care right well the Housing Industry is getting a little bit upset with the current situation so they wrote a letter to to the uh head of the FED Jerome Powell to um you know let him know that they were upset right it's always been funny like if you look in Congress if if like if you watch those people if you watch like a senator will say he'll demand that the FBI release all documents related to such and such and the FBI just tells them to go take a hike I don't care I don't care at all and uh and it's you know like you back in the day I was doing something and uh I called I called my attorney and he's like what do you want me to do write a letter yes he's okay okay that's 250 bucks that was back then with inflation God writing a strongly worded letter now would be probably at least a thousand I'm thinking anyway um what I wanted to do is how I wanted to set this up is I'd like to read the letter first then we can go over some commentary on the letter um and just see where where you sit and where where I sit on this this whole issue so here it is okay and we'll just read it in entire because you know we've never seen we don't get to write letters that people read dear chairman Paul now this is from the National Association of home builders The Mortgage Bankers Association the National Association of Realtors so yeah I would say that these are you know people that are very interested in how the the housing market is working it's regards uh providing Market certainty on rate path and MBS sales those are mortgage back security okay here we go dear chairman po that's nice to start off the Mortgage Bankers Association National Association of Realtors and the National Association of home builders right today to the Board of Governors of the Federal Reserve System here and after the FED to convey profound profound concern shared among our our Collective memberships that ongoing Market uncertainty about the fed's rate path is contributing to recent interest rate hikes and volatility oh let's get let's do that again we're going to convey profound concern shared amongst our Collective memberships that ongoing labor or ongoing Market uncertainty about the fed's rate path is contributing to recent interest rates hikes and volatility so because so what they're saying is because we don't know what you're going to do other people don't know what you're going to do and it's causing

volatility okay well that's you know we never really know what the fed's going to do so okay it says this is has exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and H sale volume these Market changes occur amidst a historic shortage of attainable housing now we've heard affordable housing they've gone with attainable

housing um so they're saying because we don't know where the rates are going to go it's hurting housing affordability because rates keep rising and um it's creating disruptions in the marketplace which was the whole point of him raising rates in the first place H says according to NBA's week latest weekly application survey data mortgage rates have now reached a 23e high this was of October 9th dragging application activity down to a low lasting in 1996 I graduated high school 1995 the speed and magnitude of these rate increases and resulting dislocation in our industry is painful and unprecedent in the absence of larger economic turmoil and I would just disagree with that I would just disagree with that we have a massive amount of economic turmoil it's just being papered over I mean inflation is a real problem okay and the FED is trying to fix that real problem but there's also this thing called spending and the government is spending and spending and spending and spending and making our money worth nothing anyway today the spread between the 30-year mortgage rates and the 10-year treasure yield is at historically high levels signaling deep-seated uncertainty about where the FED is headed that spread to be honest with you has been there the whole time that they've been raising rates and it tends to indicate that it's supposed to indicate of uh definitely of uncertainty amongst the bond Traders that's that's the theory um and you know what I don't think they're they're too far off from that the difference between the current spread and the long run average indicates mortgage rates for home buyers across the country that are at least 120 point 20 basis points higher than they otherwise would be in other words the uncertainty induced mortgage to treasury spread is costing today's home buyers an extra $245 in monthly payment on a standard $300,000 mortgage which by the way is not even a median priced home anymore in the United States further rate increases and persistently widespread post broader risk to economic growth heightening the likelihood and magnitude of a recession and so if you get this like do you think that chair do you think that chairman Paul actually reads this or do you think he has one of his people read it and even then like they're saying if you keep raising rates with these spreads you're going to hurt the industry and his whole thing is he's going to try and hurt the industry that's what he's been tasked to do there's been inflation and now he's there that he started or the FED started and now they're going to put it out by raising rates to ridiculous levels furthermore a leading source of inflation in recent months has been increasing in shelter costs in the August CPI report consumer prices were up 3.7% while shelter costs were up 7.3% in July shelter inflation was responsible for 90% of the gain for Consumer prices the most effective approach to tame shelter costs and assist on the broader inflation fight is to facilitate the construction of attainable affordable housing there's that word affordable housing we know we we know what that means that doesn't mean what what they they write sustained wide spreads or further increases in interest rates make this economic goal more challenging by limiting lot development and home construction exacerbating housing Supply and pricing out millions of households from the goal of home

ownership so so here's my here's my problem with that is look the inflation is Raising its head in in many different places and it's definitely in housing there's no there's no doubt about that but that's why they keep raising the rates we strongly urge the FED to make two clear statements to the market so they're saying now now fed you need to go ahead and do this or else we'll be upset the FED does not contemplate further rate hikes and the FED will not sell off any of its mortgage back security Holdings until and unless the Housing Finance Market has stabilized and mortgage to treasury treasury spread have normalized huh the the FED should not ever say that they will not contemplate further R they should they should not they don't speak to the National Association of homeb Builders or Realtors they they don't care it's not their that's I don't care at all and then the FED will not sell not now you're telling the FED what to do with its balance sheet like do you think that they really care these will provide the market greater certainty about the fed's rate path and its plans for the mortgage back security portfolio and reduce volatility for Traders and investors um greater Market certainty doesn't matter when interest rates are at 8% or mortgage rates are at 8% and the median price of a home is over $400,000 like you're not you we don't need Finance stability for that to be the case and I would just ask like look in 199 96 when the mortgage applications were at their lowest was there Financial stability then what about in 1980 see this is this letter is is nonsensical it's it's not based in the real world housing activity accounts for nearly 16% of the GDP according to the National Association of home builder estimates we urge the FED to take these simple steps to ensure that this sector does not precipitate the hard Landing the FED has tried so hard to avoid well it's coming it's coming so then now like so what was the point of the letter the point of the letter was to market the National Association of Home Builders Association of Realtors and the National Association of mortgage folks I forgot their name um I'll get it let me I feel bad uh The Mortgage Bankers Association okay so but then now they're hoping to get a response in the media like to pick up on the story to put more pressure on the fed and so let's look at an article written on CNBC and see if we think it's you know decent all right here it is and somehow I got to the end of it again I didn't put it at the top but I'm sorry so it says Housing Industry urges pal to stop raising interest rates or risk in economic hard Landing if you think that that a hard Landing is not coming already We Just Disagree right so let's get into it it says top real estate and banking officials are calling on the Federal Reserve to stop Rising interest raising interest rates as the industry suffers through surging housing costs and historic shortage of available homes for sale and I just want to reiterate surging housing costs are a result of the inflation the FED is trying to Tamp down inflation because you have surging housing costs 16% of the economy is based on the housing market and you've got massive inflation there so the fed's doing what it's been tasked to do we can disagree with how it does it and we can say we don't like it I certainly my transactions are just terrible right now as a real estate agent right because my buyers aren't buying and my sellers aren't going to sell they're the 3% fixed mortgage they don't want to sell so all that's coming to the market is people that have passed people that are divorced um if you have to move for a job or something like that those are the people that are moving it's not anybody else if you've got a house right now at 3% you're probably not going to listed anytime soon but the FED caused that because they had naturally unnaturally low rates to try to spur the economy so anyway in recent days several officials have noticed that the Central Bank could be in a position to hold off on further increases as it assesses the impact the previous ones have had on various parts of the economy however there appears to be little appetite for easing with the Benchmark fed funds rate now pegged in a range between 5.2 and 5.5% the highest in some 22 years and again I would say that um the FED probably should have started earlier and put it and and should have um waited they said that it can take up to a year before any sort of interest rates the effects of raising interest rates will show up in the economy I don't know if it's true I'm just saying that's what's said at the same time the housing market is suffering through constrained inventory levels caused by artificially low rates and investors buying millions of properties prices that have jumped nearly 30% caused by inflation okay after you printed all kinds of money for various reasons since the early days of the co pandemic and sales volumes that are off more than 15% a year ago caused by the combination of high interest rates which are from the FED uh and then and and uh constrained inventory levels also because of the FED policy they've really put them themselves into a a hole here it says the letter notes that the rate hikes have exacerbated housing affordability and created additional disruptions for real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume these Market changes occur amidst a historic shortage of attainable housing well I mean the prices went up because of inflation the rate hikes have not really exacerbated it as much as it kind of showed it kind of showed like hey inflation is here and it's in housing definitely in housing and probably need to do something about that at recent meetings Paul has acknowledged dislocations in the housing market during his July news conference the chair noted this will take some time to work through hopefully more Supply comes online um but as the rates keep going up you're going to start seeing less and less construction what's what's what's putting what's putting people I mean still making the I mean what's allowing developers to still try to develop Homes at this point is um the fact that prices haven't collapsed I mean if prices start going down and the and your interest rates are going up you know you're not going to like that as a as a developer it says the average home price is climbed to $47,700 with available inventory at the equivalent of 3.3 month Nar officials estimate the inventory would need a double to bring down houses and look if we're at 6 months on or more than six months on available listings that is that becomes a buyer Market okay but man we're still three months off from that you you got a serious problem here the speed and magnitude of these rate increases and the resulting dislocation in our industry is painful and unprecedented in these in the absence of larger economic ter I told you about this when we were reading the letter I don't I don't I don't agree with this I would say the speed and magnitude of the price hikes due to inflation the asking prices of homes would be the biggest problem the the inflation the inflation part is worse than the um the rate increases in my opinion so that's that that's that I put it right down here what do you all think you should put in the comment section you should talk about this I mean maybe you don't agree with me maybe you think that uh house prices are okay and it's just the interest rate that's the problem the mortgage rate now I I mean I just I'm I don't I'll be I doubt that I'll be convinced otherwise I'm pretty set in my position here as far as the FED selling mortgage back Securities or things like that I'm not going to get into that on this particular uh episode because it's like it's a whole different deal but it's like the the FED being the FED is an odd position you're always going to be being attacked by someone for something rightly or wrongly so I mean the FED does not control spending Congress controls the spending and look at what they've done look at what they've done so um with that I'm going to head on out thank you for watching thank you for listening I will catch you on the next one