All In Uncensored with Ryan & Bryon

00;00;00;00 - 00;00;09;12
Unknown
I've got a question for you, Ryan. What is it, Brian? What causes interest rates, mortgage interest rates, for that matter, to go up or down? Let's dive in and check it out. Let's find out, guys.

00;00;32;16 - 00;00;36;25
Unknown
Here we are, another episode. Hi, Brian. How are you? Good.

00;00;36;25 - 00;00;58;22
Unknown
Ryan, How are you? Great. Good. You know what today is? It's another great day. And the start of the masters. Hol man, my favorite weekly year. A tradition like no other. If. If if you're on video watching this, I am wearing my master shirt today. Speaking of masters, we're going to master the conversation about interest rates. Okay, let's do it.

00;00;58;25 - 00;01;17;11
Unknown
This week has been a doozy. Yeah. Crime Mini Pete. It's been a whopper. So what actually goes into an interest rate? The Fed moving the rate up or down? We talked about this in a different episode, but that's not really what drives interest rates going up or down on a daily basis. No, a lot of times it's already built in.

00;01;17;16 - 00;01;37;17
Unknown
Yeah. And right now we have two Fed cuts, supposedly already built in. So when the Fed does lower the rates sometime in the future, if they even lower the rates this year at all. That's a different topic that we don't we don't want to we don't want to go into that. But we do think that the Fed's going to lower rates.

00;01;37;17 - 00;01;57;08
Unknown
Yes, eventually it is going to take longer than expected. And we are just here to inform you on what's going on in the market. Let's let's wind back in a little bit here, back to about, what was it, December when that fund manager for IAG came out and said, there's going to be six Fed rate cuts in 2024.

00;01;57;10 - 00;02;20;09
Unknown
And then every real estate agent out there was posting it like crazy on social media. Six cuts this year. Rates are going down. awesome. This one didn't happen. Wah wah. Not going to happen. Now the feds are saying maybe to by the end of the year. Well, they're saying two, but we will see. Yeah. Everybody expected rates to start coming down in March.

00;02;20;12 - 00;02;47;14
Unknown
And the biggest thing that is stopping the rates from coming down is inflation. GLEASON Yeah, so there's three main things. So we got a what was it, a CPI report? CPI report is Consumer price Index, and that came out Wednesday this week, which would have been what, the ninth? Yes. It came out Wednesday. And there's three things that currently are driving inflation like crazy right now.

00;02;47;14 - 00;03;14;28
Unknown
The obvious one is shelter. Shelters, the most expensive. 45% of inflation. The Consumer Price index report, 45% of that report is the cost of shelter. Yes. And they were expecting rents to start softening and coming down. That hasn't happened, folks, and it's hopefully going to start happening a little bit. But yeah, so that at the end of the year they want total rents to raise by three and a half percent.

00;03;15;01 - 00;03;35;07
Unknown
Well, quarter one of this year, they've already rose 2%. Yeah. So if we just average point two for the rest of the year on wages, we're good. we're good. Do you think it's going to average point to in rent increase per year. Not from what history says. Yeah, I don't think so either. Now so we're going to have that stubborn inflation being present in the shelter aspect of things.

00;03;35;10 - 00;04;02;12
Unknown
The other big thing in the CPI report is energy, oil or gas. Yeah. man, I don't know about you, but I've seen it at the pump. Yep. I have to thank God for Safeway Rewards. I love those things. I pay for it in groceries, but whatever Safeway and Costco are my to go to for those. Yeah. And let's let's talk about the price of oil for a second.

00;04;02;14 - 00;04;23;00
Unknown
Let's just have a real talk here. We need to we need to have a real talk with you guys. If the president could actually control oil prices and dictate the outcome of the election, don't you think he would have probably done that by now? Yeah. Instead of gas prices being, I don't know what what are the average now for 2430 in our area.

00;04;23;02 - 00;04;41;17
Unknown
Don't you think that he'd want them down in like the $2 range. Yeah. To guarantee his reelection that would really help him. Yeah. Yeah. That's what he doesn't have control over that stuff, people. Right. Stop getting political about stuff you can't control, Right? Same thing with interest rates. Everybody. election cycles coming up, gas. What do you watch?

00;04;41;17 - 00;05;00;26
Unknown
Rates are going to come down if and the ironic thing about that everybody everybody says he can't even make a correct sentence because he's a little bit senile or whatever. I feel like that in here sometimes. I do too. yeah. But if he really had that kind of power, don't you think he would have already done something about the rates?

00;05;00;29 - 00;05;18;25
Unknown
One would think, Yeah, kind of crazy to think about it from a logical perspective. Elections coming up and what, seven months? Yeah. Yeah. You would think that he'd want rates to come down and again, solidify his reelection. But how they know are they going to go down what they expected they would go this year that I. Angie guy No.

00;05;18;27 - 00;05;39;00
Unknown
Now speaking of which you talked you told me this morning in a phone conversation, where should home buyers and people looking to get mortgage loans expect rates to just kind of be bobbling around between and just get comfortable without that being the new norm? I think the new norm is going to be between, let's call it six and eight.

00;05;39;02 - 00;05;55;10
Unknown
Are they going to dip into the fives? Yes, I do believe they will dip in the files. It's going to take longer than people thought. Are we going to see the floor as again, who knows? It's going to take a huge catastrophic event to get back down into the force? Yeah, I think so, too. What takes rates down?

00;05;55;12 - 00;06;18;07
Unknown
War. That's not good. Unemployment. Not good. Yeah. Speaking of it, let's touch on unemployment for a second, because that was another factor that's kind of going into the stubborn inflation. So we had a jobs report last week I believe. Yup. And predicted 200,000 200,000 jobs were going to be created and it came in at 300,000. But there's a caveat to that, right?

00;06;18;09 - 00;06;43;16
Unknown
Most of those jobs created were part time employment for the gig economy type stuff. For the most part, if you if you take all of that, those numbers, the ages of 18 to 25 and 55 and over were the biggest factor of that $300,000 jobs. Yeah. And for the most part, those people are trying to climb and they're trying to supplement their current income, correct?

00;06;43;17 - 00;07;09;11
Unknown
Yep. So the main working demographic between the ages of what did you say, 25 and 55. Correct. Guess what? We actually saw the job numbers in that demographic negative. The other dropped the drop. Yeah. So the way that the media is interpreting the data coming out in the way that they're actually interpreting the data itself and what statistical markers are using to interpret inflation, it's totally arbitrary and subjective.

00;07;09;14 - 00;07;25;11
Unknown
So like if the Fed's not careful, in my opinion, they're going to run us into a recession and things are going to get ugly. I agree with that. Yeah, if they get ugly, rates going to come down, but who cares? Rates come down, you're going to be unemployed. You can't you can't buy a house anymore. Unemployed. And that's the tragic truth.

00;07;25;11 - 00;07;50;18
Unknown
They really want unemployment numbers to go up in order to justify bringing rates down. Yes. And people already struggling. So it's like, I don't know. Yeah, it's a topic for another day. Another big thing in the CPI is motor vehicle insurance. my God. Year over year it's gone up 22%. Yeah, this this thing's a big thing. That's that's arguably your house payments going to be your largest expense.

00;07;50;21 - 00;08;23;02
Unknown
And honestly, insurance is probably going to be your second largest expense. Maybe, except yeah, insurance, generally speaking, between health care and auto and home. Yeah. So having that went up, what, 22%, 22% year over year, 2.6% so far in the first quarter. So let's just do the math on that. If the average household has auto insurance, accumulative auto premium of 2000 per year, somewhere a lot more and it went up 22%, that means it went up over $400 or $400 a month.

00;08;23;02 - 00;08;42;17
Unknown
Call it for 80. So that's that's $40 a month more on their insurance payments. That stings, folks. That's that's real money. Yeah, that's real money. You go to the grocery store and $44 while these days doesn't really get you much. But yeah, it gets you a meal for the night for your family. Yeah. Instead, you're paying it for car insurance on top of the gas.

00;08;42;19 - 00;09;03;08
Unknown
And I think we need to have an insurance. We need to have insurance people on our show to explain why we're seeing these rising rates. But just from a purely actuarial perspective, insurance companies understand that climate change is real. So, folks, whether you believe climate change is real or not and global warming is real or not, it doesn't care if you believe it or not, it's happening.

00;09;03;14 - 00;09;18;11
Unknown
And guess what? The people with the money there have already factored that into their pricing. The insurance companies are pulling out of Florida and California. I mean, we've talked about this to a state farm, all state, to name two of the biggest ones. They're no longer insuring in the states of California or Florida. It's too risky for them.

00;09;18;11 - 00;09;38;02
Unknown
Too risky. But the big guys pull out. Why is it to risk premiums go up? They're having 100 year storm events every year, every month or maybe two, two times a year, like happening all the time. Yeah, we just had a couple of big earthquakes. That doesn't help insurance. I had a client, a potential client call me from Texas.

00;09;38;04 - 00;09;59;07
Unknown
They just had a wrath of storms roll through there. Doesn't have enough insurance to cover the hail damage. Like he's not insured for hail damage. So he has to take out a home equity line of credit to do $45,000 and repair to his roof in his home from hail damage. That's crazy. That's kind of crazy, dude. Let's get back to rates and movements and the Fed cuts.

00;09;59;07 - 00;10;20;02
Unknown
So obviously, we have not had any Fed cuts this year. Right. And a lot of people thought, all right, we're moving to June. Well, June is right around the corner right now. They're predicting 23% chance that the Fed will cut rates in June. I wonder what the percentage chance they're going to make a cut in July, 47%. So you're saying there's a chance.

00;10;20;04 - 00;10;40;07
Unknown
There's a chance. It's not in the positive? No, it's not. I personally think that rate cuts are going to start. I think we'll see the first one in September at the earliest. That is my prediction. I'd be more willing to bet money that Tiger Woods will win this Masters than the Fed's will cut the rate in July. That's good.

00;10;40;07 - 00;11;16;13
Unknown
I made a bet on that. You should pay to 40 to 1. That's pretty good odds. That's good odds. Go to win. Go, tiger. Yeah. So you guys kind of got an overview of what's going on with inflation. So and they also the other thing that you know we listen to mortgage NBC Highway with Barry Habib and like Brian's talked about before, we plug in to a lot of industry specific news sources that are data driven so that we can get real time updates as to what's going on with all the reports that are coming out that's driving the Fed's decision making and thus driving the mortgage backed securities market.

00;11;16;13 - 00;11;36;29
Unknown
So what just happened yesterday at the bond auction, it wasn't very good news was, the ten year bond auction really took a shit. Yeah. On top of the CPI being bad. So let's just talk about what rates did this week. Actually over the last couple of days, when the CPI report came out Wednesday morning, mortgage rates went up 75 basis points.

00;11;37;01 - 00;11;58;23
Unknown
Actually, they went down, which means rates went up. Yeah. What that means in layman's terms, if you were to lock alone on Tuesday. Well, let's let's back up let's look at mortgage backed security basically as a stock. Right? It's a bond. Yeah, it's a it's a stock. Yeah. Think of it as a stock for layman's terms. Just think of it as just a stock that when it goes down, it loses value.

00;11;58;25 - 00;12;24;23
Unknown
Correct. And so when it loses value, there's less demand. And so the rates are shooting up because they're trying to create more demand for it, correct? Yep. So I think I was a little backwards on my on my thinking there. If you at the rate on Wednesday versus Tuesday, it would have cost you .75 percent to get the same rate on Wednesday afternoon as it did Tuesday afternoon.

00;12;24;26 - 00;12;50;27
Unknown
Right folks that's a big job. Yep. And in terms of what kind of movement that is on the interest rate itself, it was 0.375 difference. So the same cost I price to an FHA clean out. So on that Tuesday before the bond market auction took a crap, I was pricing them out at 6.25 at a small cost. Yeah that same cost after Wednesday's bond auction was terrible.

00;12;51;00 - 00;13;08;21
Unknown
That's now three quarters of a percent higher. Yeah, just about it was like 0.375 to rate higher than what they could have got. So they that what they would have got in at 6.65 now is like almost 6.75. Freight rates are volatile right now. Yep. And you need to work with a professional that actually follows this stuff. Yes.

00;13;08;24 - 00;13;31;14
Unknown
And for those of you that are kind of like Biden, your time to get a refinance done to do debt consolidation, you should actually really be plugging in with us because we can get you on a rate watch program. And so we'll like have your specific scenario tied to pricing daily so that when it hits that right metric that makes sense for you, we can instantly notify you of that.

00;13;31;18 - 00;13;49;02
Unknown
Yes. Yeah, that's one of the things I'm excited about, where we're at and what we've got going on and how we can navigate these tough markets. Right now we have a lot of fintech behind us. Yes. And it's a beautiful thing. And it helps It really helps you, the consumer. Yes. And do you have any messages for realtors in this volatile rate environment right now?

00;13;49;04 - 00;14;10;00
Unknown
Education? Yes. Number one, education. You need to educate people on the lawsuit that just came out. You need to you need to be with a trusted adviser, a mortgage person that knows what they're talking about, to be able to educate your clients on what rate movements are doing. I started doing a rate watch program. not really a rate loss program.

00;14;10;00 - 00;14;33;10
Unknown
I started doing a weekly update to currently I have about 30 agents that I text it out to every week, and it's just my take on where rates are, what they were the previous Friday and what they are this Friday. It's every Friday that I do it and I've gotten really good feedback on it. Yeah, it just kind of shows them, you know, here's what happened in the market last week.

00;14;33;10 - 00;14;55;02
Unknown
This tomorrow is going to be a fun little update that I do not in the positive way but negative. You know to get a little bit technical in the in the mortgage backed securities bond market. I watch the A chart it's called Japanese candlesticks. And it gives you, you know, 100 day moving average, 200 day moving average 50 day 25 day.

00;14;55;04 - 00;15;20;22
Unknown
The 200 day moving average is the big one. And we've been above that since about middle of November. And just today with the CPI report, we dropped well below the 200 day moving average, which means we could freefall from here and rates could get definitely worse before they get better. Going back to the original topic, what moves rates?

00;15;20;24 - 00;15;50;14
Unknown
It's the biggest number one thing is inflation. Right now it's inflation and jobs. Yeah. So watch for inflation when inflation gets starts coming down. That's a good thing for us. When the economy starts, the economy just keeps on plugging away. And it's it's still good right now, which is amazing and I love that. But as the volatility of the economy gets a little bit worse, inflation starts coming down.

00;15;50;17 - 00;16;08;14
Unknown
Feds have to start lowering rates. That's better for interest rates, but it's not better for people working. I'm wondering, you know, as somebody listening to the show, they might be wondering, well, why do we even have inflation in the first place? Well, that's pretty easy to explain. So these past two administrations, like this is a totally apolitical statement.

00;16;08;16 - 00;16;37;16
Unknown
So the administration, prior to this one, they ended up having sweeping tax cuts for corporate America and the top 1%. So you've got like a he ended up being the equivalent of $4 trillion in stimulus for those that demographic trillion trillion with a T and then they had another $4 trillion stimulus. Was the COVID bailout stuff. Yeah. And so then on top of that, the following administration had a similar like stimulus package.

00;16;37;19 - 00;16;57;16
Unknown
So you've got this back to back to back. You know, when all was said and done, the administration prior to this one had $8 trillion more money pumped into the economy just in that four years. And we're getting probably close to 4 to 6 on this one. As we print more money, that increases inflation. Yeah, because you have more dollars competing for less goods and services.

00;16;57;16 - 00;17;24;15
Unknown
So if you have that and people have disposable money to go acquire things to a value, you're going to have more people competing for less things and that's going to drive the prices up. It's because supply and demand, it's it's a formula. So if you have an oversupply of money and you have less supply of goods and services is going to be a higher demand for those things and it's going to drive those prices up so it balances out well.

00;17;24;15 - 00;17;51;03
Unknown
Let's just hope that inflation gets under control. Yes, let's hope that people don't lose a lot of their jobs and let's just educate people that this is the new norm. Look, if if you're looking to buy, buy, if you can afford it right now, this is the time to buy. Don't worry about what rates are doing. If you can afford the payment on a house buy, you're missing out on future appreciation.

00;17;51;03 - 00;18;11;10
Unknown
If you don't buy right now, you too. It's going to cost you thousands of dollars if you don't buy. We were talking about this, I think, yesterday. So if you're a home buyer, now is the perfect time to buy, assuming that you believe that house prices aren't going to fall. Because I don't believe that. I don't believe that long as we supply and demand, yes, we don't have enough of a supply of homes.

00;18;11;10 - 00;18;28;29
Unknown
So all things considered, let's say houses continued to trend upward and appreciation just at a bare minimum of 3% year per year. Now it's a perfect time to buy if you're ready to buy a home. And if you were to wait for rates to drop, the values of the homes are going to keep climbing. So you've lost out on that economic opportunity to gain appreciation.

00;18;29;02 - 00;18;43;05
Unknown
But if you buy now and rates come down, you can always refinance into a lower rate later on. Correct. And if rates go up, guess what? You've walked into a rate that's lower than what then future rates are going to be and you can afford the payment already. Either way. You made a good decision, guys. Let's talk about that appreciation.

00;18;43;12 - 00;19;10;27
Unknown
You said 3%. Let's just say it's 3%. You go buy a 500,000 on house, which in our area is really low. That's starter homes, but a $500,000 house at 3% appreciation. On paper, you made $15,000 in year one. Yep. In equity, you're two. It's just over 15,000. So after two years in equity on paper, you've increased your net worth by over $30,000 by buying now, right?

00;19;11;00 - 00;19;30;15
Unknown
Yeah. I remember a friend of my wife, she was really hesitant to buy it because at a time I think it was before COVID. And so times were kind of didn't know if the rates were going to come down or go up and, you know, just didn't know if the timing was right. The price seemed too high for her, but she ended up paying 299 for this house, which at the time she felt was a little high.

00;19;30;15 - 00;19;51;07
Unknown
And I thought, man, this is kind of a high price for this area. Fast forward to I think it was about three years and change after COVID. She relocates to Texas. She ended up netting $100,000 on the sale of her home because it sold for well over 400,000 after three years of ownership. That's amazing, she that is like, where else can you do that?

00;19;51;09 - 00;20;16;04
Unknown
Real estate is a wealth builder. Yeah. You leverage your money, it grows exponentially. I mean, you might be able to make that in Dogecoin if you were one of the first to market on that. But dogecoin. Yeah. Elon Musk loves dogecoin. Yep. So wrapping this up, let's watching for inflation. Yeah. The feds are going to do what the feds are going to do based on inflation in the economy.

00;20;16;09 - 00;20;34;17
Unknown
Right? We can't control that. And if inflation has you down, give us a call. We'll help you put together a household budget and get you on A plan to deleverage from debt doesn't necessarily mean refinancing your house and tapping into your equity. But if we can at least help you educate you on some steps you can take to counter inflation.

00;20;34;17 - 00;20;51;25
Unknown
So my wife and I have done that. We've gotten rid of higher interest rate credit cards so that we don't have to make those interest payments on those things. That frees up cash flow every month. Yeah, we're cooking more from home. We're making different choices with how we spend our money. So I have a bad daily Starbucks habit.

00;20;51;25 - 00;21;14;00
Unknown
I'm trying to quit that. But if I was to make coffee from home every day, it's going to average out to about at eight bucks a latte. Now. Jeez, that's like $40 a week in savings. Yeah. I love my new home coffeemaker. Yeah, you've been rocking that thing. man. Yeah. Start starts brewing at 630 every morning. So maybe we could talk about the Masters on our next podcast.

00;21;14;03 - 00;21;26;14
Unknown
I can't wait to see who the winner is. I know it's going to be so fun to watch. Hopefully, Tiger. Let's go. Let's go. Thanks for tuning in, everybody. You know where to find us. And it's another great day. Another great day.