From our CEO's desk
Hi, it’s Mendel Klagsbrun here.
As a grandfather in the mortgage industry (and in real life!), I wanted to offer a few tidbits of insight. With Hashem’s help, I’ve been in this business for 25 years – from 1997. When I first entered the industry, there was a refinance boom; people refinanced to a 7% interest rate – from 8-9% and up. Then came September 11, 2001 when rates jumped up again to 8+/- for a period of time and beyond.
Today, the news is filled with screaming headlines of the so-called upcoming (housing) crash on the heels of the rate increase. The fact is that the Monthly payment for a $600,000 loan went up from approximately $2,530 to $3,550, which is more than $1,000 per month. Everyone is worried about the upcoming housing market crash. There is a lot of anxiety and uncertainty. “Will we have another crash like 2008?” and so on.
In my professional opinion, I don’t believe we’re at the same stage as 2008 at all. First of all, what led up to 2008 was mainly the types of loans that were underwritten at the time: over 100% LTV (loan to value); option ARM (adjustable-rate mortgages); and others, which tricked people into low payments in the early months, with sharply rising payments over time. Additionally, the guidelines were irresponsibly lax—talk about the part where you didn’t even have to show any income documentation; we just had to check your pulse, and voila! A loan was approved! Anyone with a heartbeat was able to easily get a mortgage. This artificially drove up housing prices because the price didn’t matter and you didn’t have to put down much or anything. When the banks went down the drain due to the masses losing their ability to make payments, the banks had to foreclose on the homes, which was really worth much less than what the person owed on it.
Fast forward in 2022. We had a huge increase in housing prices, in part driven by the abundance of money the government pumped into people’s hands—several trillion dollars worth. (To visualize 1 trillion dollars, think of getting 1 million dollars a day deposited to your account over the course of 2739 years.) Another contributing factor were the historically low interest rates. We now have the inflation monster, so home prices keep on climbing up and up, with bidding wars on every house before it even comes onto the market. When the government started taking action and hiking interest rates to try and control the raging inflation, mortgage rates started climbing up (because investors are choosing government bonds instead of mortgage bonds – NOT because the government controls the mortgage rates), people started freaking out that a huge market crash will ensue. There probably will be some sort of adjustment in the housing market, but we are by far not in the same position as 2008. We have a huge supply vs. demand shortage; mortgages are now given out by lenders in a very responsible manner; and historically the rates of today are the norm. What is happening now is that the government went from throwing money at people to suddenly choking it off. The shock is what hurts, and the sudden rise of interest rates are making people worried.
I believe that the time to buy a home is now. Everyone needs a house to live, if you want to rent, your landlord is also going to have to raise your rent if he has to pay more. The best time to buy a home is always NOW, and if (rather when) rates go down again, you can always refinance and pay a lower payment at that point. What you need is the right company and the honest professionals to guide you and hold your hand during the process. If you’re looking to buy even in 6 months to a year from now, you should work on your finances right away, get everything in order, make sure you know how much funds you will need, get pre-approved, and we can even get a full COMMITMENT so you have the best chance that the home you like lands by you IY”H.
To accomplish the above you would want to deal with a company that already lived through and survived such turmoil in the past. You want someone to responsibly guide you and point you to the best place. When you get a pre-approval from a known trusted broker, the agent will gain confidence and know that you’ll be able to get to the closing table well prepared and on time. We had the opportunity to guide thousands of families over the past 25 years, and look forward to take you home.
Writing to you from the Home of Results™
Founder and CEO
and the professional TEAM at Funding Source