We are joined by Mark Greenberg, CEO of Equity Mortgage Lending to discuss real estate, mortgages, interest rates and more! During the COVID-19 Pandemic, we have seen interest rates plummet as the price of housing continues to grow.
In this podcast, you will learn:
Mark Greenberg is the CEO of Equity Mortgage Lending, a full-service mortgage banker that handles purchases and refinances of primary residences, second homes and investment properties. Mark has been in the mortgage industry since 1981 and knows that asking proper questions is critical in understanding his clients’ goals. Mark educates his clients throughout the lending process while providing them with ample options so they can make informed decisions aligned with their personal and financial goals. In today’s digital landscape, Mark prides himself on sharing his experience and knowledge personally to provide the best services and products available in our marketplace.
Maggie: Thank you so much for joining us, Mark. It is so nice to have you on The Prosperous Life podcast.
Megan: Thanks so much, Mark. So to start, can you just tell us a little bit about what you do?
Mark: I am in the mortgage banking business and have been since 1981. And what we do is we help people purchase homes, and we help people refinance their existing homes, so they can get payments in an affordable area, or take cash out of their properties or take money out to fix up their properties.
Maggie: That seems really interesting. And I think right now is such an interesting time to talk about that. So many people are buying houses, and the market is so nuts right now. I think the big question on everyone’s mind is interest rates. They went down significantly with the pandemic. How do you see that affecting the housing market?
Mark: So in the past, I’d say the beginning of 2020, rates really dipped to an all-time low when they probably hit a range of 2.65%. And because of that, it drove the housing market. People started buying houses and buying bigger houses because they could afford more based on that. So it was a great opportunity.
However, low interest rates took a real strain on the inventory of housing, and whatever was existing on the market has gone off. Usually, you find a large portfolio of new homes coming on the market because people want to either downsize or upsize. And especially with baby boomers trying to figure out what their next steps are. We’ve found that people are staying in their homes longer, and people aren’t moving because they can’t find a benefit from moving. Usually, you would downsize and pay less. Now you’re downsizing and paying more. So people are saying “I want to stay where I am”, and they’re improving their properties. They were getting better interest rates or refinancing and restructuring their debt versus going ahead and selling their homes.
Megan: That is very interesting. So, where do you foresee interest rates and the housing market going?
Mark: Since January, they’ve increased from probably about 2.75-2.875%, up to 3.17%, which is about almost a half a percent increase in the interest rate, which is pretty dramatic. And what it means is, depending on what the economy continues to do, and depending on what the government’s going to put out on taxes, we’re going to find that the rates are probably going to try to creep up a little bit more. And the government’s going to try to keep them down to keep the economy stimulated.
What does that mean? In the long term, it means that we’re going to lose a lot of volume initially. Then as it spreads out and goes a little bit longer, they’re going to figure out what’s the best way to stimulate this economy with the inflation issues and the housing markets and the interest rates. It’s a constant balance with inflation and trying to stop hyperinflation.
Maggie: Do you foresee that affecting the inventory? Right now, we’ve looked for houses, and they’ll go on the market and are sold before we can see them. So do you think with the interest rates going up a little, we’ll see the market get more inventory this year, maybe next year? Or where do you see that going?
Mark: I don’t. We’ve got to realize and put everything in perspective that rates, a 3.25%, or even a 3.5%, are still historically low. So that’s been driven for quite some time now. And I don’t believe I see any major increases in inventory of properties coming on the market. You’re going to see it in slow dribs and drabs, depending on situations, but I don’t see any major changes of people selling their houses or any new major projects coming about. So, what you’re going to find is supply and demand will really dictate the value of a home.
And like you said, you’re out there shopping for a home, and you can’t find it, or you have to put in a higher bid or escalation clause. And we’ve gone through this before, where properties increased dramatically. And then we saw the financial crisis strike. And it’s just not the right time to buy a house at that point in time. If you can sell a house, it’s great because you can get top dollar, but then the question is, where are you going to go? Are you going to turn into a renter, which is not necessarily a bad thing, until the market changes are stabilized?
Maggie: Speaking of supply and demand, we’ve heard that Biden is proposing a first-time homebuyer credit of $15,000. What impact do you think that will have on the market if that were to pass?
Mark: It will create a greater strain on the properties that are available. It’ll either drive prices up dramatically because they’re going to find a whole new segment of the marketplace, but it’s really geared toward the person who’s been a renter. So you’re looking at more affordable housing areas, and that is not increasing dramatically, either. So it’s going to be hard for people to find properties. At that point, you may find a lot of people selling investment properties that they had in the past for rentals and just profit out on those types of properties. But we won’t know until we see. It depends on the areas, and it’ll hit the cities, the major metropolitan cities, more than it will in the suburban areas.
Megan: Do you think homeowners should look into refinancing their homes right now?
Mark: Well, last year, the rates were so low, and everybody was refinancing. So there were tremendous, tremendous volumes of refinancing. I would tell you that the wave was about $3 trillion of refinances in 2020. That’s not expected this year, just because the rates have slipped up a little bit. There are a lot of people who didn’t take advantage of the lower rates.
But again, depending on what your rate is, and depending on what your needs are, it will be dependent on whether it makes sense to refinance at a lower rate and depends on what you’re doing. If it’s just a rate and term refinance, that differs from whether you’re taking cash out and utilizing some of the other equity in your house for other purposes, whether it’s buying another capital expenditure or whether it’s just fixing up your house and maintaining it.
We’re seeing a lot of people making additions to their homes because they aren’t getting out and they’re not vacationing. So they’re just making their homes more of a paradise for themselves.
Maggie: That sounds so nice. We talked about refinancing. What about selling your home? I know you mentioned earlier that for people who have one home, the question is where do you go, and is it a good idea to become a renter for some time? What are the other factors that people need to consider if they are going to be selling their homes?
Mark: Well, I think the first thing you have to determine is where you’re going and what you’re going to be doing. I recently had a friend who was right outside of New York City in a suburban area. They put their home on the market; they figured it was going to be the height of the market. They sold it, and it went to sort of an auction scenario where they put it on the market at a low price. They got probably $200,000-$250,000 over what they had listed it at initially, and they ended up moving into a rental home. They’re not going to be putting the roots back down, and they’re okay with that for right now. Because now they have cash, and they think that cash is going to be king for a little bit. The question is, then what do you do as an investment with the money? And that’s what you guys are here for as well.
Megan: We did hear about some recent changes to interest rates for second properties and investment homes. Can you tell us what’s going on with that?
Mark: Fannie Mae and Freddie Mac had deep in their guidelines that a certain percentage of the mortgage-backed securities that they put in the market could not exceed 7% of what they are securitizing. Because of the rates being so low and people staying at home or wanting to get vacation properties, a lot of people were buying second homes and investment properties, and it took the percentage over the 7% threshold. So all of a sudden, they looked at this, and they said, we’ve got to stop the flow of that kind of product. And they put a ruling out there that just said it’s going to cost more, or you may be stuck with it as a mortgage banker and not be able to sell it to Fannie Mae if our portfolio is completely filled. So, in turn, everybody has increased their rates as a risk-based pricing structure for second homes and investment properties. We’ve seen an increase of 1- 1.5% in the interest rate for an investment property and, in addition to that, there were points that needed to be charged. So before, we may have been on an investment property, at 3.25-3.5%, it’s now 4.25-4.75%, and it was a point and a half being charged.
In second homes, it’s not quite as steep. But it’s the same scenario. If you have a second home, you really need to look at where your rates were, and you may have missed an opportunity to refinance. Same thing with investment properties because they may not have the advantage that they did before this happened. And it pretty much happened overnight. They realized what was happening in two days, and the next day, they said, we’re going to increase the pricing. So the risk-based pricing on the adjustments affected that immediately.
Maggie: I guess the people that have those properties already have some options. They could, of course, sell and then buy another investment property when the market adjusts, or they can stay. I mean, it’s just an interesting market. We have a lot of clients who have second homes, and a lot of clients have homes in Florida. And that’s a question that we get: is this a good time for us to sell this house or not?
Mark: Well, it’s whether it’s to sell it or to refinance it, depending on what the interest rate differential is, it is going to be dependent on also the loan size because you’re going to see savings. And ultimately, people are going to look to save money or build equity in their house quicker. So everybody wants to lower the cost of money. But you also want to figure out how that’s going to affect your asset base and whether you want to build up equity in a piece of real estate that may or may not appreciate, versus whether you extend it and help the property with cash flow.
Megan: Wow, there are a lot of considerations there. We’ve got one last question for you, Mark. And this is a bit of a personal one. What does living a prosperous life mean to you?
Mark: Being prosperous has always been about being able to be in a position of giving back to the community, whether it’s time or money, or in a lot of cases, both. I find that pretty fulfilling, and being able to enrich other people’s lives and being involved in a relationship with those organizations and those people that makes a difference in their lives.
When you realize it–and I think the pandemic has created this–we realize that we don’t really need a whole lot of material goods. And ultimately, money is important because it sustains us. It gives us food and the environment around us. But does that really fulfill our needs? It’s really helping the people without food, without shelter, without people supporting them as a resource. It’s about being a to educate people, which we like to do a lot with financial literacy. So it’s really just about being able to give back and helping the community and the world as a whole.
Maggie: That is a wonderful answer to that question. I think it’s such a great time right now to give back. It’s always a great time to give back, but a lot of people have suffered from the pandemic. I think it’s great what you guys do; financial literacy is so important. And that’s something we take very seriously as well, at Prosperity and The Hoffman Group. Before we let you go, can you let listeners know where they can contact you and find you online?
Mark: Absolutely. Our website is www.equitymortgagelending.com. We have an 800 number: 800-332-9221, and my email address is firstname.lastname@example.org.
Maggie: Thank you so much.
Megan: Thanks so much for being on show Mark. That was fantastic information.
Maggie: We will add your contact info to the show notes in case anyone missed that. And hopefully, we’ll have you back on The Prosperous Life sometime soon.
Mark: Wonderful. Thank you for the opportunity, and I hope that the information I provided was helpful to all.
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Contact Mark Greenberg at Equity Mortgage Lending: