Housing Market Predictions

To say that the real estate market is moving fast is quite literally an understatement. Homes are being listed and sold in days while prices are soaring. One can't help but wonder, "is this a bubble?" To answer that question I recently sat down to chat with Marylin de la Hoz, a Mortgage Loan Originator based in Miami, FL. Watch the video or read the full transcript below.

If you are ready to buy or sell in Miami, FL, let's chat! Schedule a call here.

Janice:Thank you so much for coming here to come and chat with me. So, you are a mortgage loan originator which means you fund loans, right. You make a home loans happen, right. And in this last year, it has been pretty bonkers in the real estate world. So, I thought it would be great for us to get on a quick call and talk about WTF happened in the last year in real estate. So, my first question to you is first of all, thank you, and also, what in your opinion happened?

Marilyn: So, in my opinion, we saw a lot of purchasing. We saw people buying like crazy. They decided to sell at the top of the market and then buyers were coming in and taking advantage and buying. The rates were hell a low which was amazing and it also did well for refinancing, because a lot of people were able to drop the price. And then we'll talk a little bit about what they did with that later because a lot of them were able capitalize on their equity. They didn't really want to move but they were able to buy second homes and investments which is a bonus.

So, we'll talk about that later, but for the most part last year with the interest rates being low with the market being at its peak. Or I don't even know if it's a peak but at an all-time high, people were able to sell and get so much out of the money and people were able to buy houses that were already updated, right. It was move-in ready, just bring your bags and awesome because the ones, the previous owners invested money in updating and all that Stuff. So, a lot of the new properties that came to the market, were moving ready.

Janice: Right. It's been a pretty crazy year definitely. It was interesting to see how that that shift went from pre-pandemic where we had inventory and it was still a pretty balanced market to people stopped moving out of their homes. And so, we kind of drained all of our inventory and at the same time rates dropped. So, it created like you said like this feeding frenzy where all of a sudden. We just couldn't sustain the inventory for the amount of people that needed homes, right?

Marilyn: And I think that's a great point like when people were in their homes during like the lockdown in the height of the pandemic. Like they looked around and they were like, I need a bigger house, like I need a bigger space. Like they were able to kind of really live in their home in a way that we had it in so long because we're always in and out of places and really kind of reflect and be like, I think I need a bigger space or I want to update this or whatever. And that's what kicked 2021 into high gear the way it did, because I think people knew what they wanted at that point.

Janice: I would agreed definitely. For a while there, it was like a little bit of a slowdown where a lot of people that I think normally would have said, okay, well I'm ready to upgrade and get something bigger about grown in. I need a pool. Whatever it is. Said, well maybe I'm going to stay home and just make this one work because they saw that there were so many buyers out there. But then it shifted, right. Like oh, there's very little material. There's no labors. There's a shortage. And all of a sudden that stalled as well as things started to get more expensive to rebuild or to.

Marilyn: Right, to renovate.

Janice: Renovate. Thank you.

Marilyn: You're welcome.

Janice: So, since you do mortgages, I wonder did you see an uptick at one point in the people that were applying for refinancing and pull-out loans to for example renovate their homes.

Marilyn: 150% yes. The amount and it was two-fold, right. They could capitalize on lowering that interest rate. So usually, the rule of thumb is at minimum you want to be able to reduce your Mortgage interest rate by 1% for it to be really beneficial, right. Like you could see a hit but if you can cut it in half, I mean, ridiculous, right. There were some people.

Janice: Some people that cut theirs in half?

Marilyn: Yes, there were people that were still rolling with like 28 20, 2028. I can't even say 2008, because it's like now it's like 2010, 2015, 2021. So, they were rolling with like 08 rates or 09 rates. You're talking 7, 7.5, maybe even 6 and in those times 6% was great, right. Like a 6% rate is awesome. So, now in the beginning of 2021, you're talking the high 2s, low 3s. Like I had one client even have a 2.75 at one point so it's like and cash out which is the kicker, right. So, they were able to lower their interest rate by let's say 1.5% to be reserved, right. And in addition to it, cash out some money and invest, right.

They were able to buy a second home to vacation or an investment that now all of the rage is the Airbnb business, right. Like they're able to create this income property that doubles as a vacation home sometimes because it's in a desirable location.

Janice: 100%. I get calls daily. People asking exactly about that. How do I get into the Airbnb? What buildings are Airbnb approved? What areas are? That's definitely high. And as I was preparing for our conversation, I did see some interesting numbers that said that the applications for investment homes and second homes almost doubled in the last year. Did you see that as well?

Marilyn: Yeah, absolutely because people are now trying to figure out how to make additional income or how to get into the real estate game of owning and becoming their own bosses as a figure of speech right. They still have their 9 to 5 or they have their business that they work in, but they're like wow if I could create equity and income and have different sources of income and diversify portfolios as an investor, why not. And now a lot of people like well the market you know it's so high or the prices are so high and all the stuff it's like, yeah but it's not stopping. Like you know what I mean? Like don't be that guy or that girl that surpasses up on an opportunity that you can qualify for, and then have that property be worth double in 5 years and then kick yourself in the **** for it.

Janice: Exactly. So, almost like the people that started buying in the pandemic and everyone's thinking it's crazy you're bidding. You're going above asking. You're going above appraisal. I mean those people that started it in the pandemic, at the beginning of the pandemic now have probably a pretty good amount of equity. In fact, again when I was looking at the numbers, the average Florida homeowner made $64,000 in equity in the last year. I mean.

Marilyn: That's amazing.

Janice: And it's often.

Marilyn: No, it's not. And as an investment or second home like if that's what you're looking for. What you need is 10%. And obviously, 10% down you'll have mortgage insurance. There are some programs now that the lenders fold in the MI, so you're not paying MI monthly. It's like an upfront and we can go into that in a different video, which I think more about financing. But there's so many programs out there that are pro investment. Pro, getting people into the investment game, because there aren't a lot of properties out there per se for people to live as primary homes because the inventory shortage. But there's plenty of investments out there that could be fixer uppers, that could be income properties like we said about Airbnb and all these things.

Janice: Right.

Marilyn: And having someone on your side to look them up and make sure because I didn't know that certain areas had to be Airbnb approved.

Janice: That's right. There’re ordinances all over the place now. Yeah, definitely.

Marilyn: So, having somebody that's well worth and that backs you up and it's like, okay, I love your ideas, all amazing. But we can't do it in this community or in this town or in the city because some of them require 30-day rentals or 30-day [INAUDIBLE WORD 08:13].

Janice: Correct, or more even. Yeah.

Marilyn: For sure.

Janice: And/or they just outright don't allow it. They just don't allow.

Marilyn: Yeah, and you would be surprised now even with the rates shifting in the upward, the having an upward shift in the recent weeks. They're still people applying because rentals are shifting just along with them.

Janice: Exactly. Well, that was actually my next question for you, because I have a lot of clients that are now doing that cost analysis, right. I am paying $2, 500 a month in rent. Am I better off at this point looking into buying, right? And so, what point are we going to see that shift where it actually is cheaper to buy than to rent or would you say that we're there? Are we officially there?

Marilyn: Oh, I think we're there.

Janice: We're there. Okay.

Marilyn: I think we have arrived and this being said, a lot of times people that are renters that have rented their whole life or that maybe feel that they won't qualify because they feel overextended or they feel, a lot of that stuff is internal, right. It's an internal struggle of like I don't make enough. I don't have enough. I don't like and you don't know what you got until you look at it, right. A lot of people are scared to look at their bank statements. I work with clients all the time that, they're just, I'm scared to I'm scared to log into my banking or whatever. It's like they know they have enough because they make it every month but there's the extremes, right.

Or there's people that have plenty but they don't feel like it's enough to invest or enough to buy so they don't ever try.

Janice: Or it's too much responsibility.

Marilyn: Right, and essentially if you're renting, you're paying someone else's mortgage. You're investing. You're pouring into someone else's investment.

Janice: Literally building their portfolio, their wealth.

Marilyn: Like and it's something you can do. So, what I say to you renter that is watching that may feel that it is not the right time. It costs you nothing to get preapproved. It costs you nothing to find out and get prequalified. They give you the most income. So, you get to qualify on your gross income and on your net liabilities. What do all those words mean? They give you the most money. So, like if you are a W2 and you make $100,000 a year they go off of that 100K, not the money after taxes, right. That that's not what you bring home.

Janice: Right.

Marilyn: But you have that that gross number, and the liabilities is only credit-based money. So, it's to say, your car payment, your credit card, a student loan, like things like that, not your AT&T bill or not your wireless or your internet or your kid's school. Like none of that stuff counts.

Janice: There you go. Tuition count, that's a big line item, childcare doesn't count, another big line item.

Marilyn: And that's the thing that sometimes just educating yourself a little bit, right. Like what are they looking for? What are the requirements? Credit is huge. You can buy with a 600-credit score, but now your interest rate is going to be a lot different versus a 720-credit score. So, all of these things that you can be working on if you only inquire and figure out, okay where am I and where do I need to be and what's the goal and what do I pay now and what would I pay if I bought a home. And we ran some numbers before we started recording, based on a five hundred-thousand-dollar purchase price. 10% down which I think is a middle of the road.

We can do as little as 3% for first-time homebuyers. We've seen a lot of 5% in coming in but I'm saying not20 not 10 or not 20 not 5. We're doing 10%. Which is 50K to come in the door plus closing cost. At a 720 score, at today's rate for 30 years, you're looking at a $2,100 payment, principal and interest, right. And then add another hundred $10 or so for mortgage insurance. So, let's call it 2,300, to be for 2,300 bucks principal and interest. You're in. Now you have taxes and insurance and all the stuff that varies depending on the property if you have an association. So, all of these things it would have to be a tailored. Like we'd have to look at the numbers for you.

Janice: Right.

Marilyn: But that's a pretty nice number $500,000, a half a million-dollar house for 2,300 bucks a month principal.

Janice: 100%. So, I actually asked you to run these numbers based on a client that I am working with currently. She's a lovely person and works with children so you know that I already love her. And her rent is about to go up if I'm not mistaken or her lease is up. No. Yes, her lease is up and she needs to move out is the issue. So, we are off to the races running. She has a budget of a max of $2,300 a month which is what we were looking into it. She only needs one bedroom but two would be great and this is the catch. She has 3 dogs that are over 50 pounds. So, it's hard to find things, right.

However, she's open to all lot of areas. Almost anything from like coral gables up to the county line, right. And even up to the beaches. So, we're looking into a lot of different areas. All she really needs is a patio for the dogs, right. We're not, this is not a big ask. Do you know how many options there were for rent?

Marilyn: How many?

Janice: It's a little bit disturbing. 12, there were 12. When we actually looked into it of those 12, 3 of those listings were like not real listings. Were they listed in a certain way? Realtors can be shady sometimes unfortunately which is why you need a good one. So, they listed like it's looks like a monthly rental but it's really a weekly rental because if not, they'll get fined and whatever. So, of those 12, it was really 9. We like 3 of them of the 3, but the next day when we went to make our appointments, they were 2 of them were gone and taken.

So, I mean if you think that buying a house right now is tough. Try to find a rental under $3,000 my friends. Because that is like the division between like the off to the races. Like you got to be at first place in that race, right. Every time and it's competitive.

Marilyn: And then offer over, right. So, like now you're still paying. You're still risking not getting it. It's like cutthroat out there, and I don't, and as similar as they are whether you're looking for a rental or looking for a purchase like the house is yours. Like once you find it and you go through like it's your home. Like now you can do whatever you want. You can do anything and everything. You can have your three massive dogs. You can have all of the things you want. Nobody's going to not going to tell you, I'm raising the rent.

Janice: Somebody's going to kick you out because they're coming from Cuba and they need the space now, right.

Marilyn: None of it.

Janice: So, really like that is. You're building your equity in your wealth such that the day that you do want to retire. You have somewhere to draw on or somewhere even to live or something to sell and cash in on, right. Or if you want to leave something for your children or build on that, right. You buy something now in 5 years, you have the equity we just been talking about and you get another one and you keep going and you keep going and that's how you build wealth.

Marilyn: Couldn't have said it better. It's true and it’s that first. Huh?

Janice: No renting.

Marilyn: No. No. No. No. No.

Janice: I don't personally know anybody that has real wealth that did it while renting.

Marilyn: Because it's hard. It's hard to get out of that cycle and I promise you, it's scary. It feels scary, right. It feels scary the responsibility especially first-time home buyers, the younger adult demographic that like I remember when we bought here 8 years ago, we looked around like nobody's going to tell us what to. Like who's, like are we the boss. like are we like the responsible ones? Like are we supposed to know what we're doing, like the real.

Janice: The real.

Marilyn: What we're doing here, like it's the truth, right. And we all have that transition point in our lives when we come from the adolescent to the college life, then into adulthood where you get your first job and all stuff. And then it's like okay that's not real life yet. Like, you think you're grown but you're not. Then you keep going through the faces and life is understood backwards, right. Like when you look back at it.

Janice: So true.

Marilyn: You understand and you're like, ooh yeah, and things we learn. So, take it from these grandmas. No, I'm just kidding. We're not that old.

Janice: No, relax.

Marilyn: Now is the time to really take a look at your numbers and don't be scared of them knowing like knowledge is power. As cheesy as that sounds. But knowing your numbers is the powerful part, and knowing that if you both, if you are a two-income household and you both have really good jobs or even good jobs that you're making it now. You're making ends meet. You're doing it. You have money saved. You have enough. Check it out. See, you know call Janice. Let her know, what area you want. Then she'll hook you up with me. And then we'll send your numbers and then.

Janice: You can afford.

Marilyn: Absolutely.

Janice: Well, thank you so much Marilyn. I really hope that this was helpful for people. I enjoyed it very much. You are a wealth of knowledge my friend.

Marilyn: Oh, thank you so much. I love talking to you. So, any chance I get to do it. I'm here.

Janice: Awesome. Well then let's do it again for sure.

Marilyn: Alright.

Janice: Thanks so much.

Marilyn: You're welcome.

Learn more about Marylin by checking out her website https://marylindelahoz.com/