The Heath Barnes Show

Mortgages Reimagined

with your host, Heath Barnes

Ep019: The Massive Returns Of Chasing Opportunities With Barry Habib

HBS 19 | Chasing Opportunities

 

In order to grow and evolve, chasing opportunities should always be on your career to-do list. You only need to keep their eyes peeled for any chance of leveling up. Joining Heath Barnes is Barry Habib, Founder and CEO of MBS Highway. Together, they discuss how the opportunities you grab must give meaning to your life and the people around you, not just increase your revenue. Barry also talks about the high interest rates and the housing supply issue that currently put real estate in a convoluted situation. He shares tips on properly navigating this market that offers tons of benefits to those who know what to do.

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The Massive Returns Of Chasing Opportunities With Barry Habib

I’m excited to have our guest, Barry Habib, who’s an American entrepreneur and frequent media resource for his mortgage and housing expertise. He’s the number one bestselling author on Amazon of the book Money in the Streets. He’s a frequent guest on CNBC and FOX, as well as the CEO of MBS Highway. He’s won many notable awards, including the 2019 Mortgage Professional of The Year and the 2018 and 2020 Crystal Ball Award winner for his most accurate real estate forecasting. He’s founded many successful businesses and was the founding partner of Social Survey. During his mortgage career, he originated more than $2 billion in mortgages. Welcome to the show, Barry.

Thank you so much. I appreciate being here.

Barry, I’d love for you to give a little bit of your origin story. I’m holding up a book, Money in the Streets, which is Barry’s book that talks about his most humble beginnings, from selling calculators to being Crystal Ball’s number one forecaster of real estate. Give a little bit of your background before we get into the markets, Barry.

It was a very humble beginning. I’m a child of immigrants, first-generation here. We have a very difficult life from a financial perspective. My dad passed away when I was younger. My mom had a lot to deal with. She worked in a sweatshop where you make dresses. I know what it’s like to be poor. Mindset is critical, believing that there is a lot more out there and understanding that there is truly opportunity everywhere. It helped me to progress, evolve, learn a lot of lessons along the way and continue to be optimistic. An important characteristic amongst people who are successful is optimism. You know that too. Most successful people do have an air of optimism. I was able to do some things that were fun.

When I was in college, I was entrepreneurial. People needed these new calculators. It was a nice way for me to provide a service and make a few dollars in college, which we all could use. I then went on to sell stereo equipment out of the trunk of my car, which was a great learning experience. You’d go to different areas, cold call, meet people, talk to them and understand that sales is about persistence and understanding whatever product it is that you are showing. It’s also about building trust. That’s the main thing.

As this young kid selling out of the trunk of my car, I would give my phone number and somebody would call me. I would go back and do what was right. I did it because I knew it was the right thing to do. I wanted to make sure if it was me, that somebody would treat me that way. People were so blown away and the lesson that I learned is that when problems occur, it’s almost more of an opportunity than a headache.

If you look at it that way, it gives you the chance to show character and build trust. If everything had gone right, I would have been another vendor. The fact that something went wrong and I made it right built trust and friendship. Almost ultimately, they felt obligated to either buy more stuff or refer somebody. It’s like that in life. That was a valuable lesson. I’ve got into making a little bit of money during that stereo tenure that I had in my early twenties. I then saw opportunities in real estate because remember, opportunities are everywhere.

I started making some investments and buying homes from 23, 24 to 25. I had a few partners because they didn’t have a lot of money. We bought homes and either fixed them up, rented them out, or flipped them. That taught me a lot of lessons. I went to college as a Finance major, so I liked numbers. I was always a numbers person. As I would sit down with the individuals doing my mortgage, I would ask them, “How do you do in the business?” You’re in your mid-twenties, thinking you could do anything. I was like, “What do the top people in the industry do?” If I was going to do something, I wanted to know what the top people do. I figured if I could sell a stereo coming out of the trunk of my car, I probably could sell something else pretty well.

What happened was interesting. I’ve got into the mortgage business. I was not met with a parade of customers but with a lot of obstacles and a lack of knowledge, experience and relationships like we all do. This is a relationship business, so how do I try to insert myself where there was already an existing relationship? Realtors doing business were already sending their transactions somewhere. How do I win their trust with no experience? I had to be patient, but I had obligations. My twins had been born. They were two months old at the time. Think about how crazy that was at first. You have twins when you change careers.

Mindset is critical in understanding that there is opportunity everywhere. It is the key to everyone's progress, allowing you to evolve, learn a lot of lessons, and remain optimistic. Click To Tweet

Failure was not an option. I went out at night, knocked on people’s doors and asked them if they wanted to refinance or if they needed to purchase. Some people threw me out. Some people slammed the door in my face or called the cops. During my third week in the business, I happened to write sixteen mortgage transactions and took some applications, which not a lot of people had done back then. I did not have a good handle on what I was doing, but I had help from good people that helped me to piece these deals together.

It was the drive and determination that I had and looking at everything as an opportunity. I would talk to anyone that I could. If I was a customer, I gave you money, so I’ve got you as a captive audience. At that point in time, I would do what I was doing in the stereo business, like cold calling, talking to people and seeing what they could utilize. By doing that, I found a good way to gain some relationships and referrals. I was crazy enough to do this everywhere I went to the point where I’d drive down the road and come up to tollbooths.

Back then, you didn’t have the electronic methodology for collecting tolls, so there were baskets in New Jersey that you either tossed a quarter in if you had exact change. If you didn’t, you waited in a much longer line to go to a toll collector. Most people will give a $1 bill and get the change. I have $0.25, but I still went to whether it was a toll collector because that could have me a chance to talk to somebody. I gave him my card and the quarter and said, “If I can help you with a refinance and save you money or if you’re looking to purchase a home, I promised to take great care of you.” That’s it. It was three seconds that I had which I used to give the message.

My buddies would travel with me and they would be so pissed at me for taking the longer route every single time. There are several tolls in New Jersey if you’ve ever driven down the roads. One day a guy by the name of Steve Horton called me. Not only did I do his mortgage, but also seventeen of his coworkers. That was a big win for me. The point is that I was not the only person driving up and down the roads of New Jersey who was in the mortgage business or real estate business, but I may have been one of the only people that viewed opportunity even in a tollbooth.

Opportunity truly is everywhere. It’s one of the reasons I wrote the book Money in the Streets. Immigrants, when they come to the United States, think that America is such a rich country. There’s money in the streets. All you have to do is pick it up. Mom would tell me a story when I was a little kid. It would be funny and sad at the same time that America was not necessarily this wonderful wealth opportunity that you’d pick up money in the streets as they had heard. The message is true. There is opportunity everywhere. You just have to see it.

When people talk about the market and its challenges, there is an opportunity within this market, in market share and if you shift your focus. Have a broader scope mindset to train your brain and look for opportunities. There’s an exercise that we could do. Next time you go into a room, look around a room with a lot of people and observe for a moment. Put in your mind a color, say that color is green or orange. Look around and look for that color. All of a sudden, they start to pop up everywhere. It’s the same thing you look at, but what you look for jumps out at you. If you look for opportunities consciously, they will start to pop up everywhere.

What I hear you saying is if your mother had gotten here and there would have been money in the streets, then your life might have been a little bit different. The hard times that you got to go through and experience created the barrier.

It would have been a lot easier and maybe a lot more fun as a kid. I don’t know if I would have been able to do things that help as many people or have that understanding, empathy, and sensitivity to what others go through so that I could do the very best I can to help other people. In life, that’s one of the most important ingredients. There are a lot of people that make tons of money and people that even have achieved a lot of things but aren’t necessarily happy. We see that all the time.

HBS 19 | Chasing Opportunities
Chasing Opportunities: For an average person, it’s shocking how huge the benefits and appreciation of home ownership could be based upon the miracle of compound interest.

 

I truly believe that one of the things that do help is fulfillment, which comes from doing things that are meaningful or helping others. Maybe it’s a little bit different for each of us but for me, helping others has a great degree of fulfillment and happiness. I still want the financial and achievement goals. I’m not embarrassed to say that.

I want that because I want to keep growing and setting the bar. For me, those two would be meaningless without knowing that what I was doing with those things was doing good in the world, making a positive impact and helping others too. As we reach ahead with one hand, you should always reach back with the other to bring people with you.

I’ve heard Tony say many times, “What’s wrong is always available and so is what’s right.” I’d like to shift and maybe hopefully shift some of our readers’ mindset into what’s available in this market. I’ve talked to many real estate agents and one said, “I haven’t had a paycheck in a month.” It wasn’t because he didn’t have any clients. It was because he was having trouble in this market, which I’d love for you to go into. Give us a little color into what’s happening in the market and how long you think this is going to last.

First of all, this goes out to anybody who’s not getting a paycheck. It’s difficult with broad strokes to try and address that without understanding the details of what it is. There may be some things that could potentially be improved with that particular statement, but we don’t know. They have their sets of challenges.

Overall, let’s say if you’re in the mortgage business, it depends on where your lens is. If your lens is, “If I’m going to compare to $4 trillion or $4.1 trillion in 2020 or 2021 respectively, 2022 is going to seem disappointing.” The forecast for 2022 is $2.6 trillion, which happens to be the third-best year in many years. If you take out 2021 and 2020, it’d be the best year for originations. There’s a shift in focus.

First of all, the mentality is there are transactions out there. How do we get our share of them? It isn’t like shooting fish in a barrel and refinances are down 72%. Maybe shifting our focus and mindset and looking for those opportunities would be shifting our focus and mindset. What are they? They’re going all be in either being creative on your refinances or do a much more concerted effort to solve problems and points of friction on the purchase side.

Let’s do the first one, which is refinancing. Still, 1/3 of all mortgage volume is refinanced volume, not that it’s 0. 1 out of 3 is still a refinance, so there’s a need for it. It may not be as much where you’re saving people money on a monthly basis, taking them from a higher rate to a lower rate. How can we get creative taking people from a low rate to a higher rate and taking what the defense gives us, to use a football term here?

The defense is giving you all kinds of home appreciation. The average price is almost $200,000 in equity. What if I took your loan currently? The average is about 51% LTV on a home. If you had room to go to a 75% loan-to-value, which most people do, and I could take you up to a 75%, let’s look at your debt picture. We’ve got data from articles and studies that have been published on CNBC that shows that the fourth quarter of 2021 represented the highest amount of debt in the history of the United States.

When problems occur, take it more of an opportunity than a headache. See it as something that gives you a chance to show character. Click To Tweet

It seems to me that a lot of people were getting money from COVID and those financial aid programs and stimulus programs. When that stopped, perhaps they didn’t change their spending habits. They just use debit or credit cards as a way to continue the same lifestyle. People have a lot of debt and car loans. Why don’t we think about utilizing that equity and freeing up some cash?

We talk about this a lot at MBS Highway. We’ve created tools for it where you can show somebody a 3.5% rate. Five and a half percent is the rate that the market has. How could you talk to somebody and say, “You’ve got a 3.5% mortgage that you took out years ago that brings you to a 5.5% mortgage now?” It’s not easy.

In addition to that, maybe years ago means they’ve got 27 years left. If you refinance them, that’s 30 years left. I can’t save you mortgage insurance because when you bought the home, it was an 80% LTV so no EMI savings. Let’s say on your closing costs, you’re paying a point or something like that. Let’s throw the kitchen sink of negativity at it. You put 1,000 more in closing costs, no EMI savings and add 3 years. Your rate is 2% higher or it’s going to cost you $300 a month more.

It’s a lousy situation that most people wouldn’t even touch. They put some creativity into tapping into the equity and paying off the debt. In many of these situations, you could say $1,500 or $2,000 a month. That’s serious money, but then taking it a step further would mean that what if we took this now found money, it accelerated the payments on the new mortgage that you’ll do, even if the rate is 5.5% percent. By doing so, what you wind up doing is paying off that mortgage in somewhere around twelve years.

Instead of having 27 years left, you have 12 years left. You build equity every single month during the process. After 5 years, you’ve got about $100,000 in additional equity. After ten years, it’s about $250,000. After twelve years, when the loan is paid off, it’s over $300,000 in equity. That’s a great way to have a nest egg for your kid’s college education if you haven’t started that yet.

Think about this when that loan is paid off. You start saving that aggregate $5,000 a month cost. That’s an extra $5,000 additional cashflow after the loan is paid off in 12 years for the next 15 years, comparatively, which to me sounds like the best retirement plan in the world because I haven’t paid anything into it or changed my habits. This is that creative looking for opportunities.

On the purchase side, looking at opportunities to help people would solve points of friction. There are many. Think about my next call might be with a real estate agent. With the mindset of, “How can I help solve your problems,” what are real estate agents want to do? Go on listing appointments. Your customer thinks their home is worth this, but the reality is it might be worth this. How do they bring them down to earth?

You could bring an AVM with you, but we can also provide that. Let’s say you do the homework which you can do and you create an AVM. Certainly, it’s easier if you have one but with all the comps and stats so that you have a real report, which helps your realtor present to the customer in a very professional manner and does all the homework for the realtor instead of the realtor working for 1 hour and 20 minutes to pull 10 comps. You’ve done that for them.

HBS 19 | Chasing Opportunities
Chasing Opportunities: Getting in the real estate game might require you to be in a position to bid over restaurants, but do so responsibly. You don’t want to do it blindly.

 

What have you done? You’ve resolved the point of friction and made that realtor’s life easier. It’s an easy habit for that real estate agent to get into. Anybody who’s been in the business longer than a year knows how it works when you work with a real estate agent. You have good communication and you’re helping them and talking to them. Ultimately, what happens is this. “Barry, there’s this couple I’m working with. Can you pre-qualify?” That’s how it starts.

Will this result in more business in ten seconds for you? Most likely not. It is not that type of an answer, but if you want to build more relationships, gain more transactions and build for your future, this is a great practice. Another big issue is homes being bid over that’s asking price from realtors have a difficult time articulating why you should do it from a financial perspective.

Also, with our bid-over-ask tool, maybe people can have access some other way. We’re the only ones that have an actual tool that does it. What we will do is we will answer the important question, which is if you bid X amount over the value, we will calculate for you in that ZIP code based upon a forecast and appreciation for each individual ZIP code in the country. How long will it take for that home to achieve equilibrium and break-even? How long will I be upside down?

That’s an important question, but then we also have forecasted for the next several years so we can tell you what that home’s value will be based on history or what we expect in the future. How much will be an increase over the next years? How much money will I make? People have a hard time with the principle of compound interest.

If you tell them a rate, it’s transferring that based on a dollar amount of the value into a dollar gain. It’s a hard thing even for people that are pretty proficient mathematically. For the average person, it’s shocking how quickly you can recover a bid-over-ask if it’s reasonable and also how huge the benefits and appreciation of homeownership could be based upon the miracle of compound interest.

You asked the client, “How long are you planning to live in the house?” If they’re going to live in twenty years, it’s always going to come back. It doesn’t even matter in this market. It’s a matter of getting in the game and being able to get your offer accepted.

That’s the thing too. That might require you to be in a position to bid-over-ask. We want to do it responsibly. We don’t want to do it blindly, based on competition. That’s why using a tool like this can allow you to calculate. If it’s going to take six months, you might say to yourself, “I’m going to be taking two months before I close. Four months after I close, that’s not so bad.” When you calculate what the amount is, it might only be 4.5%. If the area was forecasted for 2021, an appreciation of 9% is not unusual. Remember, we’ve come off 20%. That’s a six-month period.

The other aspect of it is that it might also allow you to think twice because I want to bid $200,000 over and it’s going to take me 7 years to break even. That may be something you should give more consideration to when there might be other opportunities you might want to consider. This is not to sell you. This is to try to help you correctly evaluate what it is and avoid you from missing an opportunity because you don’t have the tools to allow you a proper evaluation.

Fulfillment comes from meaningful things and helping others. Click To Tweet

Other ones are the ones we see all the time where people get discouraged like, “I got outbid. My heart. I wanted that home. We saw this house and liked it.” It’s a big decision. We went home, talked about it, asked other family members and took another look at it. By the time we bid, it was gone. That happens a lot. I’ve looked for 3 or 4 weekends and I can’t find anything.

In all three of those instances, they may say, “Let me come back in six months,” thinking that the market will be better, especially listening to the media that prices will be lower. Get factual data and show what the forecast is and what is expected to happen along with its reason, not just the BS you see in the media. What is the supply? What is the demand? What are the factors that are going to contribute to this? Why are we going to see prices continue based upon real data that supports that?

You may be able to either stay in the game and continue to look or bid that a little bit more to win the home of your dreams and lock that home in for yourself. It’s the things you want to do. What are alternatives? This is not about a game of perfect. If you look at the media reports, they’re going to show you that this is not a good time to buy a home. “Tell us something we don’t know.” Not only is it not a good time to buy a home, but it sucks to buy a home now.

Prices and rates are up. No inventory is out there. It is difficult to buy a home. Do you know what else sucks? It sucks dieting. I don’t like to diet, but the results are great. That’s what we have to understand. It’s not just that it’s a sentiment. Yes, it is a difficult time, no doubt, but you can persevere and buy homes. You had a big drop in 2020 and the over make-up period in 2021 in activity. 2022 is better by far in activity than 2019, ‘18, ‘17, ‘16, ‘15, ‘14, ‘13 and ‘12.

In all those years, we are far superior in the amount of purchase activity, but the media always has a negative spin. Why does the media have a negative spin? Do you remember Mark Zuckerberg when he was testifying? What did he say? “Senator, we run ads.” The media runs ads. What sells? Sex, negativity and fear sell. What they’re going to try and do is to give you what sells. They’re not good and don’t sell, unfortunately.

It’s still a good time to buy, considering inflation, even though interest rates have gone up. If we are in an inflationary period and it’s going to last for a while, there’s not a better place to put your money, most likely than real estate, even if rates are 5.5%.

It’s certainly more painful. We get that and understand. We believe that the real estate market is still going to be strong. There are many things that we need to understand, encounter and be sympathetic towards. We do that. When you take a look at the purchase of a home, let’s take an example of a $400,000 mortgage from 2021 compared to 2022, when prices are up to 18%. By the same home, in 2021, it was $400,000 and in 2022, it’s $472,000. In 2021, the rate might have been 3.5%. In 2022, it might be 5.5%, just to give you some round numbers.

The payment is almost $900 a month more, but incomes have gone up greater than that when you take a look on an annualized basis in the private sector. We can’t take in aggregate because the bottom rung of people on the income scale might include people like this. You have a wonderful young man or woman who is just getting started out. They’re nineteen years old, working at a fast-food restaurant and doing everything they can. They’re truly not a home buyer and don’t want to buy a home now, probably. God bless them. They’ll probably buy a home in the distant future, but their income when you encounter medium shouldn’t be considered.

HBS 19 | Chasing Opportunities
Chasing Opportunities: Real estate is not about a game of perfection. Media reports show that today is not a good time to buy a home. Yes, it is a difficult time, but you can still persevere.

 

It’s not in the game. You don’t want to take an average of somebody who isn’t in the game. Who’s in the game is a much closer level, but on an annualized basis, the private sector is looking at a 10.5% year-over-year gain. You at least offset. They make almost 1,000 hours a month more compared to the $900 a month more costs. Let’s be real about the other instances. Fuel is up to $79 a month and food is up to $71 a month per household. Other expenses as well as services, it was just the number that Moody’s gave that was $311 a month.

When you think about it, it probably is costing you, as a family, $200 a month more, even with your income, to buy that home in 2022. That’s not something you can dismiss. It isn’t the negative picture that the media want you to believe when they say, “It’s $900 a month.” It’s not. Let’s be fair in taking all the negativity and having the positive aspects. The media won’t do that because, as Mark said, “Senator, we run ads.”

What do you tell to people that say, “This is a bubble? I’m going to wait until interest rates go down and we go into recession. It’s a buy.”

Let’s adjust all of those. Interest rates will go down. They probably peak near October because that’s the year-over-year CPI and PC comparisons. People think inflation is peak. I don’t agree. If you look at the year-over-year comparisons and monthly inflation, there was a dip in 2021 in July, August and September that went right back up in October 2021 throughout the rest of the year. When you get the new prints in 2022 for July, August and September, they will probably compare at a higher level than in 2021.

Therefore, inflation probably goes up. It’ll give us a little heartburn in interest rates. However, it’s almost like a perfect combination of things. The supply chain gets alleviated. Shanghai shut down and gets alleviated. Thousands of giant container ships finally start to move and get offloaded and unloaded so that they can transfer goods.

By that time, the Fed rate had hiked. They’ve been two quarters in March 2022 that we have half. We know that on June 15th, 2022, we’re going to get another half. We know that on July 27th, 2022, we’re going to get another half. A house told us that. September 21st, 2022 is the next one where maybe we get another half, but this is when things start to take hold and two things occur. One is an incentive to save, which people didn’t have. You get some return instead of a fractional 1%. Two, it becomes more painful to buy things that are affected by the Fed funds rate. Mortgages are not affected by the Fed funds rate and our business loans, which is where the big commercial and industrial loans are. That’s the biggest one.

It’s your individual loans, home equity lines of credit, personal loans, credit cards, car loans and things like that. They become a little more painful. People have less of it. What is inflation? That’s what people want. Inflation is too many dollars chasing too few goods. If the good section starts to improve, that alleviates inflation. Dollars are taken out and what the Fed is trying to do is to increase rates for demand destruction.

People get it wrong. Every dollar has bad information out there. People are so misinformed on this. When the Fed hikes rates, it helps mortgage rates. Hiking rates to curb inflation, if they’re successful in curbing inflation, mortgage rates go down. Mortgage rates had gone up because inflation has gone up, not because they’ve done anything going up way before the Fed started.

When it comes to mortgages, the best rate on the wrong strategy is a lot more expensive than a competitive rate on the right game plan. Click To Tweet

We see interest rates in its improving area. We think that there’s a big difference between deceleration and appreciation with real estate, prices going down and a bubble. The shock of the terrible bubble is not too far in our memories, which we had seen that occurred in 2007, ’08 and ’09. With the circumstances of anything, when something is priced, we have the invisible hand of price.

Price discovery occurs when the amount of supply meets the amount of demand. In real estate, it’s no different. The reason why prices are going up is that there’s too little inventory. There were only 950,000 homes available. In 2007, almost three million more homes were available. Let’s exacerbate that further because between 2007 and 2020, there were an additional fourteen million households that needed a home.

That tells you that you’ve got 14 million more households competing for 3 million fewer properties on the marketplace. This is not a bubble situation. Look at demand from 2006, ’07 and ’08. The demand was much less, but builders were building far too many homes. The number of households formed in 2006 was 1 million, but builders put up 2 million homes. It had something similar for 2007, 2008 and 2009. By then, we had a full-fledged bubble to try and compensate.

There were products that were not good quality mortgage products to try and get anybody into qualify. No income, no asset, no job, nothing down just to try and fill that. As anybody in the mortgage industry will attest to or anybody who’s tried to take out a mortgage, the mortgages nowadays is a very different breed. Look at the rates of delinquencies across the board. It’s exceptionally low, high-performance or good quality. It’s not the way it was many years ago. This is a very different marketplace. There’s not a bubble, but there will be a deceleration.

That’s healthy and good. We don’t want 20% appreciation per year, but here’s the thinking that people don’t understand. Let’s say if that drops to 3%, 4% or 5%. We think we’ll probably be closer to 5% or 6%. If you were to buy a $500,000 home, that’s $25,000 or $30,000, that is not bad at all. If you find that based upon your down payment, let’s say you put 10% down or $50,000, $25,000 represents a 50% rate of return on your money, it’s not too bad. You get to live in it too.

What caused this supply issue? Why did we go from 4 million homes to less than 1 million in total supply around the United States? What’s caused that?

It’s caused by births from many years ago. When you look at households being formed in 2006, the year builders put up more homes than ever did, it was two million homes. The reason why household formations were much lower was that far fewer people were born before that or in 1973. The reason for that is that’s the year abortions were legalized. Births dropped precipitously. It stayed low for a while and then many years later, if you look at the chart, it is a replica of that. The number of household formations in 2006 years later dropped precipitously and then stayed flat before moving up.

You had too much supply. Builders were putting up too many homes and not enough demand for them. Based on the number of births from many years ago it’s increasing dramatically and builders are putting up much fewer homes. There are many reasons for that, like labor shortage, supply shortage and regulation. They’re not keeping up with it.

HBS 19 | Chasing Opportunities
The Richest Man in Babylon

Like anything else, the invisible hand and the inventory situation is a factor of too much demand and not enough supply. It didn’t happen overnight. This was happening in 2018 and 2019. By 2020, it started to take hold, like in 2006 when many people didn’t see a problem, even though the inventory started to shift. In 2007, they started to see it. By 2008 and 2009, it became blatantly obvious because we saw what was going on but remember, it was the cumulative effect. Here you have a culmination of many years of more demand than supply. You start to see what’s gone on because of that.

Any idea how long you think this stellar market might last before we come back to a more normal market?

Households being formed are going to plateau and level off in the next couple of years, so it depends on how much more supply comes on the market. There is quite a bit of multifamily coming on. If people have a greater shift towards renting than owning, that can impact because that pulls bars out of the market. If the interest rates persist at these higher levels, it will pull bars out of the market.

I believe there will be a relief, but I don’t think that the pendulum swings to this level of, “I’ve got all kinds of supply and have no buyers out there. There’s too great of a population and builders are in the hole too much.” I don’t think it’s this much, but Freddie Mac said we’re undersupplied by 3.8 billion units. It’s a lot less than that. Let’s say it’s half that number. It’s two million units left. How would you fix that to equilibrium? Not that we would have negativity where prices would come down because remember, you need more supply for a price to come down.

If builders were magically able to wave a wand and here are 2 million homes that are ready for sale, don’t listen to the numbers that the media tells you because they’ll say, “New construction has 400 and 7,000 units or so,” but the ones ready are 35,000. There’s a big difference there. Ready for sale means that all household formations would have to stop at the same time.

It isn’t just to put up another 2 million homes but put up 2 million more homes than new households being formed. You get new households every single year. You had the experience of putting Rock of Ages, Criss Angel and Whitney Houston shows. I’ve produced a few shows out there. You compare it to other things. We were on Broadway. I thought we were a good show. Rock of Ages ran for six years.

The show that always kicked us was Wicked. I’ve seen Wicked. I’m not going to say anything bad, but it’s like, “Why is Wicked always doing well every single year?” It was explained so beautifully to me by an experienced producer who said, “Barry, that’s because every year, a new crop of fourteen-year-old girls gets to see that show.” It’s the same thing with household formations. Years ago, those people were born. They’re coming and need a place to live.

It’s the Millennials, the housing supply and the costs of what’s going on. Who knows what’s going to happen in the future?

HBS 19 | Chasing Opportunities
Chasing Opportunities: Many of the world’s problems would be solved if people would understand how to build a financial future. Savings is an important aspect of that.

 

The future is very bright for housing. 4%, 5% or 6% a year, that’s an incredible amount of wealth. Albert Einstein said, “Compound interest is the eighth wonder of the world.” If you’ve ever calculated it, you’ll see why.

Being able to leverage your mortgage to be able to put more money in real estate, I find a lot of investors coming into the market. One thing we noticed is how the rates have changed on investment loans and second homes. What’s caused that with Fannie and Freddie? Do we see that changing at all in terms of having to add points and things like that where there used to be more relief there?

There was a lot of rationale for that, the percentages of loans that Fannie or Freddie will purchase have dropped. I can only speculate. I don’t know what goes on behind closed doors, but the rationale perhaps could be that they feel that their reason for existence is to help people achieve the dream of homeownership essentially.

As an investor, that may be more perceived towards something different, like a business type of outlook. I don’t know why. They do have it for second homes too. You’ve achieved the dream of homeownership, but we helped you with that. Do we have to help you with the dream of your second home? I can’t speak for them. I can only try to guess as to what potentially some of the rationalizations might be.

I appreciate you being on the show, Barry, and your insight into some new ways we can help our clients. Any final thoughts like a book or quote that you can recommend?

I’ve often been quoted saying, “When it comes to mortgage, the best rate on the wrong strategy is a lot more expensive than a competitive rate on the right game plan for your financial future.” As far as books go, one book that everybody should read and give their kids to read is The Richest Man in Babylon. A lot of the world’s problems would be solved if we understood how to build for our financial future and try our best to understand that saving is a very important aspect of that. It’s an important principle to teach kids. I made all my kids read it. I live by understanding that a portion of what you earn should be put away to save, build and grow. That provides, over time, to be a great way to secure your financial future and allow you to do good for others and help others.

I appreciate it, Barry. If our readers want to contact you, what’s the best way for them to do it?

I’m easy to find. Barry@MBSHighway.com or look up MBS Highway. Google me. LinkedIn, Facebook and Instagram is the easy way.

Barry, I acknowledge you for being a pentacle for most of us loan officers out there to see what’s possible. Thanks for being on the show, Barry.

Thank you.

 

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About Barry Habib

HBS 19 | Chasing OpportunitiesBarry Habib is an American entrepreneur and frequent media resource for his mortgage and housing expertise.

• Amazon #1 bestselling author for his book “Money in the Streets”
• Frequent appearances on CNBC and FOX
• CEO of MBS Highway – the industry’s most highly regarded and recognized tool for transforming salespeople into advisors Notable Awards.

Three-time Crystal Ball Award Winner for 2017, 2019 and 2020 by Zillow and Pulsenomics for the most accurate Real Estate forecasts out of 150 of the top economists in the US 2019 Mortgage Professional of the Year by National Mortgage Professional Magazine.

• 2019 Finalist for the prestigious Ernst & Young Entrepreneur of the Year Named to the esteemed Mortgage Global 100 list for 2021 by Mortgage Professional
• The St. Armand Ventures Businessman of the Year Award for 2021 as an innovator.

Barry has founded many successful businesses across different verticals:
• Mortgage Market Guide
• Healthcare Imaging Solutions
• Certified Mortgage Associates
• Founding partner in Social Survey

During his mortgage sales career, Barry personally originated over $2 billion dollars.
Lead Producer and Managing Partner for “Rock of Ages” – the 27 in longest running show in Broadway history.
Produced Criss Angel’s “Mindfreak” at Planet Hollywood in Vegas.
Highest-rated speaker and trainer for over 25 years in mortgage and real estate.
Barry’s Certified Mortgage Advisor (CMA) course is renowned for elevating the level of professionalism and mortgage knowledge in the industry.

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