Welcome to Mortgage Talk with Mark harriston, the program that not only talks about mortgages, taxes, and interest rates, but Mark and his guest talk real estate trends and you're home. He also answers your mortgage questions to help you make the right financing or refinancing decisions.
Now here's Mark Hairston.
Happy today, everybody, and welcome back to the show Mortgage Talk with Mark. I'm really excited to have to introduce my guest today, and here's a couple of reasons why. First of all, he's a really a smart guy. Second of all, I've had this show about two years and he was one of my first guests on about the summer of twenty twenty three. As I recall, we had a great conversation. One thing I love about Chris and you'll meet him just a second, is he knows how
to speak. I don't have to drag stuff out of him. So if you're look at the buyer sell reroll estate this year in Austin, Texas or Central Texas, you really want to stay tuned and listen to my buddies, Chris Jacobs, who let's introduce yourself a little bit and tell us that's your background.
Hey, Mark, Chris Jacobs. I'm with Portico Real Estate. Been a real estate agent now about eighteen years. It just renewed my license in March. Been an active investor in real estate consultant almost the entire eighteen years. I found my niche in real estate where I work predominantly with investors and commercial and you know, we placed a lot of money and manage a lot of portfolios and help clients make those strategic decisions on where to invest and how to invest and love.
It what to look for. I love it, you know because you're coming from a little bit different angle than most of my friends who are in traditional real estate where they're broken and then selling properties to individuals years more of a portfolio.
Oh look, absolutely, I've got I've got a couple of investors. We holistically sit down, look at hey, what do we have, how properties performing, dispositioning assets, reacquiring assets, kind of going through those.
We've actually I've got.
Clients that have properties they have never seen. Wow, because it's it's spreadsheets. We live in Boston, p and ls exactly, and that's what we live by.
And you originally hail from Del Rio, from del Rio, Texas. Yes, sir, let's hear a Texas boy.
Yes, sir.
You know that market very well down there too. I do.
Actually I watched that. I watched the farming ranch down there quite a bit, and we were landowners down that way and got some places out in West Texas far further beyond that now buying that. We love to get away too.
What's been this next twenty minutes or so we have on sort of central Texas? What's er here? Because, like I said, you were here a couple of years ago, and things I want to talk about, how things have shifted and where you see things today in the future.
Yeah, so we were two years ago, we were dealing with I like to use we're diluting values. Values were decreasing, and you know, consumerism was started.
What around the summer of twenty two.
Yeah, I want to say the printing presses were turned off by the FED and March effectively of twenty twenty two where they quit buying all the mortgage backed securities.
I remember the day. Yeah, it was a sad day.
It was a sad day. Watch rates go from the low threes to four and a half overnight, right right, and of course that sends shocked ways through the market. Mortgages cost it. It's about one points, about twelve percent more on your desk servicing thereabouts.
So let's talk about that for a minute. One percent of interest rate on a mortgage is about twelve percent buying power on that property.
Correct, No, no, no, Like if you let's just say, if your mortgage was going to be my understanding, so correct me if I'm wrong. If the mortgage is going to be two thousand dollars and mortgage rates go up a point, that mortgage effectively now would be about twenty fifty fifty exactly right.
Yeah, so about twelve percent decreases you're buying power.
Decreases buying power. And then when we watch rates climb up to seven or higher or higher, we you know, we all were like because we had been addicted to cheap credit right the last ten years, and it was really all that too, I'll be honest.
So was I.
I bought a car last year and tiers zero credit was seventy nine wow at Ford Motor Credit.
And I was just like, you know, what happened to a point nine?
What happened to point nine? And I was I kind of paused. I took I took pause because you know, I bought my first car with a loan in nineteen ninety three, and my rate was six and a half in nineteen ninety three. And I'm looking at going. I was a kid at eighteen, right here, I am a full grown adult right with paying a premium, paying a premium compared to what I'm used to.
So well, I just bought a brand new Ford. Uh not four. I bought a Ram pickup truck this weekend. Okay, you know mine's five point six four. So there you have it.
Oh dude, there we go, they're coming down. Ford introduced private Sorry we got on a tangent with cars here for get that.
Yeah.
So yeah, So basically, let's pivot back. So rates were kind of in a purgatory, and buyers weren't buying because things were more expensive. We watched prices decrease, So we have two metrics. Goldman Sacks had that article come out where he said Austin's going to lose twenty five percent of values?
When was that so last year? God?
That was twenty twenty two, twenty twenty two. It's spent some time, got it? So on a rolling thirty day number because they didn't define how they were gonna lose twenty five percent. It was that story, the story of the leads, the story of the bleeds. Brandon Finial to tell you that what you're talking about, Beffini, he's the one who drilled that into my head. So we did drop twenty five percent from a.
Thirty day peak value to a thirty.
Day bottom value. But when we go look at it and over the last three years, during a three year period, yes, there was a there was a hot moment that those two numbers did come into alignment and we did hit twenty five percent. But nobody cares about thirty day windows, right. What matters is what is the three hundred and sixty five day the seasonally adjusted numbers doing, and seasonally adjusted, we gave up about eleven percent of values in Central.
Texas across the board.
Across the board, it's just eleven percent. Now, I know that's reasonable.
I mean it's not a well if you think about rates that royal recession.
No, no, and mortgage rates are up basically four points, so it cost you fifty percent more to buy at home if values only came down ten percent. So I don't think there's that perfect crash everybody was waiting for. But we have started to see and literally this is
just materialized since February one. I do some regression analysis, we have some algorithms, and we are actually starting to see the forty five day seasonally adjusted line show some downward pricing pressure, still still surprisingly And I saw.
That on one of your charts on Facebook. Yeah, and it was kind of what you were impressed. I gotta get back a hold of.
Cross exactly, and I was just like, oh my god, here it is. Because I still didn't think for an investor perspective, it was a great time to buy. Yet it was more of the if you could find the right opportunities, it's a great time to buy it. Opportunities you don't pass up. And I'm looking at going. I really think Q three, late Q three, early Q four, that's when those sellers who weren't opportunity sellers are still in the marketplace, and those sellers truly we'll be ready to wheel and deal.
Now.
The question is is how do we wheel and deal and make it with everybody? Is it a wrap?
Is a short sale? Is it?
What is it look like?
I don't know about Q three this year.
I'm talking about Q three, so I think we're early Q two. I'm thinking in sixteen weeks after this plays out that it may be buying season for investors.
You think some of this depression we're failing right now is political, im from the markets being poy nervous about things.
It feels like that to me, it does, And we talked about that, you know, kind of talked about the politics of where we're at. And you know what, I've been studying the market in Austin the entire time. Coming out of the semiconductor world, where I was a metals buyer, I had to track metal markets. We worked with hedge buying commodities. I'm just used to charts, and when I came into real estate, there was no real good charts.
There was no real good metrics. Texas A and M does a great job with what they do, but they are reaction based metrics that come out forty five days after the fact, and I needed a data set that was more where's the market going? Because we live in today when we execute our tracks, that's exactly right. We don't live in what happened forty five days ago. So everybody's like, it doesn't matter which party. I'm trying to be a little diplomatic here, it doesn't matter which party.
It happens, like markets always get better after presidential elections. Like president elections don't do a blip to any of these things. It's just rhetoric you like to spit out of your mouth because you don't may or may not like the party that was in power.
That's right, And.
I'm sitting here going, I don't think it's a go. I don't think the change of the presidency was going to cause any changes. But I do believe that with what's going on with Terras, what's going on with everything, that there is some chaos in the marketplace and it's causing institutional investors who consume our mortgage backed securities to be guarded, right, and we're still seeing those high yield spreads.
Everybody's guarded.
Everybody's guarded, and they're like, well, lend you the money, but it's going to cost you.
Yeah.
So I don't think that we're going to see I don't know what more rich are gonna do, but I don't think until we see that yield spread change between the ten year t built and thirty year fixed rate mortgage. We're going to be back to normal and we haven't seen that in three years. So it doesn't mart which administrations and.
Power that needs to come down.
It needs to come down because until that happens, we don't know what the market truly will bear, because, in my opinion, the investors have hazard pricing on mortgages right now because their scared rates are going to drop. They got to make back all their money to generate those mortgages, so they frontload all the loans. But they've been front loan loads now for three years.
I know, tell me about it, and we're sitting here going it's like, give me a break. Yeah, loans all been front loaded.
Because now guess what the mortgage backed security investors the generated loans in Q three of twenty twenty two are making super big profits. Oh sure, Now what happens? Are they going to report that the Wall Street? And now are they going to get addicted to the profit? So are we going to see a fundamental shift in mortgage backed securities? So we're going to see a fundamental shift in home buying. I don't know these answers right well, time will tell.
Time will tell based on your experience and your yeah, market knowledge and expertise, where do you see opportunities right now? You know, I'm in the residential space.
In the residential space, I I'm a firm believer. I'm buying central business districts.
Okay.
And there's some some theories and I'd be drawn a blank if I told you the books. But I always advise everybody to buy as close as you can to a central business district sixth in Congress. Buy as close as you can. You have pricing stability, that's pretty central. It's pretty central. The domain and domain the Tech corridor now one eighty three from from Cedar Park downward on that oney three And I was, you know, I've got the cute little first time home buyers are twenty four
years old. They'd be the third generation of this family. I've helped buy homes. So, you know, the first time home buyers, we all hold a special spot for them. I love them because, yeah, they appreciate what's what's happening.
Absolutely versus us older people.
Who are I got to do that for you now, I got to do what now. It always seems like my older clients complain about the mortgage loan process where my younger clients are so appreciative.
I know they'll do anything I get hold. I gotta do what.
I got to write a letter? Sure, what letter do you need me? What do I have to explain? I've read exactly. I'll get the novella out for you. It's there, it is, that's right, it's I missed my payment because I was on vacation. You know, you've had plenty of explanation letters over the years.
I'm sure we.
Don't do that much anymore, but still I had to write a letter about missing a credit card payment that you did. I did once I was on vacation. I missed it, missed it. It was paid thirty one days instead of thirty. If I'd caught it, it wouldn't have been days. A little bit the old days handering those letters, good lord. Yeah, so I think I think for first time home buyers, you know, it's.
But then we've got to deal with a phil affordability Oh my gosh, yeah, business district. But yeah, but your opportunities are some people are going to be those are even as far as in this case gerald our temple, Oh my gosh.
Yeah, people are moving out, So these first time home buyers, they were qualified at like three forty.
Yeah, it's not a lot of.
House in central Texas. No, in the five county area, being the Austin MS. More of a house though, Yeah it is. But I kind of looked at him and go, You've got to remember guys this, think of it this way. It's like, it's not your parents' house, right, that's right. It's not an apartment complex you're renting and has somebody above you and adjacent you or below you exactly, and it's yours exactly. You get painted, you can landscape it,
land you can do whatever you want. At twenty four, you're buying what might be the appreciation window of an opportunity. You have a lifetime in Central Texas, because if you wait till you're thirty five, you're gonna get less house. You wait till you're forty five, you're gonna get even less house.
Right right.
You know, if my wife and I hadn't bought our first home together, and I'm just going to preach to a choir about brian buying, we bought April two thousand and five. We scraped every penny together. We had to get a home, and if we had not bought in East Austin on we were Caesar, Travis and Komal right down town.
Yeah, oh yeah.
It was one hundred and eighty nine thousand dollars about it for I'm gonna thirty single single family home. About it from Christina Valdez, who's another agent in this town that's been here forever. She was the listing agent, was her personal property she was selling. Christina and are good friends to this day, and we were so happy to be homeowners. Mark. We were in a thousand square feet oh wow, one bathroom.
Wow, you know, just just two of you.
Then it was just two of us and a dog. And you know, we were on an eight thousand square foot lot in a little thousand square foot house.
But it was ours exactly. My first one was nineteen ninety so I remember, yeah, oh yesterday it.
Was ours and we painted every wall of crazy color. We you know, we did everything we couldn't do. And we were young. Yeah, My wife was twenty seven, I was twenty nine, and had we not bought that first home, we wouldn't be living in Central Austin to this day. I'm now over in Brentwood, you know, We've got a great twenty three hundred square foot home to nineteen fifty eight beautiful And you know.
I couldn't agree more with you. And we talked about before the show that you think and I think this too, although I've been saying this for a little bit, that this is a good time to be buying now. I'm not trying to push anything on anybody because I don't really know exactly what's going to happen, but it seems to me the it's a perfect storm right now. So let's talk inventory.
A lot of man we are at so inventory is a great question, great comment. There we are at yesterday eleven thousand plus active listings in central Texas.
When you say central TEXTA, you talk about the.
Troupe five county, the five county so to MSA technically to people who don't know, it's Travis County, Williams County, Hayes County, Cadwell and Bashtrump. Okay, that's our the statistical area that is Austin. Eleven thousand plus active listings. And you know what, we have more demand than we did last time we're at this point, which was July of twenty ten. But there's opportunity in there.
Yes, you mentioned twenty ten earlier before the show. Yeah, which was the perfect time. Oh my gosh, we bought tons. I worked with a lot of investors.
We placed a lot of money in such tyxes at twenty twenty or twenty ten, and it got liquidated in twenty twenty at about a four hundred percent increase ten years in ten years, And I don't think we're going to see another run like the pandemic. That was a unicorn.
That was a unicorn. Wet likely won't happen.
Again, most likely will never happen again. But I want to step back a little bit and go why I think it's a great time in Austin to buy a home for investors looking for appreciation place, and for first time home buyers, and for any home buyer. If we go and look at most of the United States, homes are selling for what they did during the pandemic. That's
just there's very small interest. It's a nationwide and in Texas, if we like at Texas as a whole, homes are selling at peak pandemic pricing right now in the whole state of Texas. Now, real estate is local, it is not global.
That's right. You know, it is a hyper low micro cosm.
It's a micro It can get to street to street even on what why.
I don't get it, certainly neighborhod neighorhood.
Neighorhood, neiborhod and street to streets. So something I really have just been digging in going this is why I think Austin's gonna be a great appreciation play coming into Q three for investors, and I think it's gonna be great for first time home buyers who had the flexibility of time. Is Austin is trading ten percent to eleven percent below pandemic.
Values, if not a little bit more in some areas some areas, but but that's let's just use that.
Yeah percent, Yeah, ten percent, got it. My neighborhoods probably fifteen to twenty in central Austin, which means there's neighborhoods that are five or six percent above. I live in Lakeway and that could be fifteen percent exactly. So one of the things that I'm really excited about is Dallas and Houston are trading at pandemic peak values.
Unbelievable.
Austin is not. San Antonio is not.
Is it? We had such a high run during during COVID.
I mean there's so many, there were so many people, and I think what we've got right now on our sale the people selling is you know what is I don't know the factual number, but I presume most mortgage backed securities are a three to five year product for investors, just through the natural right just to say five years five years. So we're three years out of the pandemic. So that means people who moved here early on could be getting the bug for a new home, ye, or
they're relocating in and out. My wife and I keep our home for an average of ten years. We don't We don't move like some people. I've got friends who move every three to five years.
Like a car.
It's like a car to exactly said exactly. I'm like, no, moving, I like, movie is terrible. Yeah, it's not worth it.
No.
I bought a second house Mark and I was like, we filled that house with a lot of stuff from our current house. I was like, I got out of having to buy another one to clean approache the house because we just bought another one, moved everything out there. I still got stuff of the story to man, But yeah, I think it's I think we're really on this cusp.
Of and let's talk about an opportunity that very few people think about. And you're the one that brought it up to me this morning. And it's really an opportunity for sellers too. Absolutely, you bought a property in twenty twenty one, twenty, you know, late twenty twenty. Your rate's probably three or below. See, And I was looking at my my inventory, not my database. I'm like, all these low interest rate loans.
Talk about the potential there, the opportunities as a seller. So we were just talking about this and I was I was a firm I'm a firm believer, you know. I speak with real estate agents every day. My Facebook was quiet for four months, five months. I really was focused. I'm working with some pretty big investors and focusing my energy and production. And I've made five or six posts
in the last two weeks. And MYA, you were, you were like, boom, I've had forty two thousand interactions from a forty two forty two thousand interactions on my Facebook, between engagement reaching out messages like I have a professional Facebook profile. It gives me the metrics. And I was like, wow, people are in need they want to know, they want to know what's going on. So one of the most common messages I'm getting from agents is like, my sellers
are upside down the word price, where's priced? Because that gets them out of the mortgage. And Mark, I'm looking at going is that bad advice because that mortgage, those two don't valuable. It is those three and a half rates. Those are hugely valuable instruments. Goal And I think as we distance ourselves from the pandemic, the hindsight's always twenty twenty and I want to put that out there for everybody.
The mortgage back instrument from twenty twenty to twenty twenty two will be the biggest short of the US dollar ever. You may not know what shorting is and how short is taking a bet something's going to lose value. Well, what have we had inflation?
What does that? Do?
You lose value on your dollar with inflation? But you've got a thirty year financial instrument locked. You got to sell the sell that. You've got an instrument to sell that. Hey, I'm you know, I was telling Mark Ago. I think with us A buyers on appreciation, there's gonna be sellers.
You need to get out that we could walk in and get them out of the mortgage responsibility with virtually nothing into it, with virtually nothing into and still give them a couple of points every month on the mortgage because I'm willing to take a note at five percent, they're at two and a half.
They're making money.
They're making money on the asset, and that money can be made.
It's not on the asset, it's on the loans.
On the loans the asset at that point, that's true. That it's it's producing money for them every month. And I think we're gonna see you just sold one. I just sold one in San Marcos on an owner carry and for an investment personally, not for a client.
Yeah, well it was one thing.
It's a beautiful thing, and it goes from it wasn't making any money as an investment property too. It makes money, and we have no responsibility as the investors if I have through foreclothes and take it back. No harm, no fires, yeah, no no ac unit, no capacitor oute, no hot water tank going bad, no hailstorre and tearing up the roof. You know, these are the three most common box money.
It's now mailbox money is and I'm looking at going I would buy another twenty homes in Central Texas personally, if I could wrap them, get somebody out of a bad situation, make it a positive for them, make them some money. We take the upside. It may suck, you know, you don't get the upside, But for an investor, hey, you know, I'll buy more homes all day long. Given the opportunity for a minimum, minimal amount of cash or a small down payment five to ten percent, I'm a buyer all day long.
Yeah, you know. It's also it also speaks to and we can't go in the detail run that strategy, but it's a good one. And so let's let's talk about how to get ahold of you.
Yeah, well, if you want to get ahold of meal, I'll just throw my cell phone on here. It's five to one two nine eight three three one three two. I'm Chris Jake on Facebook. You can find me. Put christ Jacob housing report. You'll find me on Twitter. You'll find me on Facebook.
It's a great report. You need to follow.
Yeah, in my my cell phone once against five one two nine eight three three one three two to make sure I said it clearly, but yeah, I'm always available to help and have a conversation and talk through scenarios. It's kind of funny because my wife will tell you I talk myself out of more business than I talk myself into because she's like, you truly put everybody first. Well that's cool, not yourself, it should be. And I got past dividends in the long run.
You called yourself pious. Yes, yes, you love it.
Just a pious way of living is a good way of doing it.
It's good. But let's talk about some of the negatives, potential negatives, and this could be pressures on rents. Yeah, so so that's all the inventorial apartments going.
Oh we were talking about that earls Also, it's just like you know, single family rentals have had a lot of pricing pressure on them, much less the air BA B market. Oh my god, here and B market. I'm in many of those groups, and those guys are all I believe the airbnb market's hurting the little because it was easy to make money during the pandemics, right, nobody so.
Much movement of people. Oh, there's so much.
Movement to people. And I remember fondly my wife. Fourth of July weekend, twenty twenty, looked at me and goes, we need to get out of this house.
Was that the way awsome?
No, this we're in Brentwood.
We had been.
We were in Brentwood now eleven years. She's like, we just need to get out of this house.
I was like, where do we go?
She's like, we liked durano I go, let's go pandemic and DURINGO and we literally went and runted a house for two weeks and grocery shop, cooked meals, did everything we did. Stuck at home. It was just someplace different, right right, People.
Did it all the time. That's how they lived.
Yeah, that's how they lived back then. And there were some there were some rentals in Fort Davis, Texas, which if you don't know where Fort Davis is, it's a the highest county seat in the state of Texas. There's twenty eight hundred people in the whole county. Wow, there were airbnbs and Fort Davis making one hundred and two twenty dollars. Ye, that's crazy for properties to sold for two hundred k. Because they were just getting crazy money.
Yeah, not to be stuck money. It was it was money. It is just flowing away.
We were all getting money in the check. You know, the personal the PPP loans, the stimulus money is the wow. It was my wife and I were just talking about the heyday of we make the same money, but it feels like there's less money, right.
Tell me about it. So we go on and got a couple of years left. Man, Let's talk about opportunities real quick for people either buying or selling.
Yeah, so I think, here, here's my opportunity. I think, right enough, you're renting a house, as you call someone like you Mark, you figure out how do I get an FHA loan and you go and pull that trigger and buy something agree more personally.
This is because rentals are probably twenty five hundred a month on average.
You think, oh my gosh, yeah, single family, you know, I just this is the exception. I just did one at ninety five hundred dollars in Westlake. But you know one on our street was fifty seven hundred dollars in Central Austin, just off justin Lane and Lamar. But you know, most of our rents because we're not in Central Austin, we're out in Hayes County or we're in Williamson County predominantly you're twenty five to twenty eight hundred dollars a month, which is plenty of money to go buy a home.
It is the hard part for someone wanting to be a home buyer is that down payment, which is faha, three and a half street.
And a half percent. But we've got down payment assistance for people like that.
You know, I would do any more percent from the state for free.
Basically I did not know this.
This is something I've just learned. Like we were talking about me buy my first home, like we scraped every penny.
There's the first time buyer.
If I could get a home and I didn't have one, I would do it because no matter what you do, a proven fact is home ownership creates wealth, Yes, long term, long term wealth. Being married and owning a home creates exponentially more wealth than being a single person and a home.
Well, my wife and I owned three properties in Travis County and probably ninety percent if you will, of my net worth at my real estate.
I believe it.
I love re estate.
Yeah, I'm a firm eighteen years in it now, I'm a firm believer in real estate is part of a balanced portfolio for people and.
It's it truly does prove somewhere anyway.
Well does and if you're able to, and this is for my investors out there, if you're you know, if we can get you to get qualified real Estate Professional status turned on your taxes, it could save you tons of money by removing that twenty five thousand dollars cap on your schedule E income. And that's that's a whole other thing, whole.
Another strategy and expertise around taxes and benefits of owning real estate.
We need a CPA for that quation because that's the qualified real estate man.
We are out of time. I've really enjoyed it again having you on, Chris.
We'll have to do it again, Yes, sir, thank you for the opportunity.
All right, buddy, This has been Mortgage Doc with Mark Hairston. Mark is a mortgage advocate with Texas Mortgage Source LLC, offering personalized mortgage solutions, fast customized quotes, great rates and service with integrity. Contact Mark at Markhirston dot com. Mark Hairston dot com. You can call our text Mark at five one two seven eight nine sixty nine sixty seven. That's five one two seven eight nine sixty nine, sixty seven, and come back next week for more mortgage talk.