Home equity and inflation in the market have been two hot topics recently. Why is it important to have refinanced? Where are we seeing the inflation? When will we see a proper correction? Our founders and real estate professional, Jon Reusch, discuss.
Salvatore Cusumano 0:00
“Why haven’t you refinanced? I paid, you know, $7,500 down over two and a half years or something like that. And over the past six months, I paid down, like, substantially more just due to the low rate, you know, and I bought my house, unfortunately, I went self-employed, so I couldn’t refi. So I was at a five and a half for like two years? That was terrible. But the ability to gain equity now. And I think that’s what is kind of insulating some of like the, like, if rates were 6-7% right now, and values, were this high, it would be alarming, because you’d have to put down, you’d have to pay so much extra to build equity in your home, but now is an opportunity. And I don’t, you know, people when you talk to them, they’re like, oh, man, I’m paying 10-15 grand extra for this house. But it’s like, dude, with this interest rate, and the way that your money will apply towards that loan, you’re going to build more long-term, if you have that plan of seven to 10 years or whatever, right. But, the price of money almost trumps the inflation in terms of the housing market, in my opinion. Up until a point at some point your dollar just isn’t– at some point, I think so. Hopefully, before that, that goes past that, right with I think that’s when you see the correction, and I think that’s when you probably see some more inventory hit the market. ”
Paul Apostolakis 1:22
“Jon, how do we see a correction when we have such a supply-demand issue that isn’t going to go away?”
Jon Reusch 1:29
“Great question, number one: when mortgage rates are stopped–when you stop supporting mortgage rates with subsidies, right? Whether that’s the unemployment checks that are still going out, when those stop, or when those programs end or change, everything else will start to ripple. Okay, number two: you’re going to have an increased amount of inventory come on the market. A lot of people predict there’s roughly five months of forbearance, or homes that are in forbearance programs that have not hit the market. So that’s around the country, of course. So here’s the point is as rates start to come back up whenever that is, okay, whenever that is a consistent thing, and get about four, four and a half percent somewhere in that range. Clearly, buyers are going to be priced out, that’s going to happen. Then number two, you’re going to–whenever these properties potentially come on the market, that’s going to help, right? But this demand isn’t going to stop. Listen before COVID, before the rates, we had 5 million homes not built in the last decade because of the recession, right? 5 million homes that were not built there’s a 5 million home gap. So you’re going–we just last year hit a million homes build again, right and now look at lumber costs.”
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