[David] Good job, Matt. I tell you, there’s a lot he summed that up so well, Bill. I can’t wait to get into some of this because it’s just weird. All the things that we thought the cause-effect one of the things that caught my attention… before I say that, be sure to sign up for Matt Graham’s MBSLive.net. You can go to that website, put LOL in there for a extended trial without having to put in your credit card number, but just to tell you, put it in there. It’s just so valuable. I have it open here all the time. Bill, when Les was talking, he says, “Are we gonna see the touching on the lows of 4.9?” I’d say today’s market activity is saying not so much. Not, I think more of a suggestion that it’s gonna be heading up, or are we in this new trading range trying to figure out where the new top is? I would love to get your thoughts on what you’re seeing with the data points we’re seeing on the screens right now
[Bill] Now, last point first. Trading range to me feels like it’s probably 10-year a little bit over five to the 535-ish range. I think we’ve seen some pretty significant events that have moved us around in that range, but, as Matt said, there’s a lot of conflicting things going on. I think that the takeaway from what we’ve seen over the last couple of weeks, which we’ve talked about before, is don’t get out over your skis. the market can move significantly and quickly and… in trading hours, after trading hours, don’t make bets because to Matt’s point, there are a lot of different… right now you have to understand what’s moving the market and then try and predict the reaction to I agree completely with Matt. When you first saw the CPI and PPI numbers, if you had made bets on where the market was gonna end the week you would’ve been hosed.
[David] You would’ve been hosed, yeah. Yep. So true. you and Les have these daily conversations back and forth, where things are at, I loved Les’s segment- … but give us some insights into where his head and heart’s at, where he thinks we’re heading.
[Bill] It kind of ties into, what Fran Tony said at MBA and, I won’t name the publications, there was more than one, but, they’re now starting to go with the clickbait, of what would it take to get rates back below 7%? Implying that’s right around the corner. And- there’s two wars, There’s hot inflation, and when you take the inflation side, when you take one-time events and you stack them up side by side, it starts to look like a bookshelf that’s pretty full. And, you gotta bury the one-time event argument. And I still feel like- when everything else normalizes out the fact that we’re still going as a country deeper and deeper into debt I completely agree with where Fran Tony was going, that kind of 7%-ish is gonna be the range going forward. And, this argument that people have been making about how we’re gonna go back to where mortgage rates were before the Iran war started, to me, that ship has sailed.
[David] Yeah. And I think it’s also detrimental to the heads of so many originators when starting getting into this thinking we could be lower,” or the consumer that they’re talking to right now trying to figure out, should we move, should we not move on this? and- Yeah … because rates still have- That, that’s one of the bigger factors that people are looking at
[Bill] And by the way, there’s this other little phenomenon going over in Europe and- … so you were just in Greece, Which used to be the basket case of Europe financially. And they’re now giving advice to France. And that, protests are getting larger- There’s clearly in a lot of places they’ve crossed the line from protests to riots. I was watching on the news this morning, There whole areas and store owners are frustrated because their store was totally trashed, and they’re like, “But I agree with the protesters.”
[Kittle] Yeah. That’s because there are many paid protesters. Yeah.
[David] There’s the paid, there’s the paid element that we- Yeah … yeah we see it here.
[Bill] The protesters are getting outdone by, the paid take that one step further, They’re paid anarchists. They’re not protesters. I saw a shocking picture in The New York Times this morning. You always see all the streets and the stores and everything, but there was, I forget what city it was, but their big, ornate, old stone city hall, completely engulfed in flames. Burned to the ground. That- Gutted … that’s not what protests are all about. But there are gonna be real ramifications, and it’s all based on, the French public wants more and more from the government and they’re like, “Guys, there’s no money.”
[David] Oh, yeah. And it’s, someone’s gotta get the memo. There is no money. But what happened to the old days where things like, that’s what happened, there would be this thing called the flight to quality, which would drive bonds- To lower rates
[Bill] I think that’s what we saw a bit of the nervousness in the tech sector was that phenomenon. That, to me, that effect is very limited by the level of debt. So flight to quality implies that there’s quality, and I think the level of debt and frankly, the uncertainty about what any policy is of the US government right now, folks are saying maybe I just take my money out of stocks and don’t put it anywhere.”
[David] Yeah. Mattress bunny, here we come. Yeah. Kittle, thoughts?
[Kittle] Yeah, a couple. We’re listening to Matt, and he really diagnoses down to the 10th, right? Yeah. And he rounds it up, and we’re at 4%. Four is worse than two. However, two and a half years ago, 9.5% is worse than four. And so we’re still in better shape inflation-wise than we were two and a half years ago, and the only thing that’s causing inflation right now is the two wars and oil prices. That’s it. Everything else, the economy’s really strong. Maybe that had something to do with bonds decisions. I don’t know. I’m not a trader. But I’ll go down… that’s a very micro look, and that’s what we want. Excuse me, macro look. Let’s take a micro look, and you kinda touched on it there just for a second, David. If you’re an, a loan officer listening to this, or even if you’re in the C-suite, you own your own company or whatever, there was a complete, to me, the people I talk to, I had a reason. I was going to the MBA annual, and had an incident inside the family. I couldn’t go. But I talked to a lot of people since then, and there are those that came back and go, “Oh, my God. It’s horrible. It’s gonna be terrible going forward.” And there’s those that came back, they came back and said, “Look, there’s a lot of opportunity out here right now,” and they list all their reasons. So if you’re a loan officer or whoever you are in the business, or just in normal life, you can either decide to be negative on this, or you can take a positive approach about it and make the best out of it and go out and do the best you can. Yeah. Lift up the people in your company. Lift up your family. Lift up your realtors and your builders and say, “What can I do to help you structure loans and talk to people?” And you can give it up right now, or you can go forward, ’cause somebody’s gonna be doing that loan, and that’s the micro of it. It’s all about your attitude going forward.
[David] On the flight back from Athens last night, or yesterday. When I was flying back there, got 11 hours in an airplane, you get a chance to watch a few movies. And I-
[Kittle] Can I ask a question? Yes. Were you gone? Just kidding.
[David] Oh, the listeners, if you knew how much ribbing there is I get for going on this honeymoon and then being gone and traveling. The good news is we sold our home. I gotta fly out again back to Texas to take care of- Oh, that is good news … yeah, that is good news. But anyway, I was on a flight- I was gonna say, high rates didn’t bother your borrower, did they? Not at all, because they saw an opportunity And they got a heck of a deal on a great house because I got tired of carrying it, so it’s kinda like we agreed to more of a… it’s not a distress sale, that there’s distress. I could keep carrying this thing, but I’m tired of it. So it’s like someone brought us an offer and I’m going, ” Hit the bid. Hit the bid. I’m tired of this. I’m tired of holding onto that.” And I think there’s enough people, probably gonna frustrate some other people in the neighborhood because I dropped the price nearly 300,000 to get this thing sold so I’m not having to deal with that. But to the many voices that are out there, a movie that I watched, I wanna talk to Alan about this one in his segment, but it’s called the AI Doc or how I became, I’m thought- when I heard this term, I thought of Bill Corbett, an apocaloptimist. Apocaloptimist. So when I heard that, Bill, I thought of you. So in the first half of this, movie it talks about AI apocalypse that’s coming, and they literally were talking all the negative people. And there’s developers that say they don’t anticipate their kids graduating from high school before the world’s gonna blow up because of AI. And then you got on, others on there they said, And this guy that’s doing the movie happened to be having, be pregnant with their first child, and he is just depressed. His wife says, “We gotta find something that’s positive about this,” and they went to that group. And then it’s interesting, those that are on the positive side of any issue, pick a, whether it’s AI, or mortgage rates, or where this thing’s going, seem to do better. It’s just that whole attitude glass half full or glass half empty. And I think it is so critical that we get our focus on the glass half full, find the opportunity, without denying the facts. someone’s getting a mortgage loan for this guy that’s buying it. He’s putting a lot down on my house, but there’s a mortgage loan out being written. And you know what? Mortgage rates didn’t have anything to do with it So anyway, I look at this whole thing
[Bill] One of the best simple analogies is something I heard from a ski instructor decades ago, right? So it was a group of us. we were going off the trail, skiing through the trees, fresh powder, et cetera. And the instructor made a great comment. He said, Cause you’re nervous, right? There are a lot of trees around and everybody starts off and they’re really tentative, and he stops the group. He goes, “Look.” He goes, “I’m gonna make this really simple.” He goes, “There’s a lot of techniques that I can teach you, but it all starts from the top.” He goes, ” If you’re looking at the trees, you’re gonna hit the trees. If you’re looking at the space between the trees, you’re gonna go between the trees.” So true. He said and he said- Great analogy … until you get that, all of the technique that I could teach you is gonna be pointless.”
[David] Yeah. It’s so true. That is a great analogy. They say you, where does the car go? It goes to where you’re looking. And so if you’re looking at something that’s in danger, just keep your eyes where it’s positive. That’s a great analogy. I like that. Being a snow skier myself, it’s so true. Alice, let’s get your thoughts.
[Alice] I do have a question. You guys talked a little bit on it since I was out for a second there, I’m not sure if I missed it. But you touched briefly on the MBA’s predictions and that it looks like their prediction’s now been adjusted, and they are saying rates look like they’re gonna stay above 7%, even through 2027, and that there will be that big drop in volume. So I love the analogy on focus on the space between the trees not focus- Yeah … on the trees, because it does look like volumes will be lower, rates are gonna be what they are. but the white paper that they wrote, I think if everyone takes a minute to go read that, when I say they, the MBA, you’ll see where the nuggets are that you can use to perhaps focus on your business model. So the MBA you can see is focusing on we need to make improvements to FHA, just as an example. So if you’re not good at FHA loans, go get good, right? So- Yeah … go figure that out, because if any of these paths really do work out that they’ve got in their white paper, then you wanna be ready to jump on any of those opportunities.
[David] Great point, Alice. And again, go see the opportunities, focus in on those than what is the possible negatives. Stay in the snow, stay out of the trees. So that’s good stuff. Let’s get over to Marc. Let’s get some of your wisdom. You and I have been around this industry for a long time. Gosh, everyone on this podcast has been, so I can’t… we don’t hold the corner, even though Marc, we may have a few years up on everybody else. Not many. But your thoughts as you look at what’s happening and this comment about rates.
[Marc] This podcast has well over 230 or 40 years of experience on it, so we ought to have some answers, right? I want to say something here today that maybe I’m wrong on this, but, I’ve learned … when I came on this podcast about four years ago, I thought I really knew a lot about rate movement and rate change, and basically what I found out was how much more I didn’t know than what I did know. And I’m kinda thinking outside the box now of something we ought to do special, and we got a number of people, not me Mr. Kittle and David, you and Bill, and some of the commentator, other commentators on the pod- podcast. I think y’all have set up a three-part series and talk about rate movement and what causes it because I think we’re leaving a lot of our viewers, listeners out a little bit on their understanding to make sure they understand what’s happened. ‘Cause I’ve learned so much of all the bits and pieces on the podcast about rate movement. I think I can now give a lecture on it, but not everybody we have as a listener’s had opportunity to hear all these things over the years, and so they haven’t had that learning experience that I’ve had. Now, I really think there’s a need for that because I think that people just go along and point a finger at rate and don’t really realize it’s out of the hands of the normal guy on the street what happens to rates, and it’s at a bigger volume. And I think people need to understand that more, and it would help them when they talk to their customers, say, “Look. Hey, I’m telling you, rates are high right now, but you know what? Based on what I’m hearing, they’re gonna go higher. You need to get in while you can.” Or when rates drop down from a, high thing and it’s time to they go to their borrowers and say, “It’s time for a refi. You need to do this. It’s time to sell your house.” I think if we do that and we can better educate the people on the streets what’s happening with rates so they at least have an understanding on it, they can do a much, much better job servicing their loan customers out there as to what they need to do. And I think we’re needed. And David, think we got participants in this podcast that could do the most outstanding job in a world on a one or two or three podcast series. We’re talking about rate movements in a educative manner. I don’t know if anybody else on the podcast agree with that, but I’d like to throw that out there because I’ve certainly been educated. I know 500% more about rate movement now than I did when I joined this podcast.
[David] And you’re a veteran. It’s been invaluable to me. I think you and I are both veterans. I listen to this and I think this is … a lot of it comes from the conversations because each one of us have lived with some history, and that history seems to not be relevant necessarily. One of the things I said was the old flight to quality. When there’s troubles overseas or some war breaking out, there’s a flight to quality, which means lower rates. Not happening. Not happening. It’s ’cause there’s so many factors- Yeah … had so much more dynamic. That’s a good suggestion.
[Marc] And- And if people, and people think, David, that rates are bad now, my second mortgage loan was 16.5%.
[David] Oh, we could talk about that. Yeah. We were all doing them, we were all doing 16, 18, 19%. That’s where it was for back then. So seven is relatively affordable if you look over the period of time So I think that’s a great point. I think there’s good discussion. We can keep it going, but I wanna move on to Alice’s segment. Thank you everyone for talking about it as you do. I’ll always love the reflection, but