Albuquerque Real Estate Market discussion: The regulation part of the mortgage industry

Albuquerque Real Estate Market discussion: The regulation part of the mortgage industry

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Tego:

So, so Chris and I, uh, saw each other the other day and we just started geeking out talking about what’s going on in the real estate market. We’re great at geeking out. Yeah, we are. We really are, you know, on, on this, you know, data and analyzing what’s going on in the real estate industry as well, all as the mortgage markets, which obviously they’re all, you know, go hand in hand very much. Yes. Um, one of the things that, uh, gets talked about sometimes, but maybe not enough is the regulation part of the mortgage industry. Yes. Uh, I, I, I think everybody, I think everybody can agree. I don’t think many people can argue with it. The prob ones that we had in 2007. And of course, you know, when it really fell in 2008, a really big portion of that had to do with poor lending standards. Yeah. Is that fair?

Chris:

Well, literally what had happened leading up to that was the deregulation of lending per se. Yeah. And, and there were a lot of schools of thought it behind that really to make the lending process more readily available to more people. Yeah. Right. And that’s something that we’re gonna have to watch moving forward now with the way that the market’s going. Absolutely. Is we, we have to be careful not to have administration step in and say, well, we need to make this easier for everybody and end up back in the same place. Yeah. So in, in that effort to make loans easier and more available to more folks, it just meant that the stability of those loans were not nowhere near, compared to the St. The stability of loans today based on today’s regulations. Yeah. And so, yes, ultimately in the end, it was a perfect recipe for, you know, millions of people to be in a mortgage that anything goes wrong, a layoff, a fluctuation and income, and then things begin to destabilize. And so of course there were other things at play, but that those readily available easy to obtain mortgages certainly didn’t help

Tego:

At all. And, and the thing is they don’t exist today no. To, to the, the way they did back then. Right. Adjustable rate mortgages. That’s, they’re really not a thing. Right. I mean, technically,

Chris:

You know, the, this fixed rates are so good. Yeah. That the need that yeah. The benefit of an adjustable rate, we don’t see it in our market. It, it was, you know, those were good short term scenarios where that maybe the adjustable rate would be a full percentage lower than a fixed, but only for a period of time, maybe for five years. And the, and at the end of the five years, you had to make a choice, either refinance into a fixed, or maybe you were only gonna keep the property for five years. Yeah. And so, but right now fixed rates are so competitive. They’re so low that we, you know, we simply are not doing fixed, or we’re not doing variable rates at all. We’re not doing any variable rate mortgages in our, our business.

Tego:

Yeah. I, you know, so if we go back to 2000 and, well, actually I got the chart here. If we go back to 2000 and, uh, let’s say 2005, 2006 mortgage rates were around 6%. Right? Yes. And, and, and they actually moved up in 2006, seven, I guess it was almost to 7%. Right. And, and, and the thing that’s, that’s interesting about that, you know, 2007 is really when everything kind of came to a head and was like, okay, we got a problem here. Right? Yes. The thing that was interesting though, home prices really didn’t start declining until a year later. Right. So I guess what I’m getting at is there was a reason to have adjustable mortgages back then when, when you had a six, 7% mortgage rate, right. Yes. Now we’re at these three, three and a quarter three and a half. Right. Right. So,

Chris:

So the need for the variable and, and the ability of investors to hold and service them at a low enough interest rate to make it lucrative for the investor. Right. The market just doesn’t need the variable rates the way that they did, but yes. Rates at 6%, 7%, if you could get a variable at five yeah. For at least five years, and you’re gonna sell the property or in a refinance, then yeah. Then, then there used to be benefit to

Tego:

It. And I think the crux of this conversation is the, the mortgage that had been made in the last, let’s say 10, whatever it is, you know, back to 2008, eight, nine. Right. Right. These are very well underwritten mortgages. Yes. They’re they’re yes. People wanna buy ’em, they’re not, they’re not junk. They’re not junk investments. Right, right. Um, right. And, and so, you know, when, when we talk about differences now versus then that’s, that’s a big one now, obviously now, versus then we’ve got this huge move in home price. Yes. Home price appreciation. Yes. Which, which is concerning for a lot of reasons. Um, one of which is, is just affordability for people that, that want to get into buying a home and owning a home. Yeah. Yeah. And, and so there’s some challenges there.