Joe Massey with Castle and Cook mortgage gives us an update in August 2024 on:

• where rates are today and where they may go
• why some people are giving up their golden 3% mortgages
• what effect the election has on rates
• and when refinancing makes sense

Joe Massey
Castle and Cook Mortgage
loansbyjomassey.com
303-809-7769

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Welcome to Mountain Real Estate, where we bring you the latest insights on real estate from Denver to Summit County, Colorado. I’m your host, Candice De, a realtor, investor, engineer, mom, and Colorado native.

We have a treat today. We have Joe Massey with Castle & Cook Mortgage here to talk about interest rates. Welcome, Joe.

Hey, Candice, thanks so much for having me. I was really excited when I got your invitation because I love talking about interest rates. I love talking about mortgages. I love talking about the economy. And I’ve always been a huge fan of you. So I was really honored and excited when I got the invitation. So thanks for having me.

Yeah. Well, this is a good time to talk to lenders because there’s a lot of questions. So let’s just jump into it. Why don’t you tell us a little bit about yourself and what you do?

Yeah. So my name is Joe Massey. I’m with Castle & Cook Mortgage and I have been in the mortgage business, what, now 22 years since February of 2002, basically straight out of college. I went to Colorado School of Mines and got a degree in economics and business. and then started working in the mortgage business about 60 days after graduating. So since 2002, and I’ve been with Castle & Cook for 15 years, and I know you’re at your Castle Real Estate. I’ve been a part of the your Castle Real Estate team since 2011, so 13 years now. And my job is to help people that want permanent financing, any property that they’re gonna buy as a primary residence, as a second home, as an investment property. really great loans for folks that are looking to buy properties or refinance properties and really enjoy it. I get to see all sorts of different folks. I get to see teachers, doctors, self-employed people that own medical businesses, self-employed people that are barbers, self-employed people that, you know, own a pizza shop. I get to see all sorts of different folks in different situations and that’s one of my favorite parts of the job is all the different people that I get to interact with because… At the end of the day, just about everybody wants to own a home, whether you’re a barber, whether you’re a hairstylist, EMT, firefighter, whatever. So I get to meet and talk to a lot of different people, which is something I really enjoy.

Yeah. And I’ll just give a little plug because I’ve worked with Joe on a couple of personal properties and his team and Joe are awesome, both providing the macro perspective, but also just communicating through the loan process, which I think is one of the most important things. You give good rates, but you also… make it easy on the consumer. So I can give that for my clients and for me firsthand. So Joe’s awesome to work with. Thank you.

Yeah. I appreciate that. Thank you. All right. But so now you’ve got to back that up. Let’s talk about, sounds like you’ve seen a lot of market cycles. What cycle are we in and what is your current interest rate just to start with some context?

So average interest rates as of today are 6.5%. You know, we’re always a little bit lower than the national average, but 6.5%, 6.5% is the average as of today when we’re recording this. And the current economic cycle, you know, we had an incredible couple of years in lending and in real estate in 2021 or 2021, and even the first part of 2022. Now, those were some really hard years for some industries, but it was a really, really great year for real estate, anybody that owned real estate. We saw really, really massive increases in prices. We saw historically low interest rates, lower than at any point in recorded history. Well what happened in 22 or early 22 is interest rates started going up. Folks started having trouble affording new properties. And so you saw home appreciation really slow down. I mean in 20 and 21, properties appreciated 15, 18, 20, 22 percent. That’s a really big run up in two years. Now we’re kind of back to… 2%, 3% appreciation. That has also led to lower transactions, right? In 20 and 21, we were selling 6 million homes per year nationwide. Now we’re down, we’re gonna sell, I think, 4 million homes this year. So that’s a really, really big decrease. And a lot of people are thinking that the market is crashing, and there’s never gonna be a time to buy a property again. But I think we’re in about the seventh inning of this slowdown. You know, we’re kind of getting back to a more normal market. And I think by early next year, it’s gonna be a pretty normal market with people buying and selling homes when they need to, right, when they’re getting married, when they’re getting divorced, when we’re having babies. That’s traditionally why people have always bought and sold homes. And I think we’re really getting back to that more natural rhythm of transaction volume.

I agree with you. I think where we were was not sustainable to keep growing like that and keep rates as low. So while it’s painful for some buyers to like look at where we’ve been and feel six and a half percent right now, I think it’s definitely good for the overall ecosystem of real estate.

Yeah, I think so, too.

So given that, given where we’ve been and where we are now, I know a lot of people are locked into their mortgages. I have a couple of properties at three percent and I look at those mortgages and I’m like, I’ll never see that number again. So how does that number of where we are right now impact buyers that are at the $500,000 range or at the million dollar range?

Yeah, so you know a real common one that I hear from clients and a lot of different folks is, Joe I have a 3% mortgage, I’m never moving and I’m kind. I’m like, hey I totally believe you, that makes total sense to me, but in the back of my mind what I kind of think is you know that’s you’re never moving. until you’re gonna move, right? Because people move for job relocations, people get married, deaths happen, babies are born, right? There’s a lot of reasons why you have to move and just having a 3% number on your mortgage statement does not mean that house is going to serve your needs forever, right? People move because the house no longer serves their needs. Now, I do think that it’s true in the short to medium term. Joe, I have a 3% mortgage, I’m never moving. for two years, for three years, for five years, I absolutely agree with that. And there will be people that will see 30 years from now that still have that same 3% mortgage, but it’s going to begin, people are gonna begin moving even with a 3% interest rate because they need to. We’re in kind of a golden handcuff period that people say, hey, I have a 3% mortgage on a $500,000 home. If I wanna buy a new $600,000 home, my payment is gonna go up by $1,500. I’m going to stay in my current home. Well, that’s true. They’re going to stay in that current home until it is so uncomfortable that $1,500 is less uncomfortable than not having the extra bedroom. And we’re beginning to see that, actually.

Over the last three months, I’ve actually helped four people that had interest rates below 3% either refinance and pay those off because they needed some cash or they needed to consolidate debt or helped them. take out a new mortgage on a new property because they needed to move, because of a job relocation, or actually I have one right now, because of a divorce. People transact because life goes on. So I think that we’re getting further and further away from those golden handcuffs, really, because the last 3% interest rate was like January of 22. We’re now two years away from somebody getting that last 3% interest rate, and people are moving because life happens, right? Yeah, yeah, definitely. So what are you seeing? I guess I have a follow on question to that. Like I have a couple of properties that are at 3% and I have a couple that are a little bit higher and then I have a couple or one that’s a variable rate.

What’s your guidance to your clients of like when’s the right time to refinance if you’re going to stay in a place? Yeah, you know, what I talk about on refinancing is why. Why would you need a new loan? So let’s say, for example, I have a 3% interest rate, and I have $200,000 of equity in my home, and I don’t need access to that equity. That’s a pretty simple conversation. Don’t do anything. Keep paying the bill. But you might have a situation where, hey, I have a 3% interest rate, and I have $200,000 equity in my home, but I need that equity because I need to pay for a child’s education, a college education. I need to buy a new car. I need to. fix up the home, I need to put an aging parent into assisted living and need money for that. So cash out is something that we are seeing more frequently because a lot of people from 20 and 21 accumulated a lot of equity in their homes. Well, there’s really only two ways really to get that. Refinance or take out a second mortgage or sell the property. And if the property is still serving your needs, you may need to refinance or take out a second mortgage in order to get access to that equity. So that’s a big one that I see is that people need money. The other one I see are debt consolidation, that a lot of people are having trouble keeping up with inflation, right? I used to go to the grocery store and it was $75 a week. Now it’s 135, right? And I’m just a single guy. If you’re a family of four or five, that bill has probably doubled. And we are seeing people, and your income didn’t double, mine didn’t double. I’m assuming your listeners income didn’t double, right? Your expenses have gone up significantly, but your income has not kept pace. And so we are seeing people that are unfortunately using credit cards to bridge that gap. So I mentioned earlier, I had a refinance where we paid off someone that had a 3% interest rate. They took out $150,000 of equity out of their home. They used about 30,000 of that to do some renovations. They used another $30,000 to buy a new vehicle. They put $25,000 in their savings. And then the difference, they had to pay off about $65,000 of credit card debt that has just accrued because they’re just not able to keep up with inflation. So we are seeing that more and more, and I think that’s going to become a pretty big driving force in next year’s market. And it’s never great to have credit card debt, but when you get it, how can you take care of it? And consolidating that back into your mortgage is a way to take care of it. But now, to go back to the original question, That’s a person who had a 3% interest rate and said, Joe, I have a 3% interest rate. I’m never moving. Life happens. Now they have a 6 and 1 half interest rate. Two or three years from now, that home may not be serving their needs. And it’s going to be a lot easier for them to say, you know what, I do need a new home. And interest rates in three years are 6% or whatever. It’s a lot easier to sell this existing property. So the golden handcuff effect is slowly going away as life goes on.

Okay. Yeah, that makes sense. And there are lots of reasons to shift this money around. And there’s a lot of strategies to it that we’ve talked about. And certainly, life, you can’t time the market always, but it’s good to pay attention, which is why we’re here talking about the market. But what are you seeing from just a lending perspective? I’ve had a couple of clients say, hey, I can’t get a loan right now or like… I’m having challenges with my lender, I have to use a different type of lender. Just are things getting tighter or is that just a perception?

That is perception. And part of that is consumer behavior, right? So when interest rates are high, when interest rates are 3% and everybody’s getting a loan at 3%, it’s pretty easy, right? You call me, you call the first person that picks up the phone and you say, hey, it’s a rate of 3%, I’ll take it, let’s close, right? Well, when interest rates are at 7%, and you really want three, what does the consumer do? The consumer calls every single person in the phone book, or I guess the phone book’s outdated, every single person on Google, right? They call every single person they can find, and they talk to 10 different lenders, and then they find somebody that says, yes, our interest rate is 6.7, right? And everybody else they’ve talked to was 7, 6.9, 6.8, and they find whoever has the lowest number. Well, and then they’re like, great, this is the guy I want. Well, That doesn’t necessarily mean that person is an expert lender. That doesn’t necessarily mean that person can actually get you approved for that loan.

And so then we see the consumer working with somebody based on price and they’ll get really far into it and find out, Oh, they actually can’t do my loan or, Oh, this is going to take 90 days or 180 days. I heard somebody working the other day on 180 days for a loan and they called me. They’re like, I’m really frustrated. I’m like, Yeah, this should take no more than two weeks. But you know why they stayed with that lender for 180 days? Because they had an interest rate quote that was 0.1% less than everyone else. Guess what never closed? That could have been an interest rate of 0%. If it doesn’t close, it doesn’t matter. So what you’re describing is real. A lot of people are struggling getting loans, but it’s not because lending has got more difficult. It’s because people are talking to a lot of different people. and they’re ultimately making a decision based on who is the cheapest.

Well, not everyone, but a lot of consumers are ultimately making decision based on this is the cheapest, but the cheapest may not A, close, may not be the best, and it may not be something that you qualify for. And that’s something that I take a lot of pride in is number one, offering great interest rates, but number two, we’re going to spend time with you, Mr. and Mrs. Client to make sure we understand your needs, your goals, your income, your assets, your credit. And that when we tell you we can get you this particular interest rate, it will close and it will close within two weeks. So the frustration that you’re hearing, I do not experience it, fortunately, but I hear it from a lot of real estate agents. I hear it from a lot of consumers. And it’s actually beneficial for our business because people get frustrated. And I’m the guy that people call after they’re frustrated. And I’m like, yeah, I can fix all of that. Just give me your stuff.

Right, right. Yeah, customer service matters these days. It does. And we don’t always see it. I think we’ve experienced that. I have a client right now that is working with a local lender and then decided to go with kind of their financial groups, preferred lender, and saved a percent, which when you’re looking at the overall, that’s a big difference. And they did get to closing, but it wasn’t as smooth. It was a little bit bumpy. And like sometimes that’s… That’s what the clients have to do is kind of shop around. And we recommend that you shop around, but we also recommend our preferred lenders that we know provide a good experience and we’ll get to closing because that matters too. Like some, we’ve had offers rejected because the lender is not a preferred lender. So it definitely matters on both sides, like the quality of service, but also the number.

We don’t want to discount the number. Yeah, I want to tell everybody, hey, if you get a rate quote for 0%, go for it. But if that doesn’t close, does it really matter what that quote was? Right? So certainty of closing, I think, is an important piece. And we see it often. I’ve seen people lose earnest money. They’re like, I had this great rate quote. How’d it go? Well, I lost $10,000, but the interest rate was so low. Yeah. I’m sorry. That’s a big difference in interest.

Yeah. Are you seeing that there’s a… broader spread?

I think there was a period of time where like everyone’s growth was three percent. Are you seeing a broader spread among lenders right now? I’m not. No. I’m seeing that everybody’s interest rates are pretty much the same, which is where I use that example that when rates are high, clients are going to talk to a lot of people and they’ll go to somebody that can save just the tiniest amount. But I am seeing a very big spread on service and on time frame. You know, so our average time frame from application to closing is 17 days. The industry average right now is 51. So we are seeing clients that are getting drug through the wringer, right? Kind of like you said, there’s a lot of talk out there that it’s harder. Yeah. It doesn’t have to be, but a lot of people are running into that. But the spread on interest rates is very, very minimal, you know, which is something that we focus on. Hey, you know what? We have the cheapest rates. Guess what? Everybody does. So once you understand that, you know, you can call and talk to a bunch of different people, but ultimately it’s gonna be roughly the same.

Okay. That’s good to know. So when we’re talking, can we jump into some numbers here and I’ll give you time with your calculator if needed. But so at the six and a half percent interest rate. So I’ve got a couple of properties that I’m like, I don’t even want to know what the mortgage is if I go from a three to a six. But what is that number on a six and a half percent on a $500,000 property and on a million dollar property? I know there’s some variables in there.

Yeah, so, you know, taking out taxes and insurance, if you’re if you’re buying a 500,000 on home at six and a half percent, you’re gonna have a payment of about 2550 ish, you know, on a million dollar home, it’ll be approximately double that, you know, 2550. So maybe 5100 bucks a month. And that’s without taxes and insurance. So that’s just principal. Okay, because taxes and insurance, that’s gonna even if you pay cash, that’s gonna be whatever that’s gonna be. Right.

Yeah. Okay. That’s helpful. I think that’s a good barometer to make sure that people understand. It sounds really scary, but it’s good to know the numbers, I guess.

Absolutely. And I think an important point, too, that a lot of people are forgetting when we talk about affordability or home prices going up, taxes and insurance have gone up. You’re in the mountains. Insurance has tripled over the past four years. I see people that used to get insurance policies for 150 bucks a month. That is now… $400, $500 a month, depending on the property price. Property taxes on a property in the mountains used to be $4,000 to $5,000 a year. Now we’re seeing upwards of $10,000 a year, depending on price range. In addition to mortgage interest rates, there’s a lot of other things making properties more expensive as well. That can create sticker shock if it’s A, the first time you’re buying a property, or B, the first time you’re buying a property in a long time. If it’s been 10 or 12 or 15 years since you bought your last home, you might be really surprised when you see taxes of this, insurance of this, and I have a 6.5% interest rate. Wow. Now my house is pretty comfortable. So we are experiencing some of that as part of that golden handcuff or part of that lock-in effect that people are seeing increased cost in every metric. And let’s not even talk about HOAs. If you have a homeowners association, that has gone up significantly as well. If you’re buying a condo or townhome. That can be a pretty big sticker shock number for people also.

For sure. We’re definitely feeling all of those, and the compound effect is significant. Yeah, property insurance was one of those contract deadlines that I was kind of like, well, make sure you do your due diligence. And now I’m like, no, make sure you call, and you get quotes, and you understand, and you give it to your lender, and it’s factored in before your deadlines, because this is a factor now. It is.

It really is. That’s right. Yeah.

All right, Joe, anything else you want to share with our listeners about lending or where we are at?

You know, the last two points I’ll give you, one question that I get, especially this time of year is, you know, what’s going to happen with the presidential election and interest rates? So I actually did about a 12 to 15 minute class on this that I recorded, and I’ll send you the link, Candice, that way you can put it in the notes for your listeners. It’s on my website, loansbyjomassey.com. because that’s a really common question and we see a lot of folks get a little bit paralyzed by the uncertain this time of the year every four years. And the really interesting point is there is very little correlation between presidential elections and interest rates. So I did a full analysis that you guys can check out, but you’ll find out it kind of doesn’t really matter. The biggest thing that I encourage people is if you need a home and you’re interested in buying a home, right now is a good time to do it because there’s a lot of people on the sidelines. saying, I want to wait and see what happens. The answer is, it’s probably not going to matter. There’s no significant correlation to interest rates in presidential elections, but a lot of buyers competition is on the sidelines right now because they don’t know that there’s no correlation.

So if you’re thinking about buying a home and you’re talking with Candice and looking at properties, now might be a very good time. And then the last point I’ll leave with you on that, on how we can help with it being a very good time. is number one, we talked about average interest rates right now are 6.5%. We offer a free one year rate reduction. So if you were to buy a home with me as your lender and Candice as your agent today, and you qualify for that rate of 6.5, for the first 12 months, your rate would be 5.5. Then after month number 13 and on forward, it is still at 6.5%. But we also offer a free refinance voucher. So whenever interest rates decrease in the future, you can refinance for free. you come back to us, there would be zero closing costs on that loan. So it helps you get into a property with a lower rate today, less competition today, because there’s a lot of people on the sidelines. And whenever interest rates go down, you give me a call and you can refinance for free. So that’s what we’re doing to help our agents, help our clients and do the best that we can to make sure everybody has a great experience.

Awesome. Yeah, that’s great. Those are great programs, because I know we have a lot of clients that are asking, Do I get into a fixed rate at this point? Do I get into a variable rate? And when do I refinance? So that takes some of that pressure off of just, let’s see what happens over the next year. That’s awesome.

That’s right. Yeah. So if I can do anything, please of course, reach out, you know, you can find my website, loansbyjoemassy.com, or you can call me 303-809-7769.

Awesome. Thanks so much, Joe. Appreciate your time.

Thank you, Candice. I really appreciate you having me on.

Thanks for joining us today on Mountain Real Estate. I’m Candice De. If the mountains are calling you, reach out to me. See you next time.