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Stay Modern With Murray
Welcome to the Stay Modern with Murray Podcast, your go-to source for the latest trends and insider tips in the homebuilding industry. Each episode, we delve into the dynamic realms of design and construction, providing valuable insights that can elevate your understanding and approach to building and renovating homes.
But we don’t stop there! We go beyond mere construction topics to engage with influential figures such as business owners, CEOs, entrepreneurs, and community leaders. These conversations highlight the experiences and expertise of those who are making significant impacts in their respective fields. Here, you will discover not only innovative ideas and practices within homebuilding but also inspirational stories that showcase leadership and creativity in action.
Whether you're a homeowner, a potential builder, or simply interested in the housing industry, our podcast will offer a wealth of knowledge and inspiration. Join us as we explore the intersection of home construction and the vibrant discussions that can help shape the future of your projects. Tune in to enrich your understanding and spark new ideas in homebuilding, design, and business leadership!
Please tune in to hear from industry experts, non-profits, and local business leaders shaping our world. Visit our website at www.murraycustomhomes.com/podcast for more information and to catch the latest episodes. Subscribe today and stay modern with Murray!
Stay Modern With Murray
Navigating Construction Lending and Housing Market Trends with Taylor Ashburn
What if you could navigate the complexities of construction lending and housing market trends with expert insights at your fingertips? Join us for a compelling conversation with Taylor Ashburn, Senior Vice President of Residential Construction Lending at Westgate Bank. Taylor shares both personal milestones, including the new freedoms and challenges of having a teenage driver in the family, and professional insights. We track his path from a bank teller to a leader in the construction lending field, offering a glimpse into the unique processes at Westgate that prioritize personalized service and efficiency in draw processing.
The 2023 housing market has seen its share of trials, from the lowest permit totals since the Great Recession to mortgage rates hovering around 8%. Yet, there is hope around the corner, with projections suggesting a rebound in single-family housing permits in 2024. Taylor and I discuss the surprising surge in multifamily permits and the implications of Fannie Mae's adjusted guidelines for self-employed individuals. With increasing conforming loan limits, we look ahead to a more balanced mortgage landscape, reflecting on past market challenges and considering what the future holds.
The conversation takes a turn toward retirement planning and the critical role of homeownership in securing financial stability. We dive into the nuances of Federal Reserve decisions and their impact on loan rates, clearing up common misconceptions about their relationship with mortgage rates. Taylor underscores the value of shopping locally for lending needs, ensuring proactive support from engaged local lenders. As we wrap up, we explore the importance of strong relationships with builders and informed insurance choices, especially in light of recent natural disasters and evolving policies. Tune in for an episode packed with expert guidance and practical advice to navigate today's housing and financial markets.
Thanks, guys, for joining us on another episode of Stay Modern with Murray. Today, our special guest is the Senior Vice President of Residential Construction Lending at Westgate Bank, taylor Ashburn. Taylor, thank you so much.
Speaker 2:A round of applause.
Speaker 1:Yeah, yes, very nice. So this is actually your second time on and I appreciate you doing this again. Of course, hopefully you had a fun time the first time. Yeah, I think your episode got really good feedback. So appreciate you doing this again. Um, hopefully you had a fun time the first time. Yeah, I think I think your episode got really good feedback. So nice, figured we'd have you on again. But, um, this mic, I was just telling you this is the first one I think I've shot for three, four or five months, so you're gonna have to help me out here. I well, you're saying that if, if you follow our podcast matthew, who works for us now just he, he had his own podcast before this and he loves doing it. So whenever I have a scheduling conflict or whatever, rather than rescheduling, he's just like let me do it. So I've just been letting him do it. So perfect. But, uh, yeah, go ahead. Uh, refresh the listeners minds on where you're from.
Speaker 2:Tell us about yourself? Yep, absolutely, and thanks again for having me. This is. This is a so, born and raised in Lincoln, graduated from the University of Nebraska. My wife and I have four children, three boys and a girl, so our lives are busy running around from sporting event to sporting event. A big change since the last time we talked is that my oldest turned 16 and now he can drive himself, which was a game changer, because now it's, you know, getting to school early, staying late after football practice, he can drive himself, which was a game changer, because now it's, you know, getting to school early, staying late after football practice, he can drive himself home If he wants to go visit a buddy. I never thought about that. Oh it's, it's awesome.
Speaker 2:Oh gosh, because the liability in the but that would be a game changer, I had about two days of like, oh crap, I mean you watch him drive away the first time and it's, it's nuts, but you get over that pretty quickly. So, other than the fact that car insurance is really expensive for a 16 year old male, I bet, um, it's, it's been really great. So, um, but yeah, so we've uh lived in Lincoln my whole life and uh been with Westgate now almost nine years. Uh got my start in college and I like I kind of said this last time too, you know, didn't have any desire to get into banking. But I was in college looking for a job.
Speaker 2:Union Bank had a teller job and they provided lunch every day. So as a poor college student, I thought, well, that's a pretty sweet deal. So I did the bank teller thing and had some opportunities to get some exposure to lending and kind of found a strong desire to do that and kind of, the rest is history. So Westgate, you know, is a locally owned, family owned community bank which is a really nice setup to be in lending because all the decision makers are right there in my physical location, so all of our committees that approve loans, you know everybody's right there so we can make decisions quickly and it's just been a really nice fit for me over the last nine years yeah.
Speaker 1:Well, you guys do good work. A little bit of that's happened on our end is we finally grew to the point where we needed a second lender. Everybody knows I've been loyal to Pinnacle Bank for 17 years of my existence, but we finally grew to the point where we needed another one. And now you guys are doing some of our spec home financing.
Speaker 2:And that's a big win for us. So thank you for that. Yeah, it's great.
Speaker 1:So obviously we're bringing you here just to kind of do a market recap. A lot's happened since the last time. I didn't even look at the data the last time we had you on, but was it a year and over a year and a half ago, right In the middle of all the COVID stuff, right, interest rates and all that. But discuss the construction lending process for you guys, cause I know that it's different. Has anything changed? Cause I know I went into that great, because on the last time, because you guys do it what I would consider a lot different than what other people do. So kind of go into that a little bit. Let us know if anything's changed in your world as far as construction lending goes.
Speaker 2:Sure. So our process is very hands-on and it's a niche within lending that our ownership has invested a lot of resources into. So what's a little unique about Westgate Bank versus other banks that I've worked at or that I run into is we have a dedicated construction loan department. So myself, one other lender in Lincoln, one lender up in Omaha and then our four loan assistants who do a great job for us. That's all we do. So I'm not a commercial lender that does you know big. You know industrial warehouse buildings and commercial real estate and then construction lending. When I get the chance In the background, yeah, that's my sole focus. That makes us a little unique, but our process is very, very hands-on.
Speaker 2:These loans aren't hard to put into place. Where problems can pop up, as if you stop paying attention, if you take your eye off the ball. So our onsite inspections and how we process the draws try to get the draws paid within 24 hours. It's just that little extra service and that little extra monitoring that I think can set a bank apart, because at the end of the day, it's a pretty simple loan in and of itself, right, but it's all about you know what you do after the closing takes place and how you get everything funded. So you know in terms of what's kind of new in the industry.
Speaker 2:For us at Westgate Bank that's a big change is we did a full core software conversion, so we left our previous provider and migrated to a brand new computer system for everything that we do at the bank. Wow, the software I use to write loan memos, the software we use to look up accounts, to open accounts, to basically run the bank it's all brand new software. And for the customer on their end, they've got some new toys to deal with. We have an online banking platform and a mobile banking platform. That is now state of the art, but that was about an 18-month process from start to finish, because you basically have to convert all your customers into a new system.
Speaker 2:And so you do about four or five test runs a lot of late nights for some people on our team just making sure that it works. Or five test runs a lot of late nights for some people on our team just making sure that it works. You know because literally what happened you know, one Sunday night we flipped the switch and went live and you got to just be darn sure that everything's gonna, you know, go as as planned. So with anything new, there's always, you know, challenges and new, new um things to learn, but, um, it's been really good and I think our customers have really enjoyed, you know, these new pieces of software.
Speaker 1:What was the reason? Integration.
Speaker 2:So, not to get too far into the weeds, but if there was, there's four or five kind of main systems that a bank uses, and three of them were with one company, one was with another, the last one was with another the system we're under now it's all under one roof, gotcha, and so the synergy and the way those systems talk to each other yep is is awesome. That's kind of what we were lacking a little bit when the you know, the, the loan document system is made by a different company that does the loan origination platform, and then the servicing you know, the system we used to pull up the accounts is different too. Right, right Now it's all under one roof. That's awesome. So that's been really good. And, you know, customer service is important. We maybe weren't getting the best customer service when things would go down, which impacts our customers, and so we found a partner that is really solid. They're used by about I think a third of the banks in the country use this, this company, and we've been really happy with them.
Speaker 1:I'm assuming that wasn't a small decision for leadership and opportunity cost to get it reported over, because it's not everybody.
Speaker 2:It's not like, you know, going online and downloading a new piece of software for your computer, Right, and then you fire it up and it works. I mean, you're building it from the ground up and so, like I said, it was about an 18 month process, a lot of different projects, a lot of you have to have a lot of buy-in from your team, because we're the ones that are going to have to do the work. So, but everyone did great and really sacrificed a lot to to make it work so that on day one it was ready to roll. You know, for our customers, that's awesome awesome.
Speaker 1:It sounds a lot like it gives me nightmares and and hope with our uh process with builder trend. So, builder trends, you know our client facing portal that we use much the same way. It's just a kind of a shell of a program, a process that you have to build out custom tailored to your needs and your desires. Yeah, it has all the functionality there, but you have to tell it what to do, sure, and and it brings everything together, like you are saying, saying so, rather than doing our estimates over here, our contracts over here, our invoicing over here, our job scheduling over here, brings it into one portal and shares it all to to the, to the crowd that you want, right, right, but it's just been or two years and and it's still a work in progress. But the huge thing that you touched on is just beginning people to buy in, because the minute you you run into something that you didn't expect, it's so easy just to say why don't we go back to the original way that we were doing it? For sure, yeah, for sure you know.
Speaker 2:so other things that are new since the last time we talked. I would say, you know, just in the market it's getting. I would say, you know, just in the market it's getting busy again, which is awesome. You know, and I'm sure you're seeing that too, if you look at single family and townhome permits for the city of Lincoln and you look at them year over year so at September of last year versus September at this year, they're up 33%, which is awesome. We're trending in the right direction.
Speaker 2:You know, 2023 was a was a tough year. Um, it was the lowest permit totals since the great recession, like 2008, nine and 10. And actually it was about as bad as it had been, going back to 1985. Holy cow. So 2023 was was about the worst year that any of us had seen in our lifetimes, going back to 1985, with the exception of the Great Recession in 08, 09, and 10, which were not great years either, but it makes sense. Prime was at 8.5. Mortgage rates were flirting with 8% and when you've got a population of people who live in their homes who probably have a mortgage rate that starts with a three or a four or maybe a two, and you're looking at the cost of borrowing being what it is, it makes you stop and it makes you pause and, yeah, maybe I don't want to do this, you know right now, but you know, over the last, you know, 15 years, you know, and even through COVID, up until last year, you know, lincoln was building or pulling permits for single family of. You know, and even through COVID, up until last year, you know, lincoln was building or pulling permits for single family of. You know, 680, 690,. You know, per year, single family permits 2023, there was only 395. Wow, and so if you look at where we are in 24, I think we'll probably hit about 500. So we're trending back in the right direction, which is good.
Speaker 2:The other thing that I found kind of interesting is looking at the number of multifamily permits that have been pulled in the last couple of years, and we all see it when we drive around Lincoln there's apartments popping up everywhere. If you look at the last three years and what we're doing this year, it's approaching 6,000 multifamily permits in the last three or four years, and so I don't know if that has anything to do with it where, where there's just more inventory of apartments and so people are deciding that's what they want to do and how that has impacted. You know what you do and what I do in terms of you know building houses and financing houses. So I mean Lincoln's grown about 6% in the last four or five years. People got to live somewhere, and so you know other things that have changed.
Speaker 2:You know Fannie Mae, which is where we get our mortgage money from. They've actually loosened up some of their underwriting guidelines, which is kind of nice to see. Two things in particular self-employed borrowers. Now they'll allow you to only have one year of self-employed income, one year of tax returns, if certain conditions are met. Like anything, there's always a little asterisk next to anything.
Speaker 2:I say, when it comes to mortgage lending that sticks a lot of people, though it does Three years or three years of tax return and also how they look at rental properties owned.
Speaker 2:They're changing their approach where if you have a loss on one property but you have pretty good income on the other, they can balance each other out. So it's nice to see that Fannie Mae is loosening up, because back in 2005, six and seven, it was really really loose. There was so much stated income, stated debt. If you had a good credit score, you could tell them I make $500,000 a year and have no debt, and they'd say, great, here you go, no wonder we had a good credit score. You could tell them I make $500,000 a year and have no debt, and they'd say, great, here you go. You know, no wonder we had a housing crisis then. Well, then the pendulum swung way too far in the other direction where, especially on self-employed people, they were so hard on those people and the level of documentation and verification just was ridiculous. So they're swinging back to a point where they're being a little bit more. I don't know common sense.
Speaker 1:Yeah, that's good. It was always rough at the beginning of my business career trying to deal with that how many years of tax returns you have to have and all that stuff.
Speaker 2:And the other thing is that. So the conforming loan limit today is 766,000. I've heard that could be up to about 800,000 come next year. And again the conforming loan limit is basically just a traditional mortgage loan. You get above that limit. Now you're in the jumbo space, which means a higher rate, maybe a second appraisal, more scrutiny with the underwriters. So the getting-.
Speaker 1:I know that time flies and it seems like just yesterday. Which by yesterday I mean a couple of years ago. Wasn't it just a couple of years ago? That was in the 500s.
Speaker 2:It was yeah, and actually it was. It was four hundred and seventeen thousand for what felt like five or six years, so I thought so it's. It's crazy how quickly that's gone up, but it's good because jumbo loans, you know there's a need for those.
Speaker 1:But, boy, if you can get to a conventional loan, it's going to be, just, you know, much easier for you. Yep, you know what's crazy is? I had a lot of deja vu and we were talking about COVID and the recession of 2023, so to speak as far as number of permits and loans.
Speaker 1:We we were all, I think, very reluctant in our space to make predictions about the future. But if you go through, historically, our podcasts, I think we did a pretty damn good job of hitting the nail on the head. I remember I was doing one with you or somebody else when we were in the middle of COVID and the 2% or 3% interest rates and we were all working 80, 90 hours a week and beating our head against the wall and getting no sleep and we were all saying can it just be a happy medium, right? Which we were saying it never seems like it is right, so we can't complain. We were hoping at that time that it didn't swing in the other direction.
Speaker 1:But then, right when it did, you had a lot of these people saying that you date the rate, you marry the house or whatever, yeah, right. And there was a lot of people just saying that they didn't think that the rise in interest rates were going to affect the housing market. Because I mean, if you look back 20, 30 years ago, our parents and grandparents were paying 20 and 30 percent and me and you were saying the exact same thing, like if you just bought a house at two percent, why are you going to move into a house at six, seven, eight percent? Of course, and I think the statistics show and the numbers show by what you were just saying that it did in fact slow down. Yeah, um, we were fortunate enough. I know that you know, speaking with a lot of bankers in the community, you guys were pretty slow, which, you know, not financially speaking but mentally speaking was probably a good refresher from coming off of.
Speaker 1:COVID, but, like I've always said, we were just fortunate enough to have enough people signed up that were still in the drafting process from the low interest rate days and then had a couple of however you want to say it more successful farmers where maybe the couple points of interest rates didn't matter. More successful farmers where maybe the the couple of points of interest rates didn't matter. They had a cash surplus that needed a house built on on on their family land or acreages, and so we were able to keep 2023 pretty normal for us, but it definitely here and here, and what went on in the community and the higher interest rates did suck, though.
Speaker 2:And I think something you said just a second ago you hit the nail on the head it's. We need to find just some normalcy in all this, because two and a half percent mortgages, while that's awesome, probably wasn't really good for us in the long run, right. And 8% mortgages, and how quickly they went up, is also not good for us. What we need is just steady, yep, find somewhere in the middle and just hang there for the next 10 years and everything will be fine. But the Fed has just been so aggressive, ratcheting up their rate I know we'll talk about rates here in a little bit that it went too low for too long and then it went up too fast and now we're stuck with again. You just put yourself in the mind of the average consumer If my rate's 3%, why would I move? If my new rate's going to be 8?, yep, I mean, they're just not going to do that.
Speaker 1:I was speaking to another realtor in town and he just got back from Boston and he was talking about the number of multifamily homes being built. And he was talking about the number of multifamily homes being built In Boston downtown near a university. So we're talking, not people that are in the workforce. The average rent was $5,000 to $6,000 a month Wow, and they had a huge banner on all the buildings that said renting is the new revolution or something to that extent. Interesting Millennials are the way to go or whatever, but they they're literally. That's what they're banking on is the fact that the younger generation doesn't want a mortgage and doesn't want permanent living. They want to live in multiple places and they just want to rent.
Speaker 2:That's crazy. I mean crazy to me, you know, because you know you want the house and the yard. But look all these apartments that are popping up. You know the city needs them. Of course you know we need housing, we need affordable housing and whatnot. But it's just interesting to me, you know, that I think that younger generation is OK, you know, moving in an apartment and starting a family there, agreed.
Speaker 1:My thought is this and I haven't thought about this a lot, but with my workforce and my friends, including myself, the only real way I got ahead and this isn't just because I'm in the construction industry, but years I owned my house and then selling, taking that equity, buying again If you're just dumping your money into rent for the first X amount of years of your life, how are you going to get ahead? Where are you going to get ahead in life? To where you know? I think we all look at you know I'm already counting. How many years do I have left before my kid retires?
Speaker 1:You know what I mean, Like when can I move to Florida for six months? Not that I want to get rid of my kids I love them to death and I'll miss them. But you're already looking forward to that those? How many more years do I have to stack up money and let my houses appreciate before I can kind of step away from the day-to-day rigmarole? Right, but if you're not doing that, I mean, what's the end goal? You're just working until you're 80?.
Speaker 2:Or always having a house payment or a rent payment. You know, when my wife and I talk about retirement, one of the first things that we know is that our house has to be paid off, whether it's our current one or whether we move. You know, at some point, you know, fine, but to think about shutting it down and not working anymore if I got a big house payment, I don't know how you make that work. So all I can do is you know, you buy that first house, you live in it for a while, you sell it, you make money, you move on to the next one, you move on to the next one, you know, accumulating that equity so that someday that housing expense is gone. Correct, you know? That's why I've always looked yeah, so I can go into retirement and not have a house payment anymore.
Speaker 2:And there's no way to do that if you've rented your entire life. Correct, you know. And so you know for every situation. I think you know, for some people it makes sense, right? My hope is that, in lieu of putting a down payment down on a house, they're investing that money or they're finding ways to, you know, save a little more for retirement. Right, you know, if, if they can, because you know you look at someone's personal financial statement and usually the equity in their home is one of the biggest line items, and at least for for most people that I run into it is you know what I find really cool.
Speaker 1:Cool and also sad is that you know when I started, when I was 27, 28, when I was interviewing people to build a $650,000 house, back then I was dealing with, you know, 50, 60 year old CEOs um, just accepted a big job in Lincoln we're moving to town presidents of banks. You know older lawyers, so there's always people that were substantially older than me. And now I've had the benefit in the last couple of years of, when I go into an interview, we just built a $1.5 million house on a farm and I go into the meeting just with this natural mindset they're going to be 50, 60 years old, have accumulated money, successful farm, and they're in the mid late twenties to early thirties. A, that's awesome, right, that they, they've been so successful at such a young age.
Speaker 1:I I'm not upset about that at all, um, but it's just weird. Now I'm the old guy in the room, right, it just makes me feel really old. I hear you, man Proud. I mean, we're, we're getting ready to build for an ex Husker volleyball player that was six or seven years younger than me and they're building the nice multimillion dollar house. So it's just. Yeah, it's cool to see that some, some of the younger generation, are having success with financials and money and doing it the right way.
Speaker 2:Getting old catches up on you, sneaks up on you. My, uh, my youngest son is seven and a lot of his buddies, so he's my youngest. Well, a lot of his buddies, that's their first kid. And so we go to these you know football game, flag football games or whatever. And I'm looking around like these parents are all like 25 years old. I was like what, what the heck happened? I got old.
Speaker 1:I know, you know what's crazy is? I think about the same thing. I'm fortunate enough to be on some sports teams for my son where all the parents are around the same age. And then when I started thinking about that, when I had my son, I was always like I'm young, I'm going to be the young parent, right, because I, you know, I just thought that I was having kids before other people. And then now I'm, you know, right there, or a little bit older than everybody, sure, sure, yeah. It's like, how did this happen? How did I get so old, right, right, yeah, well, dive into the next subject. I mean the big pink elephant in the room. I know we've asked you to make predictions before and we all kind of like want to tiptoe around it, but I mean, I'm sure if you listen to your old podcast, you're probably pretty spot on with what you thought was going to happen. I should go back and listen, I know.
Speaker 1:I didn't do my preparation for this busy week. But no, tell us what you think. Interest rates, inflation, sure when we are, where you think we're going to go.
Speaker 2:Yeah. So I'm going to talk about two different things. One would be kind of construction loan rates Yep, that also mortgage rates a little bit, because the two are different. Obviously, a construction loan is Westgate Bank money that we're loaning to the customer, to the builder, whereas a mortgage loan, those dollars come from the secondary market, so Fannie Mae and Freddie Mac. So, as far as construction loans are concerned, when the Fed makes a move, that's the type of loan that is impacted, and so we all know that in September, the Fed finally dropped rates and they did a half a point rate cut, which was very welcome for me, very welcome for you.
Speaker 2:I don't like these high rates any more than anybody else does. They're annoying. But Prime went from eight and a half to eight, and when I say Prime, that's typically the rate that a bank would charge their best customer. So that had been at eight and a half since July of 2023. And it got there in a hurry because two and a half years ago of 2023, and got there in a hurry because two and a half years ago, prime was at three and a half. So they went from three and a half to eight and a half very, very quickly, which is one of the best tools they have to try to pull inflation back. Okay, so the Fed's just trying to do their job, but, uh, it was nice to see that half a point cut, and where we go from here is up in the air, nobody really knows.
Speaker 2:Um, they, uh, the people that are on that fed committee. They're asked to complete a survey and they call it a dot plot, and I've I know I've sent that to you before and it's basically that they ask each committee member to predict where they think rates will be over the next three or four years. Then you can kind of look at the dot plot and find the middle ground of where the average would be. The most recent dot plot shows, remember, primes at eight, seven and a half by the end of the year, six and a half by the end of 2025, and 6% at the end of 2026. So a few observations from that. This is the third consecutive meeting where they had kind of raised what I'll call their neutral rate or their final resting rate. It implies that members feel that maybe a higher kind of resting rate I'll call it is going to be necessary to keep inflation at 2%, and so 6% is kind of that number today.
Speaker 2:So I think the days of 3.5% and 4% prime are probably gone. I sure would like to see it start with a 5%. I think 5.5% to me seems fair. I think five and a half to me seems fair. We can sustain inflation. We can promote growth. People will keep borrowing but we'll see they're going to keep watching inflation. They have to believe that they have it under control.
Speaker 2:The other thing is just they have to watch the employment data. That unemployment rate is really important. The Fed has to protect that data. That unemployment rate is really important. The Fed has to protect that. The September jobs report it showed that the labor market is actually in much better shape than I think people thought. And they actually revised July and August and it went up and then the actual unemployment rate went down.
Speaker 2:So I'm wondering how that changes what the Fed is going to do in November when they meet next, and then again in December. Will they do a quarter in November and a quarter in December? Will they do nothing in November and a half a point in December? Who knows? So it's a very challenging thing to predict what the Fed is going to do, because the wind blows in a different direction every day and as different reports come out, sometimes you feel like, well, maybe the economy is not that bad. And then sometimes you're like, oh shoot, this looks like a sign of weakness. So, but for now, looking at the dot plot, it would be, you know, we could hopefully go from eight to six over the next couple of years, which would be good yeah.
Speaker 1:Which I'm assuming, the world forum right now probably is a little bit in limbo and you know, as far as Israel and Gaza and all that stuff, You've got inflation, you've got unemployment, you got job reports.
Speaker 2:You've got an election. You've got the Middle East. There's so many factors.
Speaker 1:So let me ask you this, without having to stand on one side of the political line or the other, or saying who you want to win Right, do you think that what we just discussed the projection of the numbers will be impacted by the election in November?
Speaker 2:whether it goes right or left Right. It's not supposed to be, because the Federal Reserve is supposed to be independent of the executive branch of our government. I would say that what the economy seems to like is balance. So if there's a Republican in the Oval Office, but maybe the House or the Senate is controlled by the Democrats, it makes it hard to get anything done because they're never going to agree. Or if the House is Republican and the Senate's are Democrats, same sort of thing. Where the market, I think, kind of, might freak out is if it's a blue wave or a red wave and one of the parties has the House and the Senate and the Oval Office, because then it's like well, they're going to do whatever they want and nothing can stop them. So, that being said, you know I I'll come back to it. I don't think it probably matters a ton. Okay, um, but we'll see.
Speaker 1:That's it's. It's funny that you say that. Cause that, because I tend to agree. I think people overreact if this side wins, are going to do A, b, c, d, which is going to ruin the economy, and if this other side wins, they're going to do F, g, right, but I think it's a little overboard and I think it'll be a month or two of hell right after whoever wins, regardless of whoever wins. So polarized right now, yeah, then it'll settle back into normalcy, some sense of normalcy, hopefully.
Speaker 2:Right, which is kind of sad. That it's, you know I, I remember, you know, being being a kid and watching the news with my parents and watching the results roll in, or watching the debates, you know, and whatnot, and and today it's so polarizing, it's there's so much anger and hate that with my own kids I almost they'll say, can I watch the debate? And I'm like, well, let me watch it first, Because our country was built on. We don't have to always get along, but we want to be tolerant of each other. Agreed, and I just hope that both sides can find some common ground, Agreed.
Speaker 1:Agreed, no matter what side it is. I totally agree. That's. What I've definitely noticed over the last few years is, whether you're right, left or in the middle, there's just been this new norm of if you don't agree with each other, then just don't have the conversation Right or walk away from the conversation or get upset about it. We can sit here and talk normal about it and have differing opinions, and the biggest thing I've learned over the last couple of years is we can both be right. You know, I didn't used to. I'm very black and white, not very gray, but I'm learning more and more. There's there's more than one answer.
Speaker 2:Yeah. And and, like I said, both of us can be right, we don't have to both Sure, one person can only be right, everybody always talks about tolerance, and that's fine, but tolerance means that I don't agree with you, but I'll respect you and your views. So both sides need to be tolerant of each other, yeah.
Speaker 1:Well, what other statistics and numbers do you have? Any recommendations for our listeners?
Speaker 2:Well, as it pertains to mortgage rates, I think something that's really important for listeners to remember is that the Fed's decision to raise or lower rates has nothing to do with mortgage rates and, in fact, what we saw recently, when the Fed dropped their rate by a half a percent, the jobs report actually came out stronger, it changed expectations about what the Fed might do going forward, and mortgage rates actually went up a little bit. I heard that, and so then people call and they're like well, the Fed lowered rates. What happened? It's like, yeah, two different worlds. So I think that's important for people to understand.
Speaker 2:Inflation's probably the biggest thing with mortgage rates. If they can keep inflation under control and hammer it down a little bit more, I think that, um, that mortgage rates should start to trickle down, you know, and so where we go from here and what's my prediction I mean, it's impossible to know. Um, I found this earlier that I wrote it down because I wanted to share it. In October of 2022, bloomberg economists predicted a 100% chance of a recession in the coming 12 months. They said that in October of 2022. They said there's 100% chance of a recession in the next year, and it did not happen.
Speaker 1:I'm really surprised you used 100% Exactly.
Speaker 2:I should have used 99%, 99%, right, cover your tail Right, right, so it didn't happen. I mean inflation's 2.4. It's the lowest it's been since February of 2021. We already talked about all the other factors the Middle East, the election, unemployment rates and whatnot. Mortgage rates are about six and an eighth today, as of this morning. Fannie Mae thinks they'll be back into the mid fives by next year. 5.6, 5.7, you know somewhere in there, which is certainly better than the 8% rates we saw, excuse me, a year ago. You know that was the highest in 20 years. But you know, on a $500,000 mortgage loan, a 1% change in the rates, about 320 bucks. So we're we're starting to talk real dollars and cents, so it's impossible to know kind of where we go from here. I think the dot plot gives us some pretty good indications. I think, if they can keep inflation down, we should get back to the day hopefully not in too far along in the future where prime 6% mortgage rates are in the fives and if that could just hold steady for like five or 10 years, it would just be fine. Yeah, because you can live with that If your mortgage today is at four and the going rates five and a half you can. You can make that work Correct.
Speaker 2:But my advice for the listeners as they navigate the market and what's going on, I would say, first and foremost, shop local for your lending needs. Agreed, having a construction lender that's here in town who can do some on-site inspections? Having boots on the ground is important. That monitoring of your project is so key, and that is not a reaction to a bad experience with whatever builder, it's just being proactive. It's the right way to do things. Well, if you're working with ABC Bank out of you know, missouri, no one is ever going to have any eyes on your project, and so I think that that matters. I think it's okay to shop around for your mortgage, but I would remind your listeners that mortgage rates really don't differ from bank to bank, because we all pull our money from Fannie Mae, from Freddie Mac, from the secondary market. So if another bank or a mortgage broker, if my rate is six and someone's like, well, I can do four and a half man red flag right there.
Speaker 2:There's gotta be more to the story. There's probably a bunch of fees, you know, loaded in. You know what I heard this morning and this, this was crazy. Something that's happening in the mortgage world trigger leads. And so what I mean by a trigger lead is that somebody comes to the bank and applies for a mortgage loan. That inquiry hits their credit report as a mortgage loan inquiry. Those credit bureaus are actually selling those lists to mortgage brokers and mortgage banks, and if those people are willing to basically make a firm offer to extend credit, they're allowed to call the customer. So you walk into my bank, you apply for a mortgage loan, right? That's not Westgate bank selling your info to somebody else. That's Experian, that's Equifax, that's TransUnion, who are providing lists for a fee. You Google it trigger leads, mortgage lending, and I heard this morning that a customer got 30 phone calls.
Speaker 2:There's actually legislation in place to try to get this stopped, because what happens is most people don't. They don't really know what they're doing. I mean that with the total amount of respect, right, but it's the biggest financial transaction any of us will ever make, yep, and people don't always know the right questions to ask. So if you've applied for a mortgage loan with your bank and somebody calls and says, well, you know, I can get you 5%, you might go. Oh well, okay, let me look into that. And then you're like, well, now, wait a minute, that seems like a lot of fees. Well, you're going to make up for it in the long run, or no? That's, everybody charges fees like this. So these companies are getting very sophisticated with how they market to individuals, and so I always just encourage the listeners shop local for your lending needs. If something seems too good to be true, it probably is Ask questions Because, like I said, if somebody's telling you their rate's a full percent lower, there's probably a huge fee involved to get it where it needs to be. Or there's probably a huge fee involved to get it where it needs to be.
Speaker 2:The other thing I would tell the listeners is, when you do close on your loan, there seems to be a big uptick in the amount of junk mail that people are getting. So these companies will watch when a deed of trust gets filed, and then they will solicit you and they'll say you know, for $100, we'll sell you a certified copy of your warranty deed. Or, hey, can we interest you in bi-weekly payments? Or, you know, hey, let's talk about.
Speaker 2:You know credit, life insurance or something like that, and it it it'll say, regarding your loan, with whoever it's not on bank letterhead, but they know how much you borrowed, who you are and who you borrowed the money from, and so they will solicit the customer with all this junk mail trying to get them to buy something or pay for something that they don't need. So again, if something seems odd, raise a hand, ask a question. If it seems too good to be true, it probably is so between you know, these, these crazy trigger leads and these calls people are getting and all the junk mail, I just feel bad. You know it sucks.
Speaker 1:I deal with it every day. I get four to five voicemails a day from overdue back taxes. I don't have any, but they leave me a voicemail every day saying that they see that I have overdue back taxes and want to help me get debt relief and stuff like that. And when I when I the mortgage for my personal house, same thing people calling me and asking me for all kinds of different information, soliciting information and it is hard, like what you're saying, I didn't know who was working on behalf of the company or who was soliciting my information unsolicited. But yeah, it's good advice.
Speaker 2:So, you know, shop local. I think that's important. Work with a reputable builder, you guys are awesome, you know. Thank you, you have, um. Work with a reputable builder, you guys are awesome, you know, and so you have to say that you're on my podcast. I. I mean that though, but you're right, I probably do have to say that. No, just kidding. Um, no, you guys are great.
Speaker 2:Here's one thing that I've noticed lately that I want to just advise customers, because sometimes people will shop two or three builders yep, okay, fine, I'm. I'm noticing people that are paying way too much attention to the bottom line and not doing two things that I think are really important. Number one make sure that you have a good relationship, just on a person to person level, with the builder. You know, and you guys and your team here are awesome, because not only through the design phase, but the construction phase, but the warranty period afterwards, you're in a relationship with this company or with this builder for a while. Make sure you're a good fit. But what I've noticed lately is the allowances being a bait and switch to. I think it's somebody to sign a contract knowing that I think they got to be the lowest price or they're not going to pick me. And then what happens? You go to the flooring store, you go to the countertop store and you're like this is all junk.
Speaker 1:You know it's funny. It's eerily similar to what you just said about people shopping for cheaper mortgages. They don't know what questions to ask, right? And so I have to educate people. Hey, go get another price, but to your credit, you're exactly right. If our contract is $750,000 and there's another builder that's $750,000, that doesn't mean that our price is the same, right, because what happens? People are doing it all the time. They walk in. I ask them I'm like hey, I don't need your final price of your contract, it's not what I'm asking for.
Speaker 1:Let me look at your allowances and compare your allowances to our allowances, right, and people will walk in and they'll have a $2,000 allowance for appliances. I looked at one the other day and it was $1.75 for tile and it literally had in parentheses prefer that you buy your tile from a big box store. Oh, really, $1.75 tile, and ours is a $5 allowance tile. So even though our contracts were the same, we had about a $50,000 to $60,000 gap in the amount of money allowances and the amount of money that we give them to go spend on their house, right? So that's, that's great. I didn't want to cut you off, but no, no, you're fine, I mean Lincoln's.
Speaker 2:Lincoln's very fortunate to have a lot of really great home builders and so, um, you know, in, in 90% of the cases, you know, I'm seeing allowances that make sense. But I had one recently where the person took the lowest of the three and as we got into that project they quickly realized I can't even get a nice countertop and in the end I bet that house costs just as much. So if the Murray estimate is 750 and whoever is 700, ask some questions, you know, because, because I think that's that's so important and really encourage the listeners to get pre-approved before they get too far down the tracks. Yes, um, I had some people in my office yesterday that hadn't even talked to any builders yet and, um, I'll, I'll give you their name off air, cause you were one of the ones that they mentioned. Uh, but uh, you'd be surprised how often people come in and they're like well, we signed a contract with the builder and I guess we need to talk about a construction and a mortgage loan.
Speaker 2:And for me I'm like in my head, I'm like, oh shoot, I hope this works. I hope there's not something I don't Cart before the horse, cart before the horse, you know exactly. The last thing I would say is just, insurance costs are going up in a hurry. I would really encourage the listeners, if they shop around, make sure you're paying attention to the deductibles, because we're starting to see 5% deductibles for wind and hail in addition to $10,000 for everything else, and so, again, sometimes you get what you pay for. Don't focus on that bottom line, absolutely. Make sure you're you're asking the right questions and I think, like you said, matt, sometimes people don't know the right questions to ask.
Speaker 1:That's why, working with a good builder, a local bank, people that can help that customer, you know, go through this Cause you know, for a lot of these, these people, they might build a house once or that, you know, maybe twice, and they may, just they may not know what questions to ask. It's kind of funny. You bring up the insurance we're we're so owning a roofing company. We're very much in the throes of the insurance policies and how they're going to be changing, how they have been changing, and there's major, major changes coming. Stuff that you usually only see on the coasts are now going to become normal and linking, such as the percentage of house value deductibles.
Speaker 1:Sure, having separate wind and hail deductibles and the insurance companies are a little sneaky, right. So I mean, sometimes you don't even know it's buried on page 43, underline c, that your wind and hail deductible is different, or that wind driven hail, wind driven rain is different than non-wind driven rain, right, and acts of god are different than, yeah, other. So it's, yes, you're absolutely right. People really really near in the near future, in the coming months and years, need to be very particular about the questions they're asking and the numbers they're looking at when they're looking at their insurance policies.
Speaker 1:Right, because we're going to go through even more changes, especially, I think it's going to be hurried because of all the hurricanes that hit this year. But last year, and uh well, in 2024, in march, when we went to our gaf wealth builders conference, which is a week-long roofing conference, 90 of it was on the changes that is that, right, we were going to be going through in the insurance. Yeah, a lot of a lot of roofers live and die by storms, right, you, you, you get to know the insurance companies and how they work and the policies were written and et cetera, et cetera, and it's going to be a big change coming.
Speaker 1:So, that's good advice, but any final thoughts?
Speaker 2:Nope, I appreciate the chance to sit and chat with you, Always enjoy doing this and, um, you know, keep up the good work. Lincoln's lucky to have good builders, you know like you guys Appreciate it and we'll hope for lower rates next year and increasing permits and hopefully get back to some of the levels we saw you know, I want to go on record and say that I think we're going to be a half a point lower by the end of the year.
Speaker 1:Okay, maybe a quarter and then another quarter, yeah. And then I think I agree with you and your your preview of 2025, I think, will be hopefully somewhere in the mid fives. I'm only putting on a record because I think it's kind of fun. Now, like during COVID stuff, I was really nervous to talk about it Cause it was like do you buy? Do you not buy? Do you date the rate, do you not?
Speaker 2:Now it's like it before we see the fives, but I think we're going to start to see, hopefully, some good cuts. That'll just make things a little bit easier and get people off the fence. The construction loan rate's important, but sometimes I feel like that mortgage rate's even more important because that's the one they're going to have for the next 10 years, 20 years, however long it is.
Speaker 1:So if we could just get those mortgage rates down, I think that would that would be a game changer. Thank you so much for coming in. I appreciate everything you guys do and your unique way to approach builders and your building lending, so yeah absolutely. Thank you, Matt. Everyone Thanks for tuning into this episode of Stay Modern with Murray. Stay tuned for more exciting episodes and a special remote coming up later in the week.
