A Raleigh Real Estate Crash Coming Soon, NOT!

May 19, 2022 by Kevin Martini

A topic that is on the mind of many potential first-time homebuyers and current homeowners in Raleigh, North Carolina and really in every city in the U.S. is, are heading into a housing crash because we are in a housing bubble that is going to burst.

Raleigh Mortgage Broker and Certified Mortgage Lender, Kevin Martini, hosts a very special episode of the Martini Mortgage Podcast called: A Real Estate Crash Coming soon, NOT!

Episode 143 of the Martini Mortgage Podcast goes beyond the real estate headlines and deep into the data.

Home Price Appreciation Since 1945

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Forbearance Data

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Lending Standards

Foreclosure Activity

Home Price Forecast for 2022

Home Price Expectation Survey | Q1 2022

raleigh mortgage broker kevin martini 507 n blount st raleigh nc 27604

Episode 143 of the Martini Mortgage Podcast with Kevin Martini Transcript

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A topic that is on the mind of many potential first-time homebuyers and current homeowners in Raleigh, North Carolina and really in every city in the U.S. is…are heading into a housing crash because we are in a housing bubble that is going to burst.

I truly understand why many are concerned with the idea we are in a housing bubble and it is going to burst because 15-years ago we saw home prices fall and it was very painful.

Let me properly communicate this…2022 is not 2008!

Welcome to episode 143 of the Martini Mortgage Podcast, my name is Kevin Martini and I am a Certified Mortgage Advisor with the Martini Mortgage Group which is located in Raleigh, North Carolina however myself along with my very talented crew of mortgage professionals help families in all 100 counties of North Carolina and pretty much in ever state in the U.S. too! I am calling this special episode of the Martini Mortgage Podcast; A Real Estate Crash Coming Soon, NOT!

Opinions are like belly buttons, everyone has one. Some opinions are based on what one feels and some opinions are based on data. I believe when you use data to form an opinion it clears the path so one can make an educated decision based on facts. I believe educated decisions puts you ahead of the crowd.

Some folks feel we are in a real estate bubble and this bubble is going to burst and when it burst it is going to cause a housing crash like we saw in 2008. If you feel this way, with respect, you are incorrect. Let me share with you why we are not in a housing bubble and why we are not heading into a housing bubble.

Let me start with when the modern day housing boom started and that was 1945. World War II ended and soldiers were coming back and they were using the earned VA benefit where they could buy a home. Ever since then and up to today…there has ONLY been one time where homes in the U.S. lost a significant value and that was in 2008.

Why did we see homes lose value in 2008?

There were several reasons why homes lost value and they were from pure market speculation to, over supply to, very loose lending standards among other things.

When I say very loose lending standards, I mean back then you could secure a home loan with no income so a job was not required hence there was no verification of employment was even asked for. Think about it, you could buy a home or take money out of your home without really being able to qualify or have the ability to repay the home loan. Simply put, many people that were unable to afford a home were able to buy a home.

I feel it is natural to be concerned if today people are able to make their mortgage payments. Since the evil pandemic reared its ugly head, many families had to go into forbearance. In the simplest form, forbearance is a loan deferment where one can temporarily stop making payments.

About 4.8 million used forbearance to navigate during the pandemic and today there are less than 700,000 loans in forbearance as of April 2022. The number of mortgages in forbearance has dropped significantly and it is true, not everyone will be able to get out of forbearance successfully however that number is very low but rember this, the families that have not been able to recover are not upside-down on the the home and they have the ability to sell and retain a gain to get on with rebuilding. This is very different than what happened 15-years ago.

Aggressive lending standards were one of the components of the housing crisis, and let’s look at where we are today. Today lending standards are nothing like they were in the 2000s.

Consider home loan product risk and borrower risk. Think of the designer mortgage product risk as the all loans that are available to people such as NINA, which was an acronym for no income no assets or SISA, which was an acronym for stated income stated assets. These designer mortgage products have been virtually eliminated from the marketplace.

Oh by the way, these loan programs were not bad products in my opinion. Crazy statement? Not really, when you know these products had a place for the right borrower based on thier situation but these products were sold by some very bad actors to the the wrong people.

Today when getting a mortgage, there is a common sense approach to your ability to repay the home loan. Has it gotten harder. Well, yes if you compare it to the 2000’s but, common sense is still present with underwriting with the Martini Mortgage Group and I feel that product risk and borrower risk is balanced today.

Don’t believe me? Well, today we are at all time low with foreclosure activity. Sure, the last couple of years there has been a moratorium in place and the federal government has stepped in and said, look, we’re not going to process these foreclosures during the pandemic. However, back during the housing crisis, it was tragic that over nine million people went through foreclosure.

Listen, foreclosure are sadly always going to happen because bad things happen to good people. It is sad but it is a reality. Today with the common sense lending standards that have been deployed has led to less foreclosures in the marketplace pre-pandemic and post pandemic.

In other words, with highly qualified or a better qualified borrower, you’re going to see less defaults and we’re seeing exactly that and provides additional confirmation that the light at the end of the tunnel is not a train coming at us but it is rays of sunshine.

I had a conversation with a family I am working with and they were concerned about a ton of things and I understood and I appreciated their concerns. They felt like you may feel…let us see if that is the case. They felt homes are getting too expensive and people are not going to be able to support their debt load and this would cause a collapse in the housing market.

I understand the thought process but the data does not support the thesis because if you look at data from the Federal Reserve, household debt service ratio for mortgages and basically it measures the percentage of disposal personal income. So, think about the total mortgage payments divided by the total disposal personal income. Make sense?

Where the household debt service ratio is for mortgages right now much much lower than where we were in the housing crisis, even lower than we were in the 80s and 90s. And why is that? Because of rising wages. Because of interest rates that we’ve seen. And because folks that are holding mortgages today are in a much, much better position than where they were back in the housing crisis of ‘08.

So is there a bubble forming or are we in a bubble that is getting ready to burst – NO! No there is not a bubble forming and NO we are not in a bubble that is getting ready to burst. There is not an imminent housing crisis however we are right now in a housing boom!

I believe when we look back at 2022 3 to 5 years from now we will call this period of time the good old days of real estate. In other words, you will be with either be very happy that you purchased a home in 2022 or you will wish you would have purchased a home in 2022.

To highlight, Let us look at where we headed. Home prices are higher and Raleigh mortgage rates are higher and getting a mortgage today is a process not an event and then all the chatter from the Federal Reserve…what does it all mean for home values.

Simply put, Fannie Mae, Freddie Mac, CoreLogic, Mortgage Bankers Association, National Association of Realtors, Zellman and the Home Price Expectation Survey are the 7 entities the Martini Mortgage Group follows religiously to gauge the future of home values and the average of all 7 say that home values in 2022 will go up 9%.

Are homes going to lose value, well the experts don’t see that. Now we are going to see a deceleration of home values in 2022 as compared to 2021 however declaration does not mean depreciation. Declaration simply means that homes are not going to appreciate as fast as they have. I think deceleration is a good thing and is a sing of a healthy sustainable housing market.

If we want to look beyond 2022 I believe the best survey to look at is the Home Price Expectation Survey which is done by Pulsenomics. The Home Price Expectation Survey is not one persons opinion it is the opinion of a panel of over 100 economists, investment strategists and housing market analysts and they project 9% appreciation this year, 4.74% next year, 3.67% appreciation in 2024, 3.41% in 2025 and 3.57% in 2026. That is a 5-year cumulative appreciation of 26.8%.

Oh by the way, 3.84% is the average annual growth in home prices from 1989 to 2019. I was purposeful not to add the last 2-years which has been north of 20% per year to give you some perspective how strong the market has been and will continue to be.

Let me wrap it up. The market today is nothing like the market was 15-years ago. I did not mention it but it is noteworthy to share there are more households today than there were in in 2007. In 2007 there were 116 million households and today there are 130 million households. That is 14 million more households looking for home. In 2007 there are 3.7 million homes for sale and today there are under 900,000 home for sale. More demand and less supply — yikes!

I know there are inventory challenges and mortgage rates have drifted upwards and sure it would have cost less if you purchased 12-months ago but I am reminded of that old Chinese proverb.

“The best time to plant a tree was 20-years ago. The second best time is now.”

Right now is the time to explore your homeownership options as a first-time or as repeat homebuyer. Perhaps you are living in your house that you own but you and your family have outgrown it— now is the time to upgrade. Perhaps you are renting and paying your landlords mortgage for them, now is time to explore your options.

My name is Kevin Martini and I am a Certified Mortgage Advisor with the Martini Mortgage Group. I provide trusted advice with a frictionless process that offers great rates and certainty to you and your family. My number is 919.238.4934.

Looking forward to connect, stay safe out there and wishing you peace and blessings.

Now it is time for the disclaimer:

This material has been prepared for marketing purposes only. This is not a loan commitment or guarantee of any kind.

Loan approval and rate are dependent upon borrower credit, collateral, financial history, and program availability at time of origination.

Rates and terms are subject to change without notice.

The Martini Mortgage Group at PCL Financial is a division of Celebrity Home Loans, NMLS # 227765 with a Branch address of 507 N Blount St Raleigh, North Carolina 27604.

You can contract Certified Mortgage Advisor and Producing Branch Manager, Kevin Martini NMLS# 143962 by calling the Branch and that number is 919.238.4934. For a full list and more licensing information please visit: www.NMLSConsumerAccess.org or by visiting www.MartiniMortgageGroup.com – Equal Housing Lender

A Guide to Bank Statements When Applying for a Mortgage

May 17, 2022 by Kevin Martini

When you are purchasing a home, you will need to provide your bank statements to your mortgage company as part of the application process. You may have a lot of questions about why you need to do this, what mortgage companies are interested in when reviewing your statements, and how you can be sure you are providing your lender with what you need for rapid and easy approval. In this post, we will answer these questions so you have a better understanding of the role bank statements play in the application process.

Why Does Your Mortgage Company Ask for Bank Statements?

There are a few reasons your lender may ask you to provide bank statements:

You have no W-2. One common reason to provide bank statements to your lender during the application process is simply to verify your income if you are not able to do so using a W-2 form. This would be the case if you are self-employed.
Your W-2 does not tell the full story. Another reason to show bank statements during the application process is to document income that does not show up on a W-2 form, even if you have one.
Fraud prevention. Lenders look for suspicious transactions in your bank statements. They want to make sure you are using legitimate sources of funding to purchase a home.
Checking your financial viability. Depending on the type of mortgage you are applying for, there may be strict rules about sources of funds for down payments. For example, you may not be able to use a loan to cover the down payment. Examining your transaction history in your bank statements gives lenders a chance to look out for issues like this.
Closing costs. You will need enough money in your bank account to cover the down payment as well as the closing costs. By looking at your bank statements, lenders can verify if you have sufficient funds to complete the transaction.

Bank Statement Red Flags When Applying for a Home Loan

There are a few things lenders do not want to see when they check your bank statements. For example:

Inexplicable rises and falls in income. It is not unusual if you are self-employed to have fluctuations in how much money you bring in from month to month. Nevertheless, you want to try to present a picture of financial stability. That means in some situations, you may need to cover a more extensive time period with your bank statements and offer a detailed explanation for your uneven income. You should put this explanation in writing and turn it in with the bank statements.
Lack of an emergency fund. You should have enough liquidity in your assets to pay emergency repair bills, medical bills, and so forth without having to siphon money away from your monthly mortgage payments. If lenders do not see evidence of an emergency fund in your bank account, that is a cause for concern.
You should not be overdrawing from your bank account for any reason if you are financially stable. Of course, sometimes overdrafts happen because of mistakes or carelessness. During the timeframe leading up to your loan application, try and avoid these incidents.
Large, unexplained deposits. If there is a significant transfer into your bank account that is not part of your regular income, your lender is going to ask you about it. You will need to document the source of the deposit so they can confirm it is not a loan.

How Do You Provide Your Bank Statements During the Loan Process?

Obtaining your bank statements for the mortgage application process is as simple as logging into your online banking portal. Once you have signed in, there should be a section in your account that allows you to download bank statements. How many months of bank statements you need depends on your exact scenario. In the majority of cases, you just need two months. As mentioned previously, if you earn your income unevenly throughout the year, it may be more helpful to provide six months or more.

Before emailing statements to your lender, double check their file names. So that your lender can instantly identify them or find them again if they need to do so later, rename them to something both you and your lender will understand..

Learn More About Buying a Home With a Bank Statement Loan

If you have more questions about bank statements and the mortgage process, Martini Mortgage Group is here to answer them for you! We offer bank statement loans as an alternative to the traditional loan process. That way, self-employed borrowers can apply without a W-2. To get started now, please call us today at (919) 238-4934. We work with homebuyers and homeowners throughout North Carolina, Florida, Georgia, Illinois, Tennessee and Virginia.

Recession, Rates and Real Estate in Raleigh

May 10, 2022 by Kevin Martini

When there is a conversation about a recession coming to Raleigh, North Carolina it is natural to be curious about what it means for mortgage rates and real estate values.

Episode 142 of the the Martini Mortgage Podcast with Certified Mortgage Advisor Kevin Martini is called Recession, Rates and Real Estate. In this special episode, Kevin Martini unpacks what experts believe will happen to Raleigh real estate and Raleigh home loan rates when there is a recession because there will be one — it is not a question of ‘if’, it is ‘when’ it will happen.

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There is a lot of chatter recently about the thoughts of a recession coming to visit us. There are a lot of conversations about the upward movement in mortgage rates in 2022. And about the Federal Reserve, increasing the Fed funds rate and reducing their balance sheet. There is the reality that homebuyers are facing challenges finding the right place to call home. Welcome to Episode 142 of the Martini mortgage podcast. My name is Kevin Martini, and I’m a certified mortgage advisor with the Martini Mortgage Group, which is located in Raleigh, North Carolina, however, myself, along with a very talented crew of mortgage professionals, help families in all 100 counties in North Carolina, and pretty much in every state in the US to I’m calling this special episode of the Martini mortgage podcast recession rates and real estate recession rates and real estate. Oh, my, let us start with the recession. What is it simply put it is when there’s a decline in economic activity for two consecutive quarters, as reflected by the GDP and other economic indicators. GDP in the US dropped 1.4% In the first quarter of 2022. And this drop is an indicator of the potential recession coming. When will it come? I do not know. I do know this as it relates to a recession. It’s not if a recession is going to happen. It is when will a recession happen? And when the recession happens, what will happen to mortgage rates and real estate home values. When the recession rears its head. Historically, real estate performs very well. Since 1960, in the US, there have been nine recessions. In eight out of nine recessions, real estate values increased during the recession. The anomaly was during the Great Recession, which was during the housing crisis. Today, it is nothing like it was in 2008. Today, there were requirements to get a home loan. And back then the only requirement to secure a mortgage was to make sure you were breathing. Let me highlight before the Great Recession. If you had a low credit score with no job, you were getting a home loan, and in many instances you are able to get multiple home loans. It is critical to highlight to you the housing crisis led us into the recession, home values have not declined because of the recession. They declined because of the housing crisis. Let me say this again for the people in the back. The housing crisis led us into recession, home values did not decline because of the recession. They declined because of the housing crisis. Today, the home loans on the books are nothing like the ones that were on the books during the housing crisis. In addition, during the housing crisis, there was an excess inventory back then which amplified the situation. Recession does not mean reduction of home values. Also I feel obligated to highlight this deceleration of home values does not mean depreciation of home values. It is expected that values will not appreciate at the rate they have appreciated, hence deceleration. However, homes are still forecasted to appreciate. According to the home price expectation survey, home values over the next five years are projected to appreciate cumulative about 25% With the current inflation, some have the opinion that this cumulative 25% appreciation we’re five years is a conservative prediction. Here’s why.

At the time of this recording of episode 141 of the Martini Mortgage Podcast, inflation is 8.5%. During periods of inflation, fixed assets like real estate perform very well since Owning a home is a hedge against inflation. Let me illustrate using what happened in the 70s During the 70s, consumer prices increased 7.1%. However homes appreciated 9.9%. Too far back. Okay. Let us look at the 90s. during that decade, consumer prices increased 3%. And homes appreciated 4%. When we look back at this period of time that we’re in today, it is my opinion, we will look back at 2022 as the good old days of real estate, we will right now are in a housing boom, not a housing bubble friends. Sure, this market has challenges and I understand it’s not easy out there. However, there are things that I can do as a certified mortgage advisor to put your offer in the pole position by allowing you to make a same as cash offer. Nothing very good for you is easy. If you want to be healthy, you have to exercise and eat right. It’s hard to exercise consistently and eating right is hard to Yes, buying a home for the first time or as a repeat homebuyer is not easy today. However, it’s easier if you follow the proper steps. The first step to homeownership is always the home loan. And the second step is to go find a home. And the third step is to make a same as cash offer with an approval package from the Martini Mortgage Group. I know their inventory challenges, and mortgage rates have drifted upward. And sure it would have cost you last if you purchased 12 months ago. But I’m reminding you that of this old Chinese proverb The best time to plant a tree was 20 years ago. The second best time is now for all those out there that fear our real estate bubble. Let me talk about inventory for a hot second. In 2007, there were 116 million households. Today there are 130 million households. Simply put, there are 14 million more households. And Freddie Mac estimates 3.8 million homes shortage of single family homes for those 130 million households. Let me compare this to the peak in 2007, where there were 3.7 million homes available for sale. And today there are under 900,000 homes for sale. Again, right now is an opportunity and is worth the effort. Even if mortgage rates are higher today, as compared to this time last year. Let us talk about mortgage rates and the Federal Reserve and what they are doing. As a primer. Mortgage rates are based on mortgage bonds, not on the federal funds rate. The Fed funds rate and mortgage rates are two different things. Remember when the Fed funds rate was zero, and many thought that meant mortgage rates were at zero? Obviously, you know that was not the case. Mortgage rates are based on mortgage bonds. When mortgage bond price moves downward to attract more buyers yield is increased. When yield is increased home loan rates rise between 1231 2021 and the end of April of 2022. The mortgage bond price has deteriorated nine point during that period of time. Why the move? Inflation is one of the key reasons for this move in mortgage rates. Again, home loan rates live in the bond market and the Nemesis to the to a bond is inflation. Inflation is high and high inflation negatively impacts mortgage rates. However, from a historical perspective, mortgage rates are still at a record level. Don’t believe me? Well, let

me share this fact with you. When my wife Ronnie and I purchased our first home, the rate for our mortgage was in the mid 90s. And that was not even for a fixed rate mortgage. If our first mortgage would have been a fixed mortgage, it would have been in double digits. What I am going to share now Next, it’s just literally going to blow your mind. What the Federal Reserve is doing today, based on history will improve mortgage rates over time. Raising the Fed funds rate is designed to lower inflation, lower inflation means improvement in home loan rates. Now, inflation did not just pop up overnight, it took time, so will take time for the Fed to get inflation under control. But they will. When inflation gets under control, mortgage rates should improve. You heard me correctly, I believe, rates will come down from the current levels. However, they will likely get worse before they get better, they will get worse because the Fed has a very large inventory of mortgage bonds they will be selling off. But when the dust settles, it should be a good thing. When will the dust settle? It is my gas best case by the end of 2022. But that may be too optimistic with the quantity of bonds they have to sell. And based on where inflation is today. But worst case, in the beginning of 2024. So should you wait to time the market? No. timing the market for mortgage rates is insane, because it’s essentially impossible to do. But even if you could wait it out for the pivot to lower mortgage rates, you will be paying a premium for the home since the home would have appreciated why you wait it. Here’s the fact you have three options today. Number one, call your folks and see if your bedroom is still available. Number two as you can keep renting and we all know that rents are up just under 20%. And then you’re subject to future increases. Or number three, take advantage of the housing boom, we are in today and lacking your housing costs. And no if I’m your mortgage advisor, I will monitor the markets for you after closing for the opportunity to lower your fixed housing costs with a refinance. In closing.

It is not if a recession will happen. It is when it will happen. During periods of recession, home values have done very well. Right now there’s not a housing bubble. Right now there is a housing opportunity. Right now mortgage rates are higher than they’ve been in the past several years. However, they are still very attractive and below the historic average. The Fed is working hard to control inflation, and they will but it will take time. Speaking of time, right now is it time to explore your homeownership options as a first time homebuyer or as a repeat homebuyer. Perhaps you are living in a house that you owe. But you and your family have outgrown it. Now is the time to upgrade. My name is kevin martini and I am a certified mortgage advisor with a martini Mortgage Group. I provide trusted advice with a frictionless process that offers great rates and certainty to you and your family. My number is 919-238-4934 Looking forward to connect. Stay safe out there and wishing you peace and blessings. Now it’s time for the disclaimer. This material has been prepared for marketing purposes only. This is not a loan commitment or guarantee of any kind. loan approval and rates are dependent upon borrower’s credit collateral financial history and program availability at time of origination rates in terms are subject to change without notice. The Martini Mortgage Group at PCL financials the division of celebrity Home Loans NMLS 227765 with a branch address of 507 North London street, Raleigh, North Carolina 27604 You can contact certified mortgage advisor and producing branch manager kevin martini NMLS NUMBER 143962 by calling the branch and that number is 919-238-4934. For a full list and more licensing information, please visit www NMLS consumer access that or or by visiting www.MartiniMortgageGroup.com equal housing lender