Author: loantucson

Culling is Caring

“I’m not a very productive person, but I recently finished the internet. When you do, a picture of Bill Gates appears, and you get to enter your initials.” Traveling between appointments and listening to the radio recently, I heard comedian David O’Doherty share this little tidbit that made me laugh. As he went on to observe how ironic it was that a bald man was making fun of his hair, I thought more about his internet comment and concluded that this should be the subject of this week’s edition of our award-winning publication. If you’re scratching your head and wondering where I’m going with this, then you’re probably new to our weekly missive. For those of you who are veterans, you’re probably just saying, “Get on with it! I have a flan in the oven and don’t have time for this twaddle!” To the newbies, welcome! To the veterans, please don’t invite me over for dessert!

With inventories reaching historic lows in the real estate market and interest rates starting to inch their way up over time, we’re seeing one of two things: a mass exodus out of the industry or a doubling down by both real estate agents and loan originators. For those of you who are currently wading into the buying pool or are poised on the very edge with your toes testing the waters, this is actually a good thing. While the lack of inventory obviously reduces your choices of homes, this phenomenon that is causing so many to bail out is culling the herd and leaving you with agents and originators who are serious, experienced, and savvy. What else does this mean to you, the consumer?

For example, “knowing” your credit score can be quite deceiving. Just because one of the many services being advertised on TV tells you that you have a credit score that’s 800+, that doesn’t mean you’re going to qualify for the loan you want. Why? The reason could be that you’re only six months into a new job in a new industry, so most underwriters are going to require additional factors that will make your loan go in a different direction. In other words, every situation is treated on its own merits, and credit score is only ONE factor in a sometimes very complex equation. What you should really do is meet with a mortgage company – even if you’re 12 months away from when you THINK you’re ready to buy a house – and have them pull your credit REPORT. They’ll then be able to help you craft a plan that will get you a loan approval BEFORE you even start looking at homes. When you have that approval, you’ll be unstoppable as you go out to look at houses and there are seven other parties who want THAT house. This is one of those moments when it would be appropriate to stick your tongue out at others.

So, while it may seem intriguing to spend your time “finishing the internet” so you can get to that elusive Bill Gates photo and the chance to enter your initials, your time will be better spent getting ready to buy a home – if you do your loan with me, I promise not to send you my photo.


Once, many years ago, a very wise person shared with me a small but very powerful insight that has helped me in practically every aspect of my life – it’s easy to remember, too: Seek first to understand, then to be understood. Whenever I rush headlong into any situation with the goal to be understood first, I hit resistance or find my argument to have more holes in it than I had thought possible. Just the opposite: whenever I pause to ask questions and digest the answers, I find it so much easier to reach my goal(s) because I’ve either found a way to build a bridge without the need to take a leap or that my original goal needed to be adjusted because it had holes in it. There’s a great line from the novel (and movie) To Kill a Mockingbird that sums it up: “You never really understand a person until you consider things from his point of view . . . until you climb in his skin and walk around in it.” (I chose not to open this week’s article with that line for fear you might have thought I was going in a different direction with a different movie about lambs and how quite they can be.)

Recently, I was meeting with two real estate agents who handle a lot of higher-priced properties, and I wanted to steer the conversation to a topic that I thought was perfect for who I thought was their ideal clientele. Just as I was about to launch into my presentation, I stopped myself and asked this question: What’s the makeup, demographically, of most of your cash buyers? Of course, I KNEW the answer to this question – older folks who were close to retirement or who were already retired and wanted to downsize – but I asked the question because I’m big-hearted and noble that way. Their response, though, absolutely shocked me: Millennials. What?!!! They explained that most of their cash buyers were folks in their early 30s who have been saving for quite some time and have amassed enough capital to purchase a small home without a mortgage. This not only pulled the rug out from under me as to what I wanted to discuss, it went against practically everything I had believed and read about Millennials.

The focus of this week’s article isn’t really Millennials and the unexpected saving/spending habits of some of them (because my gut still tells me that Millennials buying houses with cash isn’t THAT big of a group in the grand scheme); it’s about being open to the unexpected and learning from new revelations. Because I asked the question and waited to digest the answer, I was able to make a completely different pitch on the fly that gave these two agents something that they could use to market AND take to their existing cash buyers that they’ll find very attractive (and should increase more selling/buying options for those agents). This exchange was a two-way street: I now possess a piece of information that I can add to my repertoire and trot out with other agents when the moment is right. Not bad for asking just one question, right? When you think you have all the answers, that may be true – because you’ve stopped asking questions. Whether you’re an agent or a buyer/seller of property, not asking questions severely limits your options.

I’ll close with this Chinese proverb: “He who asks a question is a fool for five minutes; he who does not ask a question remains a fool forever.” Depending on your personality, five minutes might FEEL like forever, but it beats the alternative, right? So ask the question(s) NOW, and get it over with.

Whether you’re a flipper of TV channels or a die-hard fan of one particular news source (television, radio, internet, or some weird thing called a newspaper), you can’t help but come across a story or twelve on a semi-regular basis about the housing market and whether we’re on a “bubble”.  There are those pundits who claim everything points toward the market being on a bubble and how close we are to it bursting, and there’s an equal number who blow off the idea like that’s the most ridiculous thing they’ve ever heard.  What you don’t hear, though, is actual data supporting their arguments concerning a “bubble” in the housing market because it makes for a better story to watch people wring their hands and make emotional pleas and/or flash artificially whitened and perfectly aligned teeth at the camera and say these end-of-days kooks have it all wrong.  Well, buckle up, kids!  THIS is about to become your favorite news source (at least for the next two or three minutes) because here’s some data to let you decide what’s going on in the housing market – taken from the Housing Finance Policy Center’s housing affordability index:

  • In 2006, in the run-up to the ugliness of 2008-09, there was a $22,000 shortfall between what the median household income could afford and the median sales price of a home.  In some parts of the country, that shortfall was an even greater chasm between what could be afforded and the price at which homes were selling.
  • Today, the median household can afford a home that is $70,000 higher than the price of the median house sold.

For the former, it doesn’t take Einstein to figure out that promising to spend money you don’t have at present along with the distinct possibility that you won’t be getting annual raises or increases to your income to make up that shortfall in the near future is a surefire recipe for things going sideways fairly quickly. Using that same set of sub-Einstein analytical skills, it’s not hard to see the makings of the bubble back in the day and why it eventually burst.

From the latter, we can see that income today is staying ahead of the prices – that could change, and there’s no guarantee that it won’t, but it’s pretty safe to say it’s not going to change drastically in the next 5-6 months – so the makings of a bubble, at present, are fairly absent.

I’m not trying to make any specific forecasts or prognostications about the near and/or distant future – I’m just presenting you with the data, and my interpretation of the data, that’s all. It’s up to you decide what to do with it Think of it this way: if your child – we’ll call him Jack – comes running into the living room where you’re holding a small cocktail party and says, “Jimmy was blowing bubbles, and one of them popped right in Cathy’s eye,” do you wring your hands and lose your cool or do you pat Jack on the head and ask him to join his diminutive friends back outside? Well, it might all depend on whether the source of the bubble was soap or chewing gum. Having a little bit of data can make all the difference, right?