Real Property St Pete
Real Property St Pete
Rachel Nohlgren: Financial Planning and Mortgage Lending
Rachel Nohlgren, Private Wealth Advisor with Mustard Seed Advisors of Raymond James, joins David and Julie for a discussion of financial markets, treasury notes, mortgage rates, lending in general.
- How does Rachel see the state of the economy?
- What is the likelihood of seeing a recession on the horizon?
- Unemployment, the Federal Government, and Private Sector Cuts
- The Luxury Real Estate Market: Who is Buying?
- How Does Real Estate fit into a balanced portfolio?
- How do Financial Planners advise clients on Home Purchases
- How do they advise on Investment Properties
Want to work with us? David Vann can be found here, and Julie Jones can be found here! Reach out! We're nice, and we'd love to hear from you!
I'm really happy today because my friend Rachel Nolgren is here to do a podcast with us, and she's a financial planner. We're so glad to have her here to talk a little bit about the financial aspects of what's happening in real estate, and it just so happens that she's buying a house, right?
SPEAKER_03:I am. This is one of the most exciting and stressful months of my life. All the feels. It's more excitement. I'm really happy to be taking this next step in my life.
SPEAKER_00:Yeah, we sold your house four years ago?
SPEAKER_03:Four or five. It was just before the pandemic. That was when I first met you. That's right.
SPEAKER_00:Really? Well, that's exciting.
SPEAKER_03:You were both at RE-MAX at that time, and David, I think you were traveling, and Julie came over for some important part of that process.
SPEAKER_00:This is David Vann with RE-MAX METRO.
SPEAKER_02:And this is Julie Jones with Smith& Associates Real Estate with Real Property St. Pete Podcast. And we're so happy to have Rachel Nolgren from Mustard Seed Advisors of Raymond James. Glad to have you here today, Rachel. It is so great to be here.
SPEAKER_00:Well, we had two things to talk about today. One was about the more macro aspects of what's happening in real estate and in the economy. You have some things to share with us about mortgage rates and treasury notes, real estate as an investment. And then we'll move on to talking about your transaction because that's been really fun.
SPEAKER_03:It has.
SPEAKER_00:So we're interested in where the economy is headed right now and what things look like for 2025 in terms of financial planning perspective. And getting more specific, let's hear about the 10-year Treasury note and what you think is happening with the mortgage rates. The mortgage rates have been kind of a drag on buyers and therefore a drag on sellers. It slows down the buyer's ability to pay. It makes their capacity to pay reduced. It's a big pay at 7.5%. And so tell us about where you think things are headed and what should we expect in the next nine months of the year?
SPEAKER_03:Absolutely. Well, just like when I'm speaking to clients right now about stock market volatility, I'm going to lead with this is a speculative moment because things truly could go in either direction in terms of are we going into a recession and what will inflation do? And inflation, more than anything, will be the factor that impacts treasuries and interest rates, mortgage rates, bonds, all of the aspects of the investing world that are truly hinged to one interest rate or another. So in terms of the uncertainty ahead for this year, If we have tariffs that remain more permanent than transitory, meaning if they take root and we have a global trade war and countries start changing how they build products in ways that are hard to unwind, then we could have a recession. Now, I read a lot of different economists. I am an economist by training. That was my degree in college many, many years ago. And I like to read economists from all spectrums, all the conservative schools, the liberal schools, and the collective voice seems to be that if we have a recession, it will be mild, not major, which is a great, great thing. That's a hopeful thing for investors and homebuyers, any consumer looking to make a major investment. The reason that that is the collective outlook is Of course, with the possibility that there could be extremes on either side of that. But that key reason is that our economy was very, very strong coming into this year. And although we've started to see the beginnings of a slowdown, our numbers as a country are still positive. There's plenty of buffer with the gross domestic product. And corporations have been planning for these aspects of uncertainty. They've been sitting on more cash. They've taken a break on hiring, which As a side, that can be part of the recession story. Yeah,
SPEAKER_00:that's a question. I mean, I feel like that the unemployment numbers are going to be rising significantly, not just because of the cuts in the federal government, but also private sector companies are beginning to lay off executive level people, you know, cutting the fat in different areas, reducing the workforce. I know that there's a lot of jobs that are being lost.
SPEAKER_03:There are. There are. And small businesses, which are the backbone of our economy, are going to really struggle with higher prices of products, as well as just having the freeze or the paralysis of making big investment decisions until we all see how this shakes out. So it's an uncertain time. When small business owners and consumers are paralyzed, they very quickly start making different choices with their money. They consider trade-offs, you know, what to buy, what not to buy. You mean
SPEAKER_00:like houses?
SPEAKER_03:Like houses.
SPEAKER_00:Maybe they don't buy houses?
SPEAKER_03:That could be an outcome. Well,
SPEAKER_00:it's a long-term commitment, but it's a necessity. It's shelter. So, I mean, at some level, you know, buying houses or downsizing, selling, whatever, you know, all those things are a factor of personal needs more than economics, I would say.
SPEAKER_03:Absolutely. We have a bifurcated economy, even during a recession. What do I mean by bifurcated? It's what you've just pointed out. There are needs and wants. And it's the wants that tend to suffer. So we call this consumer cyclicals. Let's not get into too much jargon. But when that consumer or that small business owner is making choices about that dollar, you know, does 50 cents go to the need or to the want? Does the full dollar go to the need so I can make sure that I can get through this weather, this storm? Housing is a need. And Julie, you pointed this out in a recent conversation. There may be an immediate immediate stall around big purchases. But coming out of the fog of this, which I, in my opinion, might only take a couple of months, people still have to make housing decisions.
SPEAKER_00:We know that this$1 million to$8 million price point has suffered. A lot of that's because it's waterfront property. So we have also a bifurcated market here in the residential real estate market in Zabie because a lot of the luxury homes are on the water, which makes them at much greater risk. And also many have flooded. So with that being the case, we've got definitely some lost value in that housing area and not as many people willing to buy in real risky areas. I've got a client who's a$3 million buyer and they pulled the plug on a single family home and we're now shopping for condos. So that's out there. And I think people who are not from here, who don't understand hurricanes and flooding, it's harder for out-of-town clients to say, hey, let's go buy a waterfront home in St. Pete or on the beaches. So anyway, and those are wants. Those are wants, not needs. And I'm not trying to be negative. I'm just trying to address what we see.
SPEAKER_03:Then we'll call you a realist.
SPEAKER_00:I try to be. Both feet on the ground.
SPEAKER_03:Well, on that note, so the sky is not falling. The sky is not falling. The collective voices, which remind us we've been through really tough economic periods before in this country. We've even been through tariffs and inflation before. They are... Outlook is a mild recession given the strength coming into this. I
SPEAKER_02:think it's easy to forget history. And so I love that you've made that point that we have been through this before. It's just maybe there's more media about it right now and more focus.
SPEAKER_03:Yeah. There's some things that are different from history, but there's also similarities. And I would encourage your listeners to... think about things. What, what would I do if there were a mild recession and it, you know, it didn't impact us for 10 years, but stay focused on shorter term decisions and what you can control in our clients' financial plans. There are a lot of choices being made around housing to your point, David, someone who wants to make sure they've got, you know, enough cash and enough capital to do, to meet multiple goals at once. They, very often are now asking, should I be buying at a lower price? Or should I buy in land and maybe my dream home on the water comes down the road?
SPEAKER_00:So you are having those discussions with some of your clients?
SPEAKER_03:With some of them, yes. And sometimes that's a matter of their actual financial picture, meaning they don't have the capital to achieve all goals during a recession. And sometimes it has nothing to do with their financial picture. It's their relationship to money. And And it's reflective of how they feel when things are uncertain.
SPEAKER_00:Well, it's definitely a great time to buy. I mean, there's great investment opportunities out there. I've got two or three or four or five clients who I know are buying right now. They're buying land, they're buying areas where they want to live or areas where they know that they can eventually build again. I mean, the land on the beaches that are, you know, is really water access type properties that are in these neighborhoods. I mean, the prices of those properties, albeit the The house is now gone. But again, the house, as we've talked about many times, could very well be only worth 20% of what they pay for the property. Because they're original 1960s, 1970s, single-story black homes that have been flooded four to six feet up. And so they've gotten a substantial damage letter. So those... Pieces of property are really just pieces of land and they're not going to be able to rebuild them. They'll tear them down. But I mean, it's a half price sale out there or less. And so when you figure that 80% of the value of the property is the land and only 20% of it's been destroyed, but the price has come down by half, that sets a scenario where it's probably a good time to buy those properties if you have the capacity. Yeah.
SPEAKER_03:Absolutely. A metaphor with stocks, I like to tell clients, in what world do you walk into a TJ Maxx or similar store and get turned off by something that's a 50% clearance sale? I
SPEAKER_00:like it. So... In general, your clients, you advise them on equities, stocks, bonds, those types of holdings that are really probably what you're licensed to deal with and sell and market and whatever, and advise people to go into those particular funds. I know that because you helped me. But how do you address when... One of your clients says, you know, I want to make some investment in real estate. I mean, do you look at their overall portfolio? Do you talk to them about what they're doing with real estate? I've always been curious as to how that gets handled, and I'm sure different advisors handle those types of questions differently.
SPEAKER_03:Yeah, you're right. There's different ways. models for giving advice. I'm a certified financial planner. And one of the things that means is that if I'm doing my job ethically and right, I am looking at the overall picture always. And starting with a long-term plan that would absolutely include my client's current home or any investment properties they have. It also includes what is the future of your real estate and how does that tie into the whole. So that's That's pretty important in the school of financial planning.
SPEAKER_00:I'm not sure that everybody looks at it that way.
SPEAKER_03:No, they don't. There are many advisors who are pretty specific. I mean, they might... focus on a certain type of stocks or bonds. This is not to say that's bad. It's just like with a doctor, you have generalists and specialists.
SPEAKER_00:I know a lot of people who are buying property or making real estate investments. They like to go and talk to their financial planner about whether this is a good idea or not. Should I buy this house? What price point should I spend? So we know that that's a factor and people like yourself are advising our clients when they're deciding what to purchase.
SPEAKER_03:Absolutely. We use, ironically, we use a house metaphor when we're working with a new client or working with a client we've had for a long time that's had a major life change. You know, they've gotten divorced or a spouse has died. That's always a new, any life change like that is a new and fresh time to look back at their financial house. So what is the financial house? You know, we break away from all the technology and software and we draw just like a very simple foundation. And the foundation is includes real estate. So those pillars are cash, real estate, stocks, and bonds. Of course, investing can be more complicated than that, but most people make better decisions when we can boil things down to a simple foundation. And Will there be multiple properties? Will there be investment properties in addition to a primary home? What will the financing look like for those properties? On the stock side, are we going to own some private companies or make a seed investment in a small business? But that foundation is, that's the metaphor we use for the foundation of financial planning.
SPEAKER_02:So the second piece you talked about was the loan process. So tell us more about your experience with that.
SPEAKER_03:Yes. So as a financial planner, I'm familiar with loans. I know how to model them in my clients' plans. I understand the basics of all the math. But now that this is my contract in my home, what I found interesting is I had been looking at what's called a jumbo loan for the homes at the higher price of my range, where with a jumbo loan, you put money down, you finance the rest, you get a variable rate that will go down and give you the opportunity to take advantage of lower interest rates should that happen over the course of that loan. And that product, that structure, I'll say, that structure was very appealing because I am of the opinion that mortgage rates may come down over the next five years. Not dramatically, but even 1%, you know, from 7% to 6% or from 6.5% to 5.5% would be a space where I would want to either refinance or use the jumbo loan, you know, the exit door that it provides. So I was pretty focused on that product. structure, which then squarely would put me at a purchase price of like, say,$750,000 to$800,000. Well, now I don't need that structure. So I had to scramble a bit when we made this offer to figure out what am I going to do with financing. Because it was a lower price point, correct? That is correct. It would not qualify for the jumbo loan structure with any vendor, not Raymond James. I shopped it around a that structure. And so I was looking now at traditional mortgage with a higher interest rate. And that freaked me out a little bit. So I ran some numbers. And I realized, because that purchase price at$5.95 was so much lower than the other, once I put 20% down, because of course, I'm going to do that either way. I'm a conservative financial plump, fiscally conservative. The monthly payments would be still lower than on the jumbo structure and that made me feel even that much more comfortable about us offering asking price and moving forward with everything
SPEAKER_00:i was glad you were doing that analysis not me it was an interesting discussion because i was concerned that your payment might be less in the jumbo loan and we had bought a property that was so much lower priced, and now you're moving to conventional, I really didn't know what was going to happen in terms of your payment. So anyway, I'm glad you were able to sort that out. And what do you think about those rates? And people always talk about the 10-year treasury being tied to the mortgage rates. And could you give us a little insight to that?
SPEAKER_03:Sure, sure. So Mortgage rates tend to follow the 10-year treasury more than any other interest rate. It's more likely a mortgage rate is hinged on that or anchored in that than, say, the federal funds rate, which is the one we all hear about when the Fed is increasing or lowering rates. That interest rate is very important to all debts, including mortgages. It's not unimportant. But mortgage rates don't always move when the Fed comes out. and lowers the rate. Sometimes they just stay flat and it's very confusing for clients. I'm sure it's confusing for you all managing these rates every day. So the reason that happens is because the 10-year treasury is essentially a marketplace. There are buyers and sellers of treasury. What is the treasury? It's debt. It's also debt that the government issues. You can buy You can buy into the U.S. government. And because that is its own marketplace, when people are flying to safety and they're flooding into treasuries, that rate will go down. That typically over a long period of time also means mortgage rates will go down. And that's exactly what's happened in the last couple of months. So this comes back to my statement that when I was looking at my jumbo loan, I wanted to be in a structure where I could bring the rate down. That is, it is going back to treasuries and watching that market and watching those rates come down as people leave stocks and go to safety. That is an indicator I think is probably the most important to watch in trying to see where would these rates go. I want to be very careful to say that to remind everyone that average mortgage rates over a long period of time float closer to 7%. So when I say the rate might come down because treasuries are lower than they were two months ago, because we may have a mild recession, All of those factors we've talked about so far could bring mortgage rates down, but I would not expect a huge movement down because we also are going to have higher prices and inflation, and that usually keeps rates up. So when you boil all of that together in the wonderful soup that is where will mortgage rates go, it may not be a huge move, maybe half of a percent or a percent, and we may not know how this is all going to sort out for a couple of years.
SPEAKER_00:Interesting.
SPEAKER_02:So, Rachel, after all of this experience with your home buying, do you think you'll look at real estate differently now when you're advising clients or even in your own planning? Are there any learning lessons you're taking from this home buying experience?
SPEAKER_03:There definitely are. So I'll start with what this validated for me. this experience validated that real estate should be looked at as a viable investment and a viable asset class alongside your stocks, your bonds, and your other investments. Well, the situation we're in right now with how the market has responded after the tariff announcement is yet another reminder. We've gotten it about twice every decade for the history of our market since the Great Depression. It's a reminder that Although stocks are great for keeping up with inflation and helping you grow wealth over a long period of time, we have these dislocation events, these times of bad periods, and often real estate is a great hedge to that because real estate holds value. So the other thing that was validated for me is when things are crazy out there in the world, cash is king, and this became so real that buying a home. So in the, in the stock market space, cash is King when things are crazy, because then you have control, you have money that's safe and you have money that you can use on a down payment for a home or any other big purchase. And when you're buying that home and I was sitting there crunching these numbers and I realized I'm going to need cash, not just for the down payment, but also for projects I want to do in the first year or two of this home. So when I'm talking to someone who maybe all they are is a real estate investor, that's their thing. That's not necessarily a great stock market investor. But even true in that space, cash is important right now. Why? Because we don't know where rates are going. Why? Because hurricanes. Because you could have damage and you might need to pay deductibles or you self-insure and you decide, I'm going to fix this on my own. Or I've got several clients who were impacted by hurricanes who are selling and moving. But that's not necessarily a downsize right now because if you're moving to higher ground, you're competing with people like me that just bought a home in higher ground. Right. The key to all of those financial decisions right now is having cash and not being too tied up in any one thing.
SPEAKER_00:Good advice. You should be a financial planner. Yeah.
SPEAKER_03:I guess I found my calling.
SPEAKER_00:Right. Well, this has been fantastic. I mean, so much good stuff, great information. It's been a great experience for me to work with you as a financial planner and then to have the opportunity to guide you through the real estate process. Thank you so much for coming in, Rachel. It's been so cool to get both the financial planner lens and the personal homebuyer experience from you.
SPEAKER_03:It's been great to be here. Thank you for welcoming into your home. podcast zone. I so much enjoy listening to your episodes. And for any of you listening, the most recent episode all about buying a home is excellent. It was well timed for me and I hope it will be for others.
SPEAKER_02:I love hearing that. That's awesome. So if people want to get in touch with you or learn more about what you do or get your help, where can they find you?
SPEAKER_03:Best place to start is online www.mustardseedadvisors.com.
SPEAKER_00:That's wonderful. And this has been the Real Property St. Pete podcast. Thank you, Julie.
SPEAKER_02:I'm Julie Jones with Smith& Associates Real Estate.
SPEAKER_00:And I'm David Vann with REMAX Metro.
SPEAKER_02:And we have Rachel Nolgren. Thanks so much for being with us today.