It's no secret that the coronavirus has prompted many consumers to rethink our homes and their purpose. During the stay-at-home orders, many of us saw our home transform into something far more than just for eating and sleeping: our home become our new office, the gym, the movie theater, church, the playground, and more.
Some forever-renters have since departed their beloved urban apartments in favor of single-family homes with outdoor space for kids and pets to run around. Others are just looking for more space now that we're working, playing, sleeping, and eating within the walls of our homes. Consumers concerned about the value of their homes are putting their homes on the market too, fearful their home values will plummet in the COVID economy.
Despite record unemployment and no end in sight to the stay-at-home orders, homes are selling at record highs throughout the U.S. Some homes are selling so quickly in fact that sellers have increasingly grown nervous they won't find a new home before they're expected to leave their current property.
Joining us on the show is Daniel Lehman, Owner and Team Lead of The Lehman Group. Daniel joins the Talk Wealth To Me crew for a discussion on how to decide whether buying a home right now is a smart money move for your family's finances and more!
It's no secret that the coronavirus has prompted many consumers to rethink our homes and their purpose. During the stay-at-home orders, many of us saw our home transform into something far more than just for eating and sleeping: our home become our new office, the gym, the movie theater, church, the playground, and more.
Some forever-renters have since departed their beloved urban apartments in favor of single-family homes with outdoor space for kids and pets to run around. Others are just looking for more space now that we're working, playing, sleeping, and eating within the walls of our homes. Consumers concerned about the value of their homes are putting their homes on the market too, fearful their home values will plummet in the COVID economy.
Despite record unemployment and no end in sight to the stay-at-home orders, homes are selling at record highs throughout the U.S. Some homes are selling so quickly in fact that sellers have increasingly grown nervous they won't find a new home before they're expected to leave their current property.
Joining us on the show is Daniel Lehman, Owner and Team Lead of The Lehman Group. Daniel joins the Talk Wealth To Me crew for a discussion on how to decide whether buying a home right now is a smart money move for your family's finances and more!
Welcome to Talk Wealth To Me, a safe space podcast, where we chat about anything and everything related to personal finance.
Felipe Arevalo:The information contained in this podcast is for educational and entertainment purposes only. It does not constitute as accounting, legal, tax or other professional advice.
Chase Peckham:2020 will forever be remembered as the year the world faced a great pandemic. COVID-19 has turned a lot of lives upside down, a profound effect on our economy, a financial crisis that brings back memories of a financial crisis about a decade ago, but for entirely different reasons. So we at Talk Wealth To Me, wondered how is the housing market, the way lending is being done, been affected by the pandemic? So we turned to an old friend, Daniel Lehman of the Lehman group about those very things And much, much more[inaudible] ABR always be recording. Alright, so Daniel, thank you very much for being with us. I mean, this is the second time a second go round. You've been with us and we did first time homebuying the last time we were together, which is one of our more listened to podcasts, actually, even though it was one of the early, uh, shows that we had. Uh, but we find ourselves here when we're recording this in July of 2020. And as we know that kind of puts us, we're now all have been programmed and are learning our new, new, normal of COVID-19 and pandemic. And, um, finding ourselves at home social distancing is become the keyword I can just imagine. And, uh, you know, my grandkids when they go to school and there's going to be the word social distancing is, is going to be a part of their history lesson. Um, but one thing, and we talked about this early on Daniel, when this first started happening and we were all kind of in that reality that here we go, we're going to, we're going to be at home. Our discussion when we were talking about these podcasts was what is happening to the real estate. Um, and I have to tell you, I, we have a few friends here that live in our area that literally panicked and had lived through 2008, 2010, saw the value of their home go down. They were panicked. The same thing was going to happen again, sold their home, moved to a new development and got a lot more bang for their buck to speak, but did it, and, and they even admit now they think they might have just acted hastily. So I guess just to start it off from the front, if you can kind of take us back to what your, if you can remember, what was your thought process when this was all kind of coming down to like how this was going to affect lending and real estate in general?
Daniel Lehman:Well, in retrospect, what I should've done is gone and take a year long sabbatical starting in around February. Cause this has been crazy. Um, but, uh, um, I'm trying to think, you know, going into it, nobody knew what to expect it at all. I think there's a difference between on the banking side, what we had happen versus what happened actually in the market, which are two different things entirely. So I have, I have kind of like from a banking standpoint, what happened was we had, you know, once we got into it and the economy got shut down, we had word from politicians and other people saying, Hey, you know, don't make your mortgage payment, you know? Right. Um, you know, with, with the, uh, with the, uh, forbearances and, and being in the business, as long as I have, I know that there's no situation where that doesn't have some kind of effect, like on the front end, you can say, Hey, yeah, don't make your mortgage payment. There's not any, any immediate kind of credit implications. And, and obviously, you know, for certain people that, that needed that relief super important, but what happened on the lending side, on the backend of it was like banks were like, okay, you know? Yeah, sure, totally. You know, we'll work with you on making sure that you could skip a couple of payments and that kind of thing. We all kind of stay good. But on the new origination side, a lot of banks were like, we're implementing new guidelines, we're making it a lot tougher. And we're, and we had several people who are deep into the process and depending on who is doing their loan, you know, some of the bigger banks were a very big nightmare to work with. Um, and, and that's not the vast majority of the business we do, but even people that were just getting furloughed, you know, there were complete. I have people right now who are completely on hold in, escrow, just waiting until their first paycheck comes back, you know, until they get back to work, generally speaking, they need the paycheck back on the other end of the spectrum. Well, just to cut to it. I think a lot of the people in the business are having their best years ever because there's so much activity, massive amounts of activity because rates just came down in a huge way. And the thought was that the activity was the thought initially was that people are kind of gonna freeze. But if you look at what your friends did, they had two transactions, you know? So from my standpoint, on the, on the business side, we've seen a massive increase in transactions. We've seen a massive increase and I, and I can't tell how much of it is just like, you know, a lot of time to kind of like focus on those things, kids out of school, for example. Um, and I can't tell how much of it, which is probably a good clip of it is, um, just with rates being as low as they are from our standpoint, you know, um, I think that's prompted a lot of movement in the market and we haven't seen much softening. It's very competitive, still
Chase Peckham:Interesting. You say that because when they decided they went up and just looked at this new development and didn't expect to buy, and then they found themselves making an offer within a day and them getting it approved. And now all of a sudden they're sitting there with their home going, okay, well, you know, the kind of that, like the color in the face kind of goes away and they're like, what are we going to do? And yet, as a real estate agent happened to just sold the house across the street, happened to walk across and saw them cleaning things out and just said, are you by chance going to sell? They never even put it on the market. It was sold within seven days.
Daniel Lehman:Yeah. It's, it's been, I mean, in terms of, in terms of the market, it's been really, really interesting. Well, a lot of the impact of coronavirus was felt by who, by like retail, by, um, by a lot of the people that were, um, you know, uh, uh, restaurant, industry and servers even. And self-employed right. So, you know, generally speaking, like from my side, you know, the military active military, there was no furlough there. Right? So they were still kind of operating under the same circumstances financially. Not obviously not much other than that, but, uh, and then you have, um, people that were, are allowed they're able to work from home. You know what I mean? Those are, those are, you know, in those positions, right. Where you could potentially go and work from home, you know, those, those incomes are generally stable enough to purchase property. So I don't know that there was a massive impact, even though obviously there was a massive impact in, uh, an impact that's like it was super negative on, on certain elements of the economy.
Katie Utterback:Right. You said something and I'm still stuck there. I guess just talking about that. Some people were having a really great year in terms of state and Chase. I'm still stuck to that, you know, somebody that sold and then also bought in that short of a time. Um, you said though, that people are still stuck in escrow, like people are, you know, they lost their job. You're still kind of waiting for that proof of income or some new income, I guess. Um, how many people did that happen to? Are we talking about like a significant number or is this just like a small pool of people and the industry is fine
Daniel Lehman:And you know, one of the, one of the biggest things that we can do right in our industry is do no harm. Right? And, and there's this. So when you buy a house, you put a deposit in, after a certain period of time, you're expected to remove that deposit and you're expected to close, right? Because if you, you know, you do, what's called removing contingencies. I've done my due diligence. I've done what I got to do. I'm going to buy the house and I'm not going to expect you to kind of keep your house off the market if I'm not willing to close on it. Right. And so a lot of the things that we get really nervous about is after that point in time, I mean, from a lending standpoint, in a normal market, we want to make sure that everything is done on our end before then. So there was even it's. So to answer your question, there was, there was enough of that going on that the California association of realtors came out with a completely new form. The COVID form that basically said that if something happens to your employment or some circumstance changes or something happens with the bank, that's giving you the loan. After your move with the contingencies, you are not going to lose your deposit. And a lot of times on the front end, the sellers were asked to sign that, to provide for that, so that you don't a lose the property and lose your deposit, which would be a massive double whammy. You know, that would, that would be terrible. There were, there were two kinds of cases, you know, there were one where actually like a business shut down and they just, you know, uh, there were some furloughs and then there were also on, and I don't want to like name names, but the big banks that were doing like the bigger loans outside of what is government lending, not government lending, like outside of the typical loan amounts, we'll call it conventional loan amounts. Those are kind of like not the wild West, like jumbo, right? Like those things, what ha those are the ones that get pulled away, pulled off the market immediately. So we had clients that, um, that were buying a bigger property, which, which isn't typically our, our, our, you know, our market, right? Like we deal with a lot of like military, again, military, and first time buyers. And a lot of people that need that education. These were repeat clients that are building, they're buying their next property. And, uh, and at the last minute, a big known bank just completely pulled the file, but they didn't pull the file and say, we're not doing the loan because of any. They said, we don't like this. And it was about the appraisal. And it was just some little, they found a reason to pull it and drag it out and just let it expire. And it was really unfortunate. And luckily these clients had enough income and hadn't had enough cash to put some extra money down and get into the, into the spot where there was a solution. Cause if not, they would have just lost the property.
Chase Peckham:So all of a sudden that appraisal doesn't matter anymore?
Daniel Lehman:It was crazy. It was, it was clear to me, but you couldn't, they wouldn't say it that the reason why there were it's a, it's a murky story, but they came up with a reason to cancel it, that they wouldn't have outside of COVID because like, at that point it was really, that was really early on. That was probably in, you know, mid March to late March.
Katie Utterback:I want to ask you, cause you mentioned you typically work with first time home buyer. Um, so I would be your client currently a renter I'm looking for by, um, we, you guys talked about this on the first episode that we did on buying a home, like prices in San Diego are going to be a little more steep than other parts of city or country are you finding are first time home buyers are the qualifications to buy a home, hasve they intensified, have they, I guess, increased in what you need to do is I guess having an income no longer sufficient, like I have my job today, but I don't know what's going to happen tomorrow. So how do you handle that uncertainty?
Daniel Lehman:Yeah, so, so there's three main core loan types. There's conventional, there's FHA and there's VA. Those are the three core loan types income overall, um, is not very, it doesn't vary a ton between those in terms of qual, in terms of quantifying, uh, not quantifying in terms of verifying that income is usable income, right? So you have to show a history. So for you specifically, you would have to show a history, not in the same job, but in the same industry. So in the same type of role, so you wouldn't have to be in the same job, you would just have to be in the same type of role. And what you're asking about is likelihood to continue likely.
Katie Utterback:Okay. I guess I'm just wondering, you know, with, uh, with the coronavirus, we saw industries that I guess I personally would have considered safe, like hospitality and tourism. I mean, it's weird that hairstylists are out of a job. I've not, I don't think I'm the only person to say that it's weird that doctors are losing their jobs, like emergency rooms as there's nobody really in there in some parts of the country, they're getting sent home. It's just weird. So I'm wondering, like, because of that, we really don't know what's going on.
Daniel Lehman:from a lending standpoint.
Katie Utterback:Sure. Yeah. I guess, do you value, like how do you look at someone's career? Like if I'm in a writing editing industry, I might be able to freelance or find my way, but you know,
Daniel Lehman:Well, see, they don't even look at it as an industry. They don't look, they look at it as you individually period. So if you are buying a house and you are a salaried employer and employee, all they would do is at the end of the transaction, right before you closed, they'd call your employer and say, Hey, did she, that she still worked there and is it likely that she'll continue working there? And yeah. And then you close the loan, you get the house and if you decide to quit and go run off and you know, like do something else the next week, there's, there's not any recourse for that. Like there's no nothing we can do about it. They're not going to verify continually that you're still employed or, and they're not going to say, Hey, you're in business a job, what they may do. And what we did have do as if someone's self employed, they'll verify that their receipts, that they're, that they're still actually actively like working with clients, you know, and that they're not completely shut down. That's a little bit tougher, but, um, but generally speaking, it's, it's on the individual level, they'll verify that you have two years in the same industry in the same line of work, and they'll verify that you're still working, but they can't really verify that you're going to be working after that. Um, if someone has been furloughed, what they'll generally require before you, they give you a loan is, is evidence that you're back working. So they'll require some kind of like a first pay stub or that kind of thing, but that's not to start that's to get your key. That's the close generally.
Katie Utterback:So let me ask you this. If I'm, let's say I was going to close on at home at the end of this week or something, and my husband and I are both currently employed, but let's say like two months from now, we both lose our jobs. We're furloughed. Do we have any sort of protection and keeping our, our home, like this new mortgage or anything like that? Or I guess that's what I'm trying to ask is what kind of protections exist for people who may have an income now and may want to buy a home, but because of the uncertainty of the pandemic, if something changes in like six months or whatever, what protections are there
Daniel Lehman:For like, for the consumer? Like in terms of like, yeah, it's tough. I mean, those are those things. Like, there's all sorts of stuff at the bank level too, but going into it, obviously you would never want to go into it unless you had confidence that you were going to have that's what's been so shocking, kind of Chase, you know, back to what you guys were saying is like, there seems to be this still this level of confidence that, that incomes are going to continue at a certain level, because you would know, I would tell you if that's even a concern, I would hang tight, you know, until you are a super cause. Cause there is, are those things, but those are very much like worst case scenarios furloughs and all that, you know, like for load payments, there's nothing that a bank is going to like push to say, Hey, buy now. And if you, you know, in two months, you know, if you lose your job, we'll take care of you. It's like they're going to do everything that they can now to verify that you're not going to be in that situation. There's no way that they can really do that. Right. But they're going to do everything they can to, to make sure that that's not the case. If that is the case, that they, they work with you on it, but that's more of a personal finance thing. Right. Cause you wouldn't want to even put yourself in that position. So, so, but, but again, you, I would've figured either there's a lack of inventory or I would have figured that there would have been more of that concern. There's probably some concern like that out there where they're like, Hey, you know what, we are going to buy, but we're going to buy later. Once these things all work out. Um, but yeah, I mean, I,
Felipe Arevalo:you know, it's not like the car industry where they're advertising, Hey, if you lose your job in the next year, we're open and make six payments for you or whatever it is, the mortgage industry wants to is always taking it the next step. They're not, they don't have any thing in play that protects consumers. If so, yeah.
Daniel Lehman:So what happens is what happens is the bank, does the loan, a servicer collects the payments. Sometimes that's the same organization. Sometimes it's not. And then there's an investor on the back end that continually has to get paid. So a lot of times the servicer doesn't even get a payment and they still have to pay out on the investment. So when all this stuff went on, all of a sudden the companies that were buying servicing, meaning like that were, that were buying the loans to collect the payments and make a return that shut down entirely. And that's why there was some kind of a, a disruption. So that's all very wonky. So that's, that's a little bit away from like the consumer side. But I mean, from my standpoint, it's always important at the consumer level to have a discussion of what the bank will do, but also have a discussion from a personal finance standpoint where you're comfortable and you always, always, always want to look at the risk of buying. You know, you always want to look at that. That's why, that's why, again, I see home ownership as kind of a multi, as part of a multi-tiered like, and the same thing you guys always talk about, you know, which is, you know, having that as a part of an over overarching financial plan, that's strong that can, that can weather any of those kinds of things with, with cash as a buffer with other investments, you know, homeownership is amazingly beneficial as a, as a leg of the stool, but standing on its own, you know, all of a sudden something can take you out real quick. So you want to make sure that's part of a overall overall financial plan. That's solid. And that's something, I mean, to our credit, I think that we discussed a lot, you know, and give a lot of advice about, you know, in our office is, uh, is making sure that it fits into a much bigger overarching plan, where there are other safety mechanisms and cash and, and not an overwhelming, overwhelming amount of consumer debt. Um, you know, that there's money at the end of the month to continue to invest in 401k and like, you know, and, and, and IRAs and that kind of thing. Yeah.
Chase Peckham:And we talk about that all the time. I mean, t hat it's gotta be, if you're reaching for any purchase, if you're reaching and you're g oing t o be at the top of your budget and that monthly, p ayment's g oing t o put you in any kind of damage, any kind of way t hat i t's probably not smart to buy that. And that goes for i f i t's a car, if it's going to Costco and buying a new mattress, right. It could be, whatever's going to put you in, in y our, in h arm's way financially. You need to think about t hink before you make those purchases. A nd a home just is on a much grander scale, right? Because that tends to be the largest purchase that most people are ever g oing t o make in their lives.
Daniel Lehman:And, uh, you know, the water heater goes out, you call your landlord, they fix it. The water heater goes out. You got to come up with some cash in the place, right.
Chase Peckham:By the way,$2,000. They're delivering my water heater tomorrow. Sorry, man. That was too close to home. That was timing. Sorry, man.
Katie Utterback:That's a good point. Like there are emergencies that arise when you are a homeowner and you don't get the luxury of calling the landlord. However, I think the pandemic has also shown a light on the benefits of being a homeowner. And you have all of these people, you know, craving that, that ability to have, like for us, it would be amazing to have a yard right now for my dog? there's just little things. And so you start thinking about your situation and like, I know for Felipe he wishes he had a yard,
Felipe Arevalo:we'd love to have a yard. My kids and the kids get so happy when I say, Hey, you're going over to grandma's today. That's where they're at now. Cause then they're like, Oh, this is great. I get to be outside all day. Yeah.
Daniel Lehman:Oh overarching. Like, I think it's, it's like between renting and home ownership, it's like home ownership from a financial standpoint, from a quality of life standpoint, all that stuff is so massive. Even like the fed does this studies every three years and they show the difference in net worth between a homeowner and renter over time. And it's massive, it's North of$120,000 and that's nationwide. That's not even in California where we get a lot more appreciation. So that net worth difference is massive. But you know, like anything else you have to have to have to be smart about it. And you got to build a foundation on the stone. You can't build it on the sand. Right. So if you have nothing underlying, you could, you could just have that wiped out real quick. And, and that's what, yeah, that's what we try to instill, you know? Um, but, um, but, uh, you know, through education, it's all about just making smart decisions and understanding kind of the underlying pieces and the underlying decision points,
Chase Peckham:Daniel. And I don't know if you deal with this very often, but you know, in San Diego and Southern California in general, we had a history of professional flippers, right. They would buy these houses and, and investors. Um, how are we seeing that still today in this period? Or do you feel like the investment individual or company that does that on a regular basis have kind of stepped back a little bit.
Daniel Lehman:It got really competitive for a while. Cause you know, you watch like HGTV and all of a sudden everybody's a flipper, right? So it gets really competitive. And then, uh, and even the guys that always did it, I think when it's not even, uh, when it's steady, you can kind of see that you're not gonna lose your butt. You know, when it's very volatile, you could do really well and you could do really bad. And, and so, well, it's also funny that you bring that up because, and this is a good point for a lot of people that are buying their home to live in, they analyze property in the same way as those flippers would. And I think that's a mistake. So a lot of times I'll have clients come in and they'll say, yeah, well, is the market going to get better after the summer? Is this going to get better after that? And so they're trying to analyze it in time, the market in the same way, you'd try to time a stock, which is always right. But you always an issue. Right. That seems to me it's well, it's a typical, I don't think, I think it's like, they're trying to get the best, best, best deal possible. It's like, but there's these multiple axes you've got interest rate, right? So, Hey, property flattened out. But your interest rates, you know, causing your payment to me much higher or yeah, rates got a little bit better, but that house you love is 25 grand more than it was three months ago. So people always try to time it. And I think it's another product of like the timing of the market kind of thing. But you're right. That it's, it is a mistake fundamentally just like people. And again, this is my personal representation of this. I think it's a mistake to buy insurance at as anything, but primarily insurance. Like when you start calling insurance and investment that somebody disagree with me on it's totally fine. But like a house fundamentally district gonna live in is a house, right? It is a house primarily. And so what I try to tell people is like, look, take all that stuff out of the picture, find a place that you want to live, you know, and buy it. You can always adjust the finance later. You could always do that later, but find the place that you want to live and buy it because you know, to overanalyze it to that extent, especially when clients come in, I think they do it probably less with realtors because realtors are dealing with the actual property itself. When I talk to people, it's all about finance. And so it's like a lot of times I have to say, look totally good. Consider all of that stuff. Be super smart about that stuff. But at the same time, just make sure you realize what this is and it's a house for your family, right? So like go somewhere. You want to be, you know, live somewhere. You want to live, you know, if you find it to be like a place that you like, even if it's 150 bucks more per month, you know, then you're then than what your target was. It's it's, you know, it's going to be worth that to someone else when you go to sell it to, because they're going to find what you liked in it and it as well. So it's kind of like trying to take people off of that. It's like, but I want it's the right time to buy. Don't overanalyze exactly. Finding the right spot. Cause you're likely not to,
Chase Peckham:Well, especially if you're talking short term, right. Because if you're looking at a house you're thinking long term, I mean 10 years in this house that we bought, you know, we're, we're talking our 10th anniversary. We're not even close to thinking about leaving yet. And yet you would because, and, and our house has increased by over like doubled right from what we purchased it for.
Daniel Lehman:And you probably had some opportunity to fix the financing, right. So even if you were to buy a higher, especially in this market, you can always like, if the market drops, you can, you can always adjust that.
Chase Peckham:I got out of the FHA, you know, paid off the home, the mortgage insurance and, uh, and got it at a lower interest rate.
Daniel Lehman:Yep. And if you, and if you hadn't have bought, because you were waiting for the right time, you would have missed out on all that stuff. And you would have been out a few hundred thousand dollars in rent rent. Probably you. Yeah. Sorry. No, you're right.
Chase Peckham:Looking ahead though. Do we see, you know, we've heard rumors of another housing bubble. I don't know if that's just rhetoric because you know, there's always doomsdayers and there's always those people that are going to write, um, that, that, that it's an ebb and flow in which it is the real estate market, all of it. But in my, in, in my experience and looking at, and you can tell me better, but looking at a home, even though you're not looking at it as an investment, a home is probably the most solid investment you can ever make or property in general. Right? Cause the fall offs are far and few between wouldn't you say
Daniel Lehman:A couple of things I can say about that. Number one, I got out of the Marine Corps in 2004, it was time for us to buy a house for our family. We bought a house at the worst possible time. Right. We bought immediately lost a hundred thousand dollars in equity. We were on a 30 year fixed. We kept making our payment. Now it's got a couple hundred grand in equity and it's rented out. Right. So that was our house in San Marcos. And now we're in Carlsbad. But, but that was, you know, so, so you're right. That over the longterm, it was a big, huge dip that we incurred. You just it's, it's not like, you know, not like the house was taken from us at the time. Right? Like we just kept making the payment in terms of the bubble stuff, man, like from, uh, from, from someone who kind of like went through that from, to, from the late nineties, early 2000, 2001 ish, all the way up through 2007, 2008, you'd be shocked. You know, you were asking about the, um, the difficulty in getting a loan, getting a loan from 2001 to like 2005, 2006 to like, what, what kind of loan you want? You want five of'em take'em here you go. You know, it was like, there was this massively crazy speaking of built on the sand, right. It was completely absurd. Uh, it was a huge lesson. I was new to the business back then. So I did recognize it and I should have, but it was insane. The kind of loans that were going on. So it was very much not built on a foundation of ability to repay the loan. From that point on 2007, 2008, I haven't seen any evidence that any loans are being done and I, man, I could be totally wrong, but foundationally we're on a much stronger, uh, it's a, it's a much stronger foundation. There's there's far fewer crazy kind of like, I don't want to say even crazy. There's far fewer loans that are not fundamentally sound in terms of like 30 or fixed or something, you know, like, cause some of the problems were that there were option arms and you were, you know, you were losing ground and stuff like that. There's far fewer that there's a little bit of stuff going on, but they're mainly like tools for people that are self employed that make good income, but can't show it. Those are the, those are the funky ones, but they're not like fundamentally, you know, so I don't, I don't see that the other, the other part of the, kind of the question is we're in a unique situation, right? We've got Mexico to the South, Camp Pendleton to the North and then you got going East. Right. And you got the, you know, and, and there's a limited space with almost unlimited demand for it. So I don't see a massive dip personally. You know, I think in the next 12 months to 18 months, rates are gonna stay really good. Cause I don't see the economy bouncing back to, you know, crazy high levels. I think the economy is going to be kind of like do its best to get better. Think it's going to continue to get better, but that tends to keep rates low to kind of incentivize activity. You know? So I think over the next like 12, 18 months, it's going to be still pretty competitive, I would think so. I think prices should continue to continue to go up.
Chase Peckham:I'm really glad you brought up 2001 through 2004 because there was a reason for the housing bubble and it wasn't because, um, the housing market was just terrible. The houses, you know, it was more of those types of lending that was going on in those practices at that time, which then takes us back to people, making purchases of homes that couldn't really afford the price of the home that they were buying. Right.
Katie Utterback:Can we talk about the price of homes now though. Like it's not even the same. It's just not like,
Daniel Lehman:Well it was with the economy for a million dollars. What's that
Katie Utterback:There's like one bedroom homes selling for a million dollars. And I feel like we have to talk about that because like you said, like the rates are low, but when the price is high, no one can really afford it
Daniel Lehman:I have this conversation quite a bit. And it's like, what ends up happening is I couldn't have bought my place in Carlsbad unless I first bought my place in San Marcos. You know, we, you, you take steps. And so what ends up happening? What I end up telling people, especially like on the early on in buying, it's like, it's important to get your foot in the door and just stop and just stop the loss of ground. Because I feel like if you look at LA, it's like, all right, you know, it's not even a one bedroom, it's a studio and it's garbage, you know, and it's a million dollars. So if you don't think that's going to be the continued trajectory, it's like that potentially, you know, I mean, gosh, maybe I kick out to Wyoming in a few years. I don't know, man. I don't know where I end up, but, but uh, but yeah, I, I feel like that's going to happen. So I always talk to clients. I'm like, look, this doesn't have to be the end, all be all dream situation. But I think a lot of people look for that. They get discouraged. And so they keep paying rent and they lose 10, 20, 30, 40,$50,000 over the next several, you know, a year or so a couple of years. I mean, it's not much cause rents are going to do the same thing and they never quite get their foot into the door. Whereas if they would buy a small place, a condo or something, just start pouring a portion of that payments paying down the principal. Right? So a portion of that payment, even if it's higher than your rent, you're getting a tax benefit and you're paying the loan down. So you're contributing to equity. You do a 30 year fixed. So you don't lose your, you don't have any risk of the payment hopping on you, you know? And uh, and at that point, you're at a position where you've kind of kept pace with the market. Cause ideally the market goes up, you've paid down. If you take that and you roll it in as a down payment on the new one and the financial impact in addition to advancements in career and investments in income and doing better and saving more and that kind of thing. So I think it's like people, people tend to sometimes miss out on opportunity because they're because they're not backing into the game plan effectively. Right. And not, and not like seeing it as a, as a tool to get your foot in the door for the ultimate longterm game plan. You said that you did an FHA loan originally, right? FHA. Isn't the best option. If you can go conventional for sure. But it's better than renting if you can't go. You know what I mean? If you can't go. So FHA is a great foothold, right? To be able to do exactly what you did get rid of FHA mortgage insurance, drop the rate, drop your payment, get into a longterm, good conventional deal. If you would have said, I don't want to do mortgage insurance, I'm just gonna rent. You know, you, you wouldn't be anywhere near, you know what I mean? The equity position that you're in now. Correct? Katie does that though.
Katie Utterback:Yeah. How do you balance though? Like your, like you said before, like a house is a house, don't look at it as an investment. Cause that's a way to kind of get yourself into trouble. So how do you view that first house maybe as like, okay, this is maybe not what I want, but it's also not an investment.
Daniel Lehman:I mean, it's, I don't, I don't think it's not an investment. I think, I don't think it's primarily an investment. You shouldn't go a hundred. I think of it that way. I think it's primarily a home. Right? Primarily in that sense, it's also one of the best things that you can do because it's a great investment potentially if you manage it the right way and make the right decisions. But the real answer is tough. You know? Like until people start giving away their million dollar homes for 300 grand tough, it's just, it is how it is. So you either put a game plan together in reality and you just work towards that. That's how everything is. Right. It's like, you know, I was talking to my son the other day and I was like, well, he's like, you're not being very supportive. We were talking about something like, yeah, I am, I'm supporting you more than anybody could support you by telling you the truth, dude, you know, it's like, here's the truth. It's reality. This is what you have to deal with. This is what you have to do. It's not, it's, it's being more supportive than anybody. Who's going to tell you, Oh no, just hang tight. So in that case it's like, it just is what it is. You either change one side or the other, you, you go after it on the income side, on the saving side, on everything else, you can go after that one or you just be really smart and tactical about it, you know? Cause it's really easy to get upset about it. Right. Or get, or get like that. Again, I meet with clients all the time and I like this house and this payment and this, and I'm like, well, okay. So, or we have people come in and they have bad credit and they'll get really discouraged. And I'm like, well, okay, it's the reality, right? So either we can sulk about it or we can say, okay, you know, here's the game plan. Start with step one, start with step two, start with step three. And then you start getting some progress. And I was telling my son, it's funny, that's how you feel really good about this. This is more of, kind of on the personal side. Like that's how you feel much more confident in what you're doing. You know, from a personal standpoint, it's like you make these steps, you have these accomplishments and it's little things at a time and it just makes you feel phenomenally well, getting to those goals, even if they're interim goals to a longterm goal.
Chase Peckham:So I would say Daniel, what you've said through this and what I'm gathering from this is his COVID or no COVID, the basics are still the same. You still need to do your homework. You still need to kind of understand where you're at. And we're lucky, right? Katie and Phil, and we've been lucky enough to work from home and we've gotten our, our salaries. Um, so Katie, I would say for you, and I know what it's like to be a renter. Uh, I was a lifer, right? Until I wasn't, until we did our homework. And what we did is we found a lender. We really, really liked somebody like Daniel. You find a realtor that you really, really trust that if in a perfect world, those two discuss and work together, which the ones we did did. And a lot of times you'll find one of the other, you know, you'll find a realtor. You really, really like, and they'll find you a lender that they really, really trust and, or it might be vice versa. You might find a lender that you've been working with forever. And who do you know and who do you recommend? So it's, it's you, you, what do we always tell people in personal finance it's you want to make the best and most educated decisions you can possibly make. And how do you do that? It's by creating the plan, creating the goal and following that and what we and I, Daniel, I know runs into it all the time. The biggest thing that people say with a home is they look at that final number. You know, if you ever would have told me at the time that I could afford a$525,000 home, which by the way was way under market at the time I would've, I would've said, excuse me, can you tell me where the bathroom is? Cause I don't think I'm going to be able to make it right. But ultimately if you come down to it and you look at what the financial senses, what is my rent, what is my mortgage going to be when it's all said and done, you'll find most of the time, they're not that far off, but what we all get scared about is 30 years in, in am I going to go into foreclosure? And what if this doesn't well, what if right? What if your landlord decides he's going to raise the rent by$500 and you can't afford that anymore. Now you gotta find a new place. So life is what if, right? So you just try to be as prepared as you possibly can. And when you find something that you generally like, and you can live in and you go, okay, let's I can see myself here for five, six, seven, eight years. And if you're comfortable with that, right.
Daniel Lehman:Well, we talk a lot about, is planning is a means by which you create flexibility. Cause that doesn't mean you get the education, you get the information and then you, you, you know, cause the MIS misconception cause most and most banks drive. This is like, you apply for a loan, you get a loan, right? You come to a bank to apply for a loan. I just think it's such a bad, like it's just a bad way of going about it. What you want to do is early, early on in the process, you want to just put a plan together and then it's up to you when you actually hit on that plan when you're comfortable you'll but you'll be able to, you'll be able to identify and analyze in an educated way, your options from a, from a objective point. So that, I mean, that's, that's the key for us is, is, uh, we said all the time, it's like, it may be too early to buy, but it's never too early to plan because you have to really get into a position where you understand what your, what you may be ready now, but like from a financial standpoint, but you don't know it right from what you do, you qualify or you may not be ready from a personal finance standpoint, but you have to really get a feel for what you should, what steps you should be taking,
Felipe Arevalo:like prices like in 2005, 2006. And then Katie mentioned it. Like, if you, when you look back at it, I'm like, if you're browsing on, on Zillow or things like that, 2005, my freshman year in college. And I remember, you know, my buddies saying, you know, if we go in there together, we can get this place by school and we get a roommate and we just buy this place and no loan us money. And, and you know, he might've been right at at the time, but then we would have finished college and neither of us could have found a job right out of college. Cause we finished in 2009, eight, nine, and it was like, then we would have been in trouble, but then you look back at it now. And so there's like the two sides. Cause you look back at the prices now that they have gone up so far. Um, so there's that,
Chase Peckham:But look at where your income is compared to where you were then.
Felipe Arevalo:No, that's all right, man. My, my rent is so much more than that mortgage would be. Um, had I done it now? Yeah, it would have definitely been at the time pushing it. Um, like you mentioned, they were giving out loans a lot more freely than so, so there's that whole, you know,
Daniel Lehman:and you would have had to go through the Oh six Oh seven. It took, it takes like a stomach to go through that kind of lost a lot of money at some point. Yeah. Well you lose on a sale. Right. So if you would have hung on to it and we just hung onto it, right? Yeah, yeah.
Chase Peckham:Say that home buying, obviously there's a lot to do with the market when it comes to the lending side. But would you say it's kind of the same thing? Like we, we just witnessed, you know, that wall street had a difficult time at the beginning of this Coronavirus and people were selling left and right. And yet wouldn't most financial planners say, look, just relax, hold tight. This wave will move on. Isn't it the same thing with a house instead of being a little over animated?
Daniel Lehman:Yeah. My, my theory is on investing is dollar cost average. And, and just when the market's up by when the market's down by. Cause it's, you know, I, and, and I think like they did a study on it. If you miss the biggest days, are you, I made a big mistake in 2000, like 2007 ish because I sold a bunch of stock when the market dropped out. I should have, you know, I, I probably, because I was scared, you know what I mean? And so, so now it's just like, you know, same thing with housing. It's like, don't overreact one way or another. Don't try and time it one way or another, when it's the right time for your family, when it's the right time and you find the right property and you feel comfortable in the payment, even if it's stretching you a little bit, a lot of times what people don't realize is the tax benefits and that equity piece, right where five,$600 is going down pain. You know, you're, you're shifting from here to here and you're still putting it into net worth, you know? And so it's actually paying the loan down. So when you look at it, net net with rent, if you can get your head wrapped around it and, and be comfortable with it, it's like, I just don't, I don't, I think people get bit more often than not when they try to time the market. I think, especially for the clients that I deal with a lot of the time and are looking for a place to live with their family. And I think that they should focus a lot more on the house itself and where they want to be. Look when my house, when I bought it in San Marcos, I think the payment was probably like somewhere I'm 20 to just over two grand, you know, something like that, maybe 2,500 bucks. When I bought my house in Carlsbad, it was like pushing five, scared the crap out of me. Um, but you know, like we were walking our kids to school. We were going to the park, the beaches nearby where the golf course, but it's like, after, like I didn't even feel it. It's funny, like how many people buy 15 Starbucks a month? And then they'll say they can't afford a$50 additional payment on something, you know, it's, you know, it's just a matter of rearranging priorities and not even really actively, it's just kind of a feel thing,
Chase Peckham:A hundred percent. It's true. And Katie, I know we're both, you and Phil are sitting. It's that first purchase. That first jump. It's scary. You know, it, it really is. I mean, no matter I remember feeling sick to my stomach for like months, like making that decision, you know, should we shouldn't we, and yet deep down there was that little person in the back of my mind and I had a lender and a realtor that I really trusted my wife. And we just said, you know what other people do this, we can do this. We just, you got to sometimes make the leap. And we were comfortable with what we bought. And here you are 10 years later, you know? So it's that, that's, it's hard for anybody. It's like the first time you ever buy a car and you have a car payment, you know, that's still, you have that, you know, that gut punch to right. And then now how many cars have you bought? Right. So it just with anything experience helps
Felipe Arevalo:Totally this time I bought a car was the first time they ever asked me to provide proof of income. Really? Probably COVID because the COVID I had to bring it. I had to get to get pay stubs to them. Oh wow. And then even after running my credit, even the trading in the car and the money, it was like, yeah, we still need a paycheck or pay stub. They may not have, even on our side, they may, they may not have even needed the amount. They probably just needed to verify the employment. There was something there, cause it had to be recent within, they even asked me, how much I made? They just wanted to pace them. Yeah. They probably just needed to verify you were still employed. And I was still working here plus extra tee shirt and basketball needing a haircut.
Chase Peckham:Daniel, have you seen a difference in the, uh, the credit score, like type qualifications through this whole thing?
Daniel Lehman:So we haven't changed, but a lot of banks have really increased and that's not even a reflection of like wanting better credit. They just wanted to, what ended up happening is they wanted to do less loans. So like banks, won't say, we're not doing this program. They'll make their rates terrible. So nobody applies. Gotcha. You know what I mean? There's all this stuff where it's like, okay, we don't necessarily, it's not even a reflection of, of, Hey, now it seems to us more risky to do a six, you know, 40 than it is to do a six 80 on a VA loan. It's that somebody sitting back behind the curtain somewhere saying, all right, well, we want to slow down volume. We want to slow our loan production down because we're not sure where this is going. We don't want to get stuck there limiting. So how do we shut this down? What's that they're limiting their exposure. Yeah. And so, and it's, and it's partially, they're like, okay, if we're going to do loans who are going to do them for, and number two, it's like, okay, so how could we slow down by 40%? Well, 40% of the loans that we did were for FICOs under 680. Wow. So they're like, okay, we're going to make this change because of COVID because of COVID, you know, but it's like, it's really just a reduction in volume. Like you'll see a bank that has really, really good rates. And then all of a sudden they're terrible and it's because they have this big influx and then they shut it off. It's not consistent.
Chase Peckham:Yeah. I think when we talking about personal finance over and over again, whether it's on this podcast or in our presentations is, you know, creating a game plan and creating those goals and monitoring your finances, any of those decisions that you make most of the time they're going to turn out. Okay. Right. As long as you're prepared and
Daniel Lehman:Yeah. Between, like I said, between home ownership, budgeting, and entrepreneurship, that was like the three things for me that were it, you know, and I say, entrepreneurship, just business or employment, whatever you're doing. Right. Improving in what it is that you do.
Chase Peckham:I don't think too many come out of the service that we're thinking like that, like you are Daniel, you don't think so. I hope so. We, I guess we don't run into them cause we're, we're usually maybe not their stuff in order.
Daniel Lehman:Yeah, no, I, well, yeah. I know from that standpoint you're absolutely right. Um, yeah, no, a hundred percent. A hundred percent. Well, cause it's not, it's not, the military is like, like I, you know, my parents passed away early. My grandpa's is like, so I went in with like, Oh, and all they teach you is what's necessary for the mission. Right. There's really little. And you know, because you guys exist partially to solve for it. Correct. Like the military doesn't, it's not their main, you know, mission set to ensure personal financial, you know, there's just not a lot of resources. I remember talking to Morgan back, Morgan McCorkle. I don't know if you remember. Yes, absolutely. Of course. Yeah. Yeah. She was at Miramar. And that was like her in charge of like thousands of people, the entire base your entire base. Yeah. So it was like, how can you really? You know, and, and um, and so it's just not that, that, that, uh, mission set, but so a lot of, yeah, a lot of it has to do with, um, with personal, like desire to improve
Chase Peckham:And just lack if it's just ignorance, they just weren't taught. Don't know that, you know, a lot of the financial stuff's taken care of them when they're on base. So the trans- getting out and going into the civilian world is just a whole entirely different world. Um, and it just takes finding the right people, the right mentorship, um, to, to say, Hey, I'm thinking about getting out in a year. You start planning now for getting out in a year.
Daniel Lehman:Right. I told my son, my son, we finally he's 16. So we opened up a bank account for him. And I'm like, look from now until the day you die, save 20% of your income and you'll do fantastically. Well, we'll be in good shape. If you start now save 20% of your income. I don't care if it's a hundred bucks, save 20% of your income. Save 20% after tax, everything else live on the remainder, but save 20% of your income, whether that's into a 401k or anything. If somebody does that from the beginning, like forget about it. Yeah.
Chase Peckham:At an early age, we say that a lot. Don't we?
Daniel Lehman:Well, when I got out of the, well, the thing is when I was in the Marine Corps, I made very little income. When I got out of the Marine Corps, I made more income and my money was still gone at the end of the month. So it's, it was a lack of organization. It was like, Oh, well we got money in the field. Let's go get sushi. You know, it's like, you, you don't plan for it. Right. It's like, you have money in there. You don't pay yourself. First people pay their car payments without paying themselves. Like if people treated their savings for retirement as like a bill that they had to pay as if it was like a car payment, you gotta be kidding me, you know? But it's like, you kind of leave yourself the scraps. Yeah. Anyways, I'm off topic.
Chase Peckham:No, it's all on topic. It all has. It all has to do with it. Yeah.
Daniel Lehman:We are very, uh, quick to suggest that's something we're always out there suggesting is to pay yourself first, treat yourself. If people get a raise, I'll get a raise and then they still don't have any money to save at the end of the month. It's like, wait a minute. You know, I have to kind of like build your stuff before you should have that money extra now with you
Chase Peckham:A hundred percent. So if you had a, a, a crystal ball to look at and you were, let's just say in Philippe situation, and you're thinking about buying in the next year, um, what would you say that the market would look like for him? And, and is that something he should still consider considering there's so much unknown?
Daniel Lehman:Well, I would say, just figure out, get a baseline knowledge. I would say like first, first and foremost, get a baseline knowledge of how everything works. You know what DTI is, what long the value is, all that stuff. Like just what options you have and then just put a game plan together for yourself, regardless of if you're buying now or not get a good understanding. So our consults are basically we establish what the goals are, max comfortable payment, how much cash you have available now, is there a price point that would work now, even if you can't buy it yet, like, is there a property you would buy if you qualified for it? How much is that? 500 grand. Okay. Let's just address that. Then understand the three loan types. There's VA generally speaking is better than conventional. If you can do it conventional, generally speaking better than FHA FHA, generally speaking better than renting. There are exceptions, but that's kind of it. Then you kind of say, okay, based on those loan types, whatever is most likely, here's how that works debt to income wise. You know, how has plus debt has to be under a certain percentage of gross income? So where do I land in that? So how much do I qualify for now? If I don't qualify for what I want, right. How do we either increase income or decrease debt? And then, and then how do we get into like payments and, and down payment, all that stuff. But it's all just figuring out, okay. Not even for right now, but hypothetically, how does all of that work? So that as you go into the next year, again, you have the flexibility, you have the knowledge to know when you can do it and you have the flexibility to act when it makes sense when you find the right spot. I think it's all about flexibility. I always have a hard time with target dates, you know, cause it's just very hard to know. It's just very hard to know. So the idea is you get as much flexibility for yourself through an understanding of guidelines, through an understanding of where you're at financially and an a and a, and a clear focus on your goals, you know, clear establishment of your goals that gives you flexibility because then you have clarity on when to act when the time is right. So that gives you, you know, over the next 12 months, that's, you know, but how's the market going to be? Gosh, I think rates are gonna stay low. I think market's going to keep going up. I think it's still going to be competitive. I don't think COVID slowed down. It's it's very local. Right? I don't see a massive foreclosure thing going on. I could be totally wrong if that does happen, they get swooped up. So darn fast, your head spins, you know, and I don't and just cause it's foreclosures doesn't mean that the bank's going to sell it for any less. You know what I mean? That's the misconception. It's not like they're selling it for pennies on the dollar. If there's demand pricing prices are going to go up. And I just, I don't see that change
Chase Peckham:Daniel again. I really appreciate you coming. Um, you sound great. Um, and uh, I can't thank you enough for coming aboard. Yeah, no man. Always good to talk to you guys. Uh, at any time I'd love it.