The Double Comma Club

You can now use the income on an auxiliary dwelling unit to qualify to purchase or rate and term refinance your home. Well, that is a game-changer, especially for people who have an investor's mindset. How can I optimize the home I'm living in? Can I look at buying a two-unit, a three or four-unit, a single-family, a rentable basement?
Well, those auxiliary dwelling units, those separate buildings in the backyard. They were not a legal unit. Now they do have to be permitted right and zoned properly. But those auxiliary dwelling units were just that they were an auxiliary dwelling unit, whether they were apartments above a garage or self-standing buildings in the backyard, but they weren't a legal unit. It's not like it was a duplex. It's a single-family home with an ADU. That ADU income had not been able to be used when qualifying for a purchase price or a loan amount.
 
Well, that just changed. That literally is a game-changer. Now I can afford more say I'm a first-time home buyer and I'm maxed out at $600,000 purchase price. If there's an ADU in the backyard and the market rents on that are $1,500. Now I'm not maxed out at $600,000 anymore.
Now I can qualify for a $711,000 purchase price by putting 10% down. Those kinds of numbers need to be explored, especially given today's market with rising and rising home prices where people know you need to get in. You need to stop paying rent and start building your own equity. And that auxiliary dwelling unit will do two things for you. Now it'll help you qualify for more and put money in your pocket so that you can save for the next one. If you want to know more information, know exactly how much you can qualify for, please call me - 303-214-6393.

With the Denver market up 123%, since its peak in 2006, we have amazing wealth in equity. How do you tap into that wealth of equity, where you can give a gift of equity to your children, or to other family members? We can transfer wealth through real estate using gifts of equity. So what does that mean? And maybe what are some of the limitations with that? 
Let's say I want to sell a home for market value. That home is $800,000 and I own that home and maybe I own that home outright, and I want to give it to my kid. I want to give them a head start and I want some money out of that home, but I don't need all $800,000 and I want to give them a head start. Maybe it's a grandchild or a niece or a nephew, and you want to give them the opportunity, maybe an opportunity you never had.
You can do that with real estate.
You can give them that gift of equity.
If the market value of that home is $800,000. I can sell it to them for $800,000, but then give them a gift of equity of whatever you want. 5%, 10%, 20%, a dollar amount, maybe it's $200,000. That means as a receiver, maybe as, as your kid or as your niece or nephew or grandchild, I can get a loan for the $600,000 and not bring any money to the table. Maybe I'm just starting out with my career. I don't have a lot of money saved, but I have a good job. I can qualify for the $600,000. You just gave me such a blessing and such a head start, but I need to know there are some limitations, depending on the loan program I use first off, it has to be a family member.
FHA does allow gifts that are either from a close friend or an employer, even, but in this case, a gift of equity, not just a gift of a check, needs to come from a family member.
FHA also has another hook.
If you have a credit score under 600, you cannot receive a gift of equity as your down payment. You have to still bring your down payment. So that's something that needs to be considered, and certainly may be a reason to get into our free credit optimization program. So let's talk about VA because VA has a benefit that if I can put a little money down. You get a reduced funding fee. Now, if you have any disability, you have no funding fee. So that becomes irrelevant. But if you're not disabled, you have a funding fee. And if you put 5% down or more, that funding fee is reduced. A gift of equity does not go towards that. You will still pay whatever the full funding fee is for your situation.
Conventional, conventional has a situation where the borrower typically needs to bring their own minimum funds. A lot of times that's 5% or even 3% for first-time home buyers. The gift of equity needs to be a minimum of 20% down in order for the buyer not to bring any of their own money. FHA and VA don't require that the gift can be just the minimum down, but in the case of conventional, the buyer still has to bring, say 5% down.
If the giver of the gift is only giving 10%, but if the gift is more than 20% of the purchase price, the buyer can bring no money of their own. So there are some fantastic opportunities in today's real estate market to continue generational wealth.
If you want to know more about gifts of equity, I would love to sit down and talk through a program and a solution with you. We'd love to go to work for you

Everybody's starting to look at the fact that more homes are now going are, are reducing their price before sale. I talked about this in the DMAR report that we just did last week in the video talking about the fact that those people that had to do a price reduction were on the market for an average of 28 days. That is a massively long time compared to what we've been feeling and how fast the market has been moving nationally. That number is up to 24% of homes are discounting their price before they sell. Historically, that number is at a third 33%. We are still well below normal.
And when we get to normal, it won't even feel like normal because we've been so fast for so long. Keep everything in perspective. Yes. I know interest rates are high and yes, I know home prices are high, but appreciation will continue because demand is going to continue. Existing homes cannot fill all the gaps in the past. Somebody had sold a home and purchased a home. Now they're holding onto that home and they're converting into a rental. Now they're keeping it in the family and selling it to a family member with a gift of equity. They are maintaining the home or they're aging in place. They're taking that equity. They're pulling some of that equity out and they're converting that home into a rental property and buying the next primary home with the equity that they've pulled out of it. That's what we're seeing a lot of in this market.
We need to see more turnover. Obviously, we're seeing a little more inventory. Fantastic. None of this means that we're going to head into a housing bubble. Interestingly, last week we had several economic indicators. We had the unemployment state flat at 3.6. We had ism manufacturing index came in stronger than expected. Yes, consumer confidence is down, but that's based on the price of everything.
Real estate is the best hedge against inflation. We are not headed towards a housing bust, will the economy slow? I hope so will spend slow. I really hope so. Because consumer spending is 70% of the GDP. I hope all of those things happen. I hope appreciation slows down. Would it shock me if we had a 0% appreciation next year, a little bit, a little bit, but I wouldn't be upset about it because I know that the value of my home is holding and that it is a hedge against inflation, the cost of everything. And that rents
Listen to this episode for the full summary of the impact.

Months of Inventory for May landed at 0.67% or 20 days.  A balanced market, when supply equals demand, is defined by 6 months of inventory.  Yet, on the street, real estate agents and buyers “feel” like we are headed towards a balanced market.  Close to List came in at 105.33% telling us buyers are still paying more than asking on average.  If you look at over $1 million dollar homes, those went for 107.12% close to list. And median days on market were still a hot 4 days. 
Yet some listings had few to no showings their first weekend on market and the median closed price actually dropped 0.24%. 197 more homes sold and 631 more homes went under contract than last month, while 72 fewer homes came on the market to choose from. 
Given these numbers it’s obvious that the active listings count pulled on the last day of May, on a Tuesday, would jump 14% from last month and 76% from last year giving buyers 3,652 homes to choose from. Right? 
Buyer demand as measured by the United States MBA Purchase Index dropped 12.3% during the month of May.  Mortgage purchase applications softened as interest rates hit an average of 5.62% for a 30-year fixed mortgage on May 7th per the Mortgage News Daily survey. Application numbers remained muted even while rates dropped 0.5% during the 2nd half of May. With all the graduations and holidays, did buyers not notice?
Buyers and sellers alike are trying to figure out how to time this market.  A market in transition is sending mixed messages. Inventory is still painfully low.  Closing 5,445 units last month means we need 32,670 homes for sale for a balanced market, an unrealistic number given Denver’s propensity for being a sellers-market.  I’d be thrilled with even the 10,527 average active listings we’ve seen in May from 2008 through 2022.  There is a third of that today. But rising inventory will be the tell-tale of an easing market.  And we would expect to see rising inventory given consumer inflation of 8.3% and mortgage rates above 5% should cool buyer demand.
Mortgage rates are expected to stay above 5% through 2022 as the Federal Reserve kicks off quantitative tightening on the 1st of June and plans on raising the Fed Rate by 0.5% in June and again in July.  We will know more as the Fed releases their Dot Plot Map at their June meeting; giving us clues as to where they see the Fed Rate going for the rest of 2022 as well as 2023 and 2024.  Many economists expect rates to stay where they are or even go a little higher as inflation continues to prove less transitory and weighted more on longer-lasting wages, housing, and the geopolitical events happening around us. These higher borrowing rates on top of our 18.42% year-to-date higher median closed prices could and should yield us longer days on market, higher active inventory counts, and softer month-over-month price growth as buyers become more decerning and slower to pull the trigger. 
Sellers will need to adjust their strategies to continue to attract more buyers.  8.3% of closed transactions this May reduced their asking price prior to receiving an offer.  This compares to 6.9% in May of 2021.  Those properties that reduced their price spent a painful average of 28.4 days in the MLS compared to 7 days for those with no price reductions.  Sellers with homes on busy streets, odd layouts, or deferred maintenance might have missed their winning opportunity.  But for the rest of the sellers, pricing right and staging well will continue to reap rewards given our current months of inventory and close-to-list.
Because buyers are still buying and willing to pay a premium. 
Despite consumer confidence dipping 2.2 points, retail sales are up 0.9% month-over-month and 8.2% year-over-year.  Luxury sales, travel, and housing are all winners in the eyes of today’s buyers.  As the number one hedge against inflation, housing will continue to remain strong even as we move inches towards a balanced market.  Because while the wealthy are spending $195 million on Andy Warhol prints of Marilyn Monroe and $143 million for 1955 vintage Mercedes Benz as hedges, the rest of us can count on a good home continuing to grow at a good pace providing stability and financial security as our hedge against inflation.
Until next time, that’s a wrap for this month’s Market Trends update. It’s my pleasure to keep you updated,
Nicole Rueth of The Rueth Team of Fairway Mortgage

Historically, we are trying to determine the best direction for us individually and personally. And how do we operate? Because many want to operate out of fear. That is our natural go-to, but those that operate out of opportunity, create doors that open. We were talking about this last Thursday, when we did this ad hoc live talking about this weekend is a door that is opening. It is your choice to go through it. You don't have to, you can continue renting which people will because sales are slightly down and what's the option. Because demographics have not changed. We are still talking about the next two to three years of incredible buyer demand. Mortgage purchase applications are down yet. Demographics have not changed. So if people are operating in fear thinking that interest rates are too high, that I can't get into the home of my dreams, then the alternative is renting.
The alternative is a 100% interest rate. The alternative is not building wealth, not creating financial stability and not creating the opportunities for multi-generational wealth. I mean that's it, it boils down to that. I can't say it any clearer. I get that higher interest rates make affordability a big question mark.  
What we have is a slowdown today. It isn't about credit deficiencies. It's about consumer confidence. Consumer confidence is down. Yes, it's down. The cost of everything is up. Why wouldn't it be down? It costs more to fill my gas tank. It costs me more for my groceries. Yes. It costs more. My gosh. Have you been to Costco lately? That little basket of goodies is way more than it used to be and my kids are. Listen to the rest of this episode for the reasons why this window is ideal for homebuyers. 

 It's not Tuesday, but I've got news that I want to share. And I know I've got market trends tomorrow, but rates went down, and I need to know that, you know, that especially going into Memorial Day weekend, how much did they go down? Why did they go down? And are they going to go down further? I mean, that's the question, right? Because is this a new trend or is this just a blip? And it's really critical that we jump in because I know something's coming, we all feel it. And I'm going to be talking about this at tomorrow's Market Trends  Update. What are all the indicators that are pointing us clearly towards an economic slowdown? And that economic slowdown is more than likely going to come with a reduction in interest rates, which is going to give us an opportunity to refinance. But almost more importantly, it's going to spark more demand.
The demand that right now is sitting on the fence, the demand that is going to get excited about in streets, dropping and get into the market still on limited supply, which is going to create another market frenzy in an increase in appreciation. So do you want to be a home buyer during that market frenzy or a homeowner? I want to own more like I want my, I want the market to raise the value of my properties, not me fighting for a property, having to put more into the offer. Because right now you can actually offer a list. Some homes you can offer at below-list. Some homes have been on the market for the last three months. That's what I want to talk about. This is going to be really specific, really quick, going into Memorial Day Weekend. I want you to know what's happening with interest rates.
Of course, we still have tomorrow and I don't know what tomorrow brings until it comes. You tell me if your crystal ball's better than mine, but I wanted to talk to you about the fact that rates dropped. Now, they dropped a quarter. How big of a deal is that? I mean, rates have been going up for 10 consecutive weeks. We hadn't seen this since 1994 rates increasing this much in such a short period of time. So to have any relief to have a week when the rates went down is a blessing and we're going into a long three-day holiday weekend. So wait, rates went down about a quarter, and that quarter can save you about a hundred dollars a month. Is that a massive deal?
It could move the needle, especially if you're right up against the edge of your eligibility. So locking in this weekend could get you just a little more house. So what's the inventory. What does that look like? But let's talk about these interest rates and whether or not we feel like they're going to go down or up for June, right? Cause what's, what's affecting interest rates right now. As I started this off, is this going to be a change in trend or is this going to be just a blip? And here's what I think. I think that interest rates are going to continue to be volatile through the point in time when the fed starts to pull their foot off the gas and takes a pause. Right? And that could be September-ish. In fact, one of the fed members actually said that they're thinking that they expect a 50 PIP increase at their next meeting in June.
They're expecting five more increases this year with a possible pause in September. So we might start seeing things shift right about then, but until then, this is not a downward trend. This is an opportunity. This is a door that opened next week. We could see that they go back up, but that quarter, that a hundred dollars. I don't want you thinking that if you don't lock in this weekend, you've lost the opportunity because you can't time. The best time to buy is today. But can I take advantage of the dip? Of course you can, but here's where we're going. So the fed, I just talked about, we're expecting five more fed rate hikes. Those are going to impact slowing down the economy. We're going to see impacts on the 10-year treasury and on the 30-year fix because of that, they're also trying to control inflation and as inflation continues to be high, even if it comes down slightly, the core of inflation is wage-based and housing-based.
And right now those two are not giving up easily. As long as inflation is high, that's going to put upward pressure on interest rates, but then you also have the geopolitical issues that are going on right now. When China opens back up again, what is that going to look like? Will we see another COVID uptick? And will they shut down again? Will the supply chain get crunched what's happening with Russia and Ukraine? Those geopolitical concerns raise the risk. They have an effect on the stock market. You have a risk-based move where people have a flight to safety. They want to move from the stock market to bonds. And when that happens, we actually see that while the stock market goes down, people move their money over to bonds. Those prices go up in bonds, which actually lets interest rates go down. So I have inflation. That's pushing interest rates up.
I have geopolitical risks and concerns and the stock market risks that might put rate might push rates down. I have competing factors that are going to continue to create volatility, but those blips and that movement, I would expect to hover between 5, 5.25, and 5.5%. Now remember, we're locking in jumbo loans in the high fours right now, right? So this is an opportunity to take advantage of, but if we're volatile within this range until the point in time where the fed pauses, I want you to continue to watch for that. I'll continue to talk about that. Where's the fed going, because right now they have the most impact on rates. But did you recently sign a lease? Did you get out of the home buying experience because you don't have 50,000, a hundred thousand dollars over asking, do you not want to bid against five 10 people?
Do you know that because of the higher interest rates, demand has slowed down, it has it slowed down. So this last week over week mortgage purchase application data showed that demand went down 1.2% week over week, last week, it went down 11% week over week. And in fact, out of the last, what is it out of the last 11 weeks nine have all been down, slowing down demand because rates have been higher. So that demand is slowing down. I don't know if I want to buy that second home anymore. I don't know if I want to buy that investment anymore. Now might not be the right time to purchase a home. I'm going to wait for the bubble. I'm going to wait for the recession.
Going into Memorial day weekend rates dropped ever so slightly, but take advantage of it. Demand is down. I have real estate agents that are talking about the fact that they have homes that have no showings homes that have not gone under contract in one or two weekends. What does that mean for you? Opportunity to come in with an offer with an FHA, with a VA, with down payment assistance you can get in with no additional over list ask. That's brilliant. And I don't know if you knew that because demand is down at the same time. Supply is up. So active inventory was up in the past DMAR market trends report showing April data. It was up 44% month over month. Now that was active inventory and that's a little bit dated at this point next week, we're going to get made data super excited about that.
But if I look nationwide week over week, we just saw 8% growth in inventory. Now, this is not going to be a continued spike in inventory in the sense that we are in the season, where more inventory comes online. This just so happens to be colliding at the same time. These rising interest rates slowing demand a little bit allowing first-time homebuyers to get in. Plus a seasonal increase in supply is giving us opportunities to not have to go over asking you to add onto that. What the roof team advantage is all about. You add to that, the fact that we're doing the TBD underwrites with eight to 10-day closings, and we're waiving loan availability. We're running automated underwriting to see if we can waive the appraisal. We're giving you a refinance certificate to give you money off of your refinance. Next year, when the rates go down, when we hit a recession and now we're partnering with agents doing a lease buyout program, and this is why it's not because I need to have a sale to get more deals in the door.
I so believe in homeownership. I so believe in this is the opportunity for the 80% of Americans to gain wealth, to gain stability. And you've been shut out this whole year because rates have screamed up so fast. It's freaking everybody out. We have such a lack of inventory. When I say that inventory is up 44%. I mean that is a number that's 3,200 homes for sale, 3,200 homes for sale. I mean we have over 3 million people in the Denver market, and 3,200 homes for sale. That number is big because the actual unit count is low. Our inventory is still low. This 5% interest rate is still historically strong. So when you have a window of opportunity and you don't know about it, I'm not doing my job because this is a time that you can get in. This is the way did you know that just last week we saw record sales on art and cars.
I mean a 1911 Mercedes just sold for the highest price car ever sold the rich know something. They know that they need a hedge against inflation. That inflation wall might come down is not going to go away for a period of time they need to make sure that their money is making them money. They're pulling it out of the stock market and volatile investments and putting it into solid investments like our, uh, art and classic cars. What do they know that you need to know? You need to know that you need a hedge against inflation and for the 80% of Americans, it's real estate, it's real estate. That gives you the opportunity to do that. And this is the way and with our routine advantage, the lease buyout, because if you gave up six months ago and I get it, I get it.
But how do I get you back in? How do I share with you the power of real estate? The opportunity to allow appreciation to drive up your wealth, the opportunity for principal reduction to pay your own mortgage. Not somebody else's because when you are paying rent, you're paying a 100% interest rate. I stole that from Jeremy Kane, when you're paying rent, your interest rate is 100%. None of that is making any money for you.
So if you lock in at today's yes,  but historically low-interest rates, you're making your money work for you. Take advantage of these. This is your weekend. This is your time we want to go to work for you. Give us a call right now, The Ruth Team, Nicole Ruth, it would be my pleasure to serve you guys have a great rest of your day. If you're an agent, catch us tomorrow with Megan hour on our market trends, update, talk to you then.
 

Today I wanna talk about being busy. I have heard a number of times over the last several weeks, maybe weeks saying, "I don't wanna bother you. You are too busy," or "I can't even believe you made time for me because you are so busy." or maybe I didn't think to call you because you're so busy when you are busy doing the things that you're passionate about. This is what I'm supposed to be doing every single day. If I showed you my calendar, it might freak you out, but I love it. It is stacked with half an hour to an hour of consultations with our clients, solving problems, creating strategies, sitting down with our real estate agents, and talking about how to continue to serve our clients. And even more important to me is how do we create wealth for you as a real estate agent?
Our team makes it possible because we have so many specialists to handle every aspect of a loan and the hiccups that crop up.
I have a member of my team who is absolutely phenomenal at two-week closes. He can get it done every single time because he is determined and dedicated to every step of the process. It's amazing! If I have a rush, I give it to him.
I have a member of my team who absolutely backward and forwards knows the non-QM loans. You have a DSCR loan that you want to be done. You have an investor loan with no income, your bank statements, or a P&L loan, which, by the way, freaks me out a little bit.
I'm just saying the fact that you can buy a home just on, a profit loss statement, audited, we're not gonna go there today, but you can, right. You can do it on 12 months' bank statements, you can do it, not just having enough assets in the bank and using assets either depletion or just calculation based on the number of assets you have, you can do the DSCR where the investment itself covers its own loan, right? There are ways to get strategic and creative in this environment. And he does that brilliantly.
I have another member of my team who is passionate about first-time homebuyers, as much as I am, she will bend over backward. Talk on the phone for two hours, making sure that you understand everything. I don't have two hours. I wish I did, but I can set the strategy with you one on one. And then she can absolutely take that strategy and bloom, and take you to the finish line because she has the patience of an angel.
I have another member of my team that is fluent in Spanish, and he is knocking out of the park. He's called a ton of our agents who are Spanish speaking, introducing himself and talking about how he just drives to serve. He is committed to creating a path for Spanish-speaking borrowers to get to the finish line. I love having him on our team.
Who's your mortgage team? We'd love to talk to you about becoming yours.
There is another member of my team who is super high energy.
You wanna solve a problem and you are just over it, done, whipped? He is gonna get you there. He's gonna power through and find the solutions. Nobody works harder on my team than him.
Another member on my team who is absolutely the best when it comes to move-up homebuyers, taking the strategy of the equity that you have in your home and capitalizing on how to use that. Whether it's a cash-out refinance, or HELOC.
I am not too busy. They are not too busy. This kind of depth in the team offers solutions to steal the slogan from an insurance company. We know a thing or two because we've seen a thing or two. What are you doing on a daily basis? I would ask you this. If you're a client, that's bumped into this and the loan officer, who's bumped into this, a real estate agent, who's bumped into this. Are you fulfilling your passion? Are you fulfilling what you were put on this earth to do? This is my journey. I am not too busy.

In the last two years, rates have been abnormally low, which has created an incessant demand, and an unlimited supply. All of that pushing home prices up higher and out of reach for first-time, homebuyers just a few months ago, the market was intense and it still is. Here's a quick recap of this episode. Listen to the full 8 minutes to get the details on the four reasons higher interest rates benefit buyers.
1. Demand is slowing down.
2. Supply is sitting on the market a hair longer - it's a bit calmer.
3. More supply, less demand = slower price growth. That's simple economics.
4. With higher interest rates you have higher savings rates.

What is an adjustable-rate mortgage? and the bigger question is should you get an adjustable-rate mortgage?
Inquiries regarding Adjustable Rate Mortgages are picking up steam!
An ARM can help buyers expand their qualifications because they tend to have lower interest rates when we are in a rising interest rate market... like today. But with a lower interest rate comes a bit more risk.
So before buyers jump in and say that this is their "golden ticket," let's break down what an ARM is, highlight the pros and cons and discuss who can benefit from ARM financing.
Have questions? Feel free to reach out to my team and we'd be happy to answer them for you :) 
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Glossary moment: A couple of terms covered in this episode: SOFR and LIBOR.
The main difference between SOFR and LIBOR is how the rates are produced. While LIBOR is based on panel bank input, SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities in the repurchase agreement (repo) market.

If you talk to two different real estate agents in the Denver real estate market, you will get two different stories. However, the theme remains the same, the housing market is in a constant state of flux. Just when we think we know where it's heading, it flips a 180! This episode is about a tale of two markets - Tips and Strategies to Get Under Contract.
I know buyers and agents are frustrated, but we are here to help you gain a competitive advantage and WIN your deal.