Lending Business: Loan programs, Refinances and Interest Rates with Cary Pearce | Part 2




Cary started his career in mortgage banking in July 1985. He became a producing branch manager in 1990 and has been in both roles ever since.


As your home loan advisor, he is genuinely interested in your financial success.  Understanding your financial goals, he can build a personalized mortgage solution for your unique needs.  Cary will keep you informed every step of the way to give you peace of mind about your new home.


Cary has a deep understanding of the local housing market and can originate loans in all 50 states. He loves to build and maintain relationships.  Whether you are coming back for a refinance or you’re a real estate investor looking to expand and diversify your portfolio though leverage, Cary can help you get to your goals.



Episode Notes:




Narrator  This is The Norris Group’s real estate investor radio show the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever -changing real estate market hosted by author, investor, and hard money lender, Bruce Norris.

Bruce Norris  Thanks for joining us. My name is Bruce Norris. And once again, we are with CaryPierce.

Joey Romero  Bruce, can I ask a question?

Bruce Norris  Yeah, sure.

Joey Romero  Cary, at Bruce’s presentation, you talked about industry wide, the layoffs and people being affected, you know? So, how much of that does, does it affect other employees? Not people that are just handling, you know, refires, or mortgages, like, you know, the rest of the bank employees is that does that affect the numbers of employees on that end to or just the people that were in the mortgage industry?

Cary Pearce  Not so much on our bank side, because our bank has so many arms and divisions that are profitable, that, you know, right now, they’re more than making up for the lack of profit on the mortgage side. But you know, for the last couple years, we’ve been killing it and dumping a ton of profit to the bottom line, so they’re willing to be patient with us. But we’re the ones who staff gets cut when things get lean. So, we’ve had layoffs, and it’s sad when it happened. But that’s just one of the costs of doing business in the mortgage industry. Don’t you stop up when things are roaring and you stop down when they’re not.

Joey Romero  Well, it’s not just it’s not just going to be the mortgage industry too that, I imagined realtors are gonna get, you know, I know they’re not regular W-2 employees. But you know, there’s going to be a lot of realtors that are not going to be working a ton either because you know, people aren’t gonna be able to qualify for loans, or aren’t going to want to get into loans that are higher than they’re used to seeing.

Cary Pearce  Well, it’s very interesting you brought that up, because I just heard a local office here in Riverside, I won’t bring up the name, but the broker shut the doors. He says, you know, I’m spending 50 grand a month to keep this place open right now, but there’s not enough volume to help me. So, he had no choice. He closed the doors.

Bruce Norris  Yeah, well, what’s you know, what’s interesting about that is if a lot of people refied their home, which I would imagine if you had a loan, almost 90% people refied and their intention is to stay well, where’s, where’s the homes for sale going to come from in mass? If you don’t have the, if you don’t have the REO world kick in, which I don’t think it’s going to?

Cary Pearce  And the builders are way behind, so it’s not going to come from them?

Bruce Norris  Yeah. Then since they’re way behind in California, there’s no, there’s no good way to catch up.

Cary Pearce  Right. We’re a very, has a lot of great insights for us. And one of the things that they just put out is, we’re short about a million and a half units right now. And there’s no place to make that up. So, we’re losing ground every year on units that we need for the buyers that are out there.

Bruce Norris  Right. So, okay, you have interest rate hikes, and the math of it looks like okay, well, that’ll really affect the price. But then all of a sudden, you go okay, well, we only have x amount for sale, and it meets the demand or maybe not. And since the new homes, aren’t there, you know, new homes used to be at the peak of a cycle 160,000 units, and where we were at 60. Well, 60,000 max was short 100,000 That year, and then go backwards. It was short 100 grand, 100 unit, 100,000 units, a lot of those years.

Cary Pearce  Right, right.

Bruce Norris  And so now you, yeah, now you’ve got an accumulation of that number that says a million and a half.

Cary Pearce  Right, right. Yeah, I think that they the report that we put out was saying that we needed something like 5.7 million units, you know, to sustain all the wires, and we were losing ground by about a million 4,000,005 a year.

Bruce Norris  Okay, now you’re talking. Okay, that’s not state of California number. That’s national too.

Cary Pearce  Right. That’s national.

Bruce Norris  Right. Well, that’s, that’s good news across the board. Because that you can’t catch up on new builds. It’s, that’s, it’s hard because you okay, you have a process, you got to find dirt. If you’re a Track Builder, you got to create lots out of bare dirt. You know, that’s not a, that’s not a month’s journey. That’s a couple year journey, even in a place that let you do it.

Cary Pearce  Right, right.

Bruce Norris  So, you don’t catch up and say, Okay, well, here’s, here’s an extra million houses. Well, no.

Cary Pearce  Well, theother thing too, is the banks aren’t letting the builders go crazy on how many units they let them build it one time. You know, it used to be they could build 100 units all at once, but now it’s like, you know, maybe 30, 40.

Bruce Norris  Well, but the builder has got that conservative outlook as well. They’re going okay, well, do we have you know, do we have a contract on this? And they they want to probably build, instead of build a spec a lot of it or building an order, you know, it doesn’t mean it’ll close, maybe it won’t, because the interest rate changed. But it’s, it’s normal to be conservative as a builder, as opposed to the mindset of 04, 05. It was just like, build build away, you know?

Cary Pearce  Yeah.

Bruce Norris  So, yeah, it’s a lot healthier on both sides.

Cary Pearce  We are seeing in inventory is starting to increase. I mean, for the longest time, we were running it two months in here in California. And I think now it’s getting closer to a normal market. I think they say nine months is normal. And I think we’re somewhere around six. So, at least there is more inventory coming to the market.

Bruce Norris  Well, but most of that is, okay, so your sales are down a lot too. And that increases the month supply. So, if your sales were down by half, you doubled your month’s supply.

Cary Pearce  Right.

Bruce Norris  So, it’s one of those factories going to have to look at okay, but what I also like to go backwards, you know, if you go back to 2019, 2018, 2019, look at the month supply that were stable in price with price going up, some you’re right, you’re more normal number is six months. So, you don’t have to freak out just because you know, you that’s the thing you’re going to see is a bunch of articles saying well, inventory has tripled. So ,freak out. Well, now your normal. So…

Cary Pearce  What was so rare in the last two years was the multiple offer, the over bids? It was just out of control?

Bruce Norris  Yeah.

Cary Pearce  I was trying. I was trying to buy a house and made 10 offers and up to 60,000 over list and did not get one accepted.

Bruce Norris  Yeah, it was an auction.

Cary Pearce  Yeah.

Bruce Norris  Absolutely plain and simple. And that’s not a healthy market either, actually. So I think it’s I think it’s good that some normal normalcy has occurred. But it’s still, it’s still active. Just because I’m always in the market with something for sale. I got a finger on the pulse of Oh, wow, this is a big change. Well, that hasn’t really occurred, we may have come off of that euphoric bidding process.

Cary Pearce  Right.

Bruce Norris  But, for instance, you know, one of the things you’ll hear is Oh, builders are lowering their prices. Okay. Well, forgive me, they’re lowering their prices from the ridiculous margin that looked like it might be possible. To the best margin they’ve ever had in their life. That’s the lowering of their price.

Cary Pearce  Right. Right, right.

Bruce Norris  Yeah. So what is that…

Cary Pearce  That’s going on, on the refis I do, where sellers would just do an astronomical number out on the price, and they’d still get over bid. But now, obviously, they’re having to have the dose of reality and put it back to where a more normal market.

Bruce Norris  Yeah, but again, if you want to say bad things, like okay, and just be sort of like a fear monger. Okay. Trustee sales, foreclosures are up 3,000%. Yeah, what does that mean? They went from three to 9000. And you need 150,000 to be an impact in a market. So, you know, it’s all of these percentages kind of drive me nuts, because it just okay, it’s meaningless, and you get your headlines. But the end result is not what you’re saying it is.

Cary Pearce  The news, they totally distort that because back in 08, I think foreclosures were around 1,000,006. And obviously, that was a lot. But then you come into, you know, the last year I think was 150,000. Or even less than that.

Bruce Norris  Yeah.

Cary Pearce So, you know what that jumps up to 300,000? Oh, my God. Voters have doubled. But there’s still well below? 08 levels?

Bruce Norris  Exactly. Yeah. And you need you need the participation to be a certain percentage to dominate the market. And back in 09 over 70% of the market that was for sale producing comps was that lender on property.

Cary Pearce  Yeah. 97, 98. too. Yeah.

Bruce Norris  Well, that was 40%. So, I’m really familiar with those charts, because I was trying to figure out, why less price damage in that stretch, you know, 90 to 96, you had a really gradual process of losing 10% where we just fell off the face of the earth in 08, 09. And it was because of the comp. The lender comp was the dominant comp 7 of 10, comps were in Moreno Valley for 360, house was now 70 grand. Well, you couldn’t appraise a fixed house for 150.

Cary Pearce  Right.

Bruce Norris  There’s no way an appraiser could justify that even if you had 20 offers on it. He would have to look at the comps that were dominant. And it was it was the lender on property that really ruled the day and that…

Cary Pearce  …ignore those as an appraiser. Yeah.

Bruce Norris  Well, not when it’s the dominant player. So, in the in the 80s. It was one in four comps. That’s, that’s not the market but in the seven excuse me in the 90s it was four in 10. So, it’s a player you know, it’s affected what you could say? But yeah, 09, it was the number. And since the appraisal world had their hands tied, where they couldn’t just say, Well, you got a bunch of offers at this number, I’m gonna honor that. Well a review appraiser if they came over the top and said, Well, that was ridiculous, then the guy had never get another appraisal job.

Cary Pearce  Right.

Bruce Norris  And so he knew that so everybody was like biting their nails being conservative, and it just destroyed the retail price for sure.

Cary Pearce  Yeah, we did have definitely some low appraisals back then.

Bruce Norris  Yeah, there was a lot of pressure to be very conservative. What does it cost now to buy down a rate? If I wanted to buy a whole percentage? Is that even possible?

Cary Pearce  Yeah, I just ran some numbers on that prior to your seminar. And they’re still true today, on a government loan, you can buy the rate down 1% for about one and a half points as a ballpark.

Bruce Norris  Okay.

Cary Pearce  So, you know, and a seller can pay on a government loan on FHA up to 6% of the sale price, VA, it’s 4%. So, you know, they can still pay closing costs on top of that buying the rate down.

Bruce Norris  Okay. Now, do you see, is that common to request? If you’re a buyer, would that be getting more common?

Cary Pearce  I think we’re going to start seeing more and more that, you know, we’ve always tried that in markets past, but that wouldn’t fly and 21.

Bruce Norris  No.

Cary Pearce  20, 21?

Bruce Norris  No.

Cary Pearce  You could not ask for any costs at all. And you have got to bid over just to have a chance to get it.

Bruce Norris  Yeah, you know, we just, we’re just closed an escrow with a VA buyer. And so to me, that’s a buyer that’s going to emerge with a chance to buy properties again. There’s a program in Florida, I think I mentioned to you that has a $25,000 slush fund for the borrower use as you want lower your rate by your closing costs, whatever. And that is huge. I think it is a lien on the property that may or may not go away, but I don’t think it has a payment doesn’t affect their qualifying. And it becomes a nothing down transaction for them.

Cary Pearce  Yeah.

Bruce Norris  So…

Cary Pearce  There are cities and municipalities locally that have had downpayment assistance programs similar to that. And I know the city of Riverside has had one for years where they would do a 20% silent second, they actually did record a deed against the house.

Bruce Norris  Right.

Cary Pearce  But there were no no payments.

Bruce Norris  Right. Okay. Well, I think some of those things are going to start. You know, like what used to work, we’ll probably see some reemergence of that. Do you have a general sense of the volume of transactions going on in California, then it’s more of a realtor question. But as far as the you get a sense that it’s down by 25% or 50%?

Cary Pearce  My guess is going to be 50.

Bruce Norris  Okay. Yeah.

Cary Pearce  The realtors are out there struggling right now, too.

Bruce Norris  Yeah, no, that makes it makes perfect sense. But I think the demand side will match that inventory side. I think the inventory side saying I’m good, I’m not going to, I’m not going to part with my two or 3% mortgage rates so that that house doesn’t show up. And if you’re already short houses, it’d be very interesting to see how this turns out in a year or two, with interest rates being much higher than they were that I think you could have, you might have something that did a lot less damage than the math would imply.

Cary Pearce  Yeah, what happened, I think over the last two years, is it squeezed a lot of those first time buyers out because the prices just got out of reach? And even at the lower rates, they just couldn’t pull it off. You know, and now hopefully now, if prices relax a little, you know, and maybe the rates come down a little we pray, you know, maybe some of those buyers will come back into the market.

Bruce Norris  Yeah. Yeah, I think that’s, that’s likely that they are, they’re usually about 30 or 35% of the market share. And I know that’s down right now. But if you have the mortgage can be bought down a percent or someone goes with an adjustable what’s an adjustable rate now, if I go, is it a 7 or a five one?

Cary Pearce  We have 5, 7 and 10. But the one I just did was a 7 year and it was at 5%. And that was the second home, it probably would have been slightly better for a primary residence.

Bruce Norris  Okay, so yeah, that would make sense. It would be a little better, but then that that could even be bought down. If it was, say four and three quarters, it could be bought down to three and three quarters for seven…

Cary Pearce  Yeah.

Bruce Norris  Well, you know, that’s awfully good. Honestly, you can’t…

Cary Pearce  We’re starting to see more of that. We just had a scenario today and one of our guys is up against the lender in Orange County. And they’re offering 20,000 for the buyer to do a 2-1 buy down and pay the bulk of their closing costs. So, that’s, you know, the temporary buy down where it’s not permanent, but at least it starts them at a lower rate to make it a little easier getting, getting started.

Bruce Norris   And is that easier for you, as a lender, broker to get a yes answer because that there’s enough time in the, in the beginning of the loan is that’s what they’re qualifying for?

Cary Pearce  Well, we still have to qualify them at like the second year rate typically. But you know, the advantage is just to get that lower payment initially to make their life a little easier.

Bruce Norris  Yeah.

Cary Pearce  Starting out the homeownership,

Bruce Norris  Okay. I’m just gonna say, Cary Pierce, honestly, is the most honest lender I’ve ever known. I’ve known him for 25 years. And if ever I need a loan, my daughter needs a loan, my friend needs a loan, he gets a call. So, I would..

Cary Pearce  Yeah, I appreciate that.

Bruce Norris  Well, hey, you know, I’m not I don’t I don’t have to make up any of the any of that. I rely on whatever you say being true. And that’s, that’s a high compliment. There’s not many people that own the space, you know, this like, okay, that’s Cary’s space. And he’s, he’s deserved it. So.

Cary Pearce  Well, I own your space for sure. And I gotta tell you, when you talked about heroes, you are definitely one of my heroes when it comes to investing in real estate for sure.

Bruce Norris  Oh wow, I appreciate that very much. So, Well, thanks. I’m glad you came to that event. And I’m glad you, glad you enjoyed it. That was, that was fun.

Cary Pearce  Well worth it. I was glad it was there

Bruce Norris  Okay. All right, Carrie. Hey, thanks for taking time for me today. I appreciate it.

Cary Pearce  You’re very welcome. Talk to you soon.

Bruce Norris  Okay, Carrie. All right. Bye bye.

Narrator  For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com.

Aaron Norris  The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.



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