Barry Habib - 10/2/2023

Barry Habib, CEO of MBS Highway, is an American entrepreneur and frequent media resource for his mortgage and housing expertise. He’s an Amazon #1 bestselling author for his book “Money in the Streets,” widely credited with saving the mortgage industry in 2020 from margin calls due to Fed actions. His presentation to the Fed created stability at a critical time. He is a three-time Crystal Ball Award Winner by Zillow and Pulsenomics for the most accurate real estate forecasts out of 150 of the top economists in the US. He was also the 2019 Mortgage Professional of the Year, a finalist for the Ernst Young Entrepreneur of the Year, was named to Mortgage Global 100 List, the St. Armand Ventures Businessman of the Year in 2021 and named to the list of 100 people to watch in 2023. During his mortgage sales career, Barry personally originated more than $2 billion. He was a lead producer and managing partner for “Rock of Ages” (the 27th longest running show in Broadway history.) He produced Criss Angel’s “Mindfreak” at Planet Hollywood in Vegas and has been the highest rated speaker and trainer for more than 25 years in mortgage and real estate. 


Key takeaways:

  1. Despite challenging market conditions, it's not the time to quit the mortgage and real estate industry. While transaction volumes have decreased, it's important to understand that the market is not as structurally troubled as it was during the 2010 downturn.

  2. The real estate market is currently exceptionally healthy, vibrant, and strong from a price and equity perspective. Unlike the 2010 crisis, there is no widespread issue of underwater properties and negative appraisals.

  3. The primary challenge in the current market is mortgage rates. Lowering mortgage rates is seen as a solution to stimulate the market. Mortgage rates are influenced by inflation, and historically, they have moved in response to changes in inflation rates.
  4. Mortgage rates typically follow the trend of inflation. When inflation rises, mortgage rates tend to increase, and when inflation falls, mortgage rates tend to decrease. This historical pattern has held true until a recent divergence.
  5. There has been an unusual divergence from historical trends, where mortgage rates have risen, despite inflation coming down to the predicted level. This unexpected outcome raises questions about the factors contributing to this change and the need to understand them for future market predictions.
  6. The first major factor influencing the recent rise in interest rates is the movement of money from bank deposits to money market accounts. Due to higher rates offered by money markets (over 5%), individuals have shifted their funds from low-yield bank deposits, impacting the banking system's ability to lend at lower rates.
  7. Banks typically invest depositors' money in various financial instruments, including car loans, personal loans, business loans, and mortgage-backed securities. When deposits decrease, banks are forced to sell mortgage-backed securities, which can drive up mortgage rates.
  8. Several external factors have contributed to the rise in interest rates, including a debt limit crisis that led to additional government spending and the selling of treasuries. When treasuries are sold in large quantities, they require higher yields to attract buyers, influencing mortgage rates.
  9. The downgrade of the U.S. credit rating by Fitch had a negative effect on interest rates. When a country's credit rating is lowered, interest rates tend to rise to compensate for the perceived higher risk.
  10. The Federal Reserve, led by Jerome Powell, has played a significant role in influencing interest rates. Despite creating inflation, the Fed is now attempting to combat it by considering keeping rates high. 
  11. One critical economic indicator to watch is job openings, as reflected in the JOLTS report (Job Openings and Labor Turnover Survey). A decline in job openings can signal a weakening job market, and this decline has been observed, with a drop from 12 million job openings to 8.8 million in 2022. 

  12. The Federal Reserve aims to achieve a 2% core inflation rate over time. However, it's important to understand the components of inflation. Shelter, which includes rents, plays a significant role, and while it may appear that inflation is high when looking at past 12-month averages, a more current view suggests a lower rate. 

  13. There has been an unusual situation where 30-year fixed-rate mortgage rates have risen above the 10-year treasury yield, primarily due to the Federal Reserve's actions. Historically, this has led to recessions. However, there is hope that mortgage rates may drop in the future, especially if the Fed changes its stance. 

  14. Credit card debt reached an all-time high, exceeding a trillion dollars, with average interest rates at 25%. Despite the opportunity for a 25% return by paying off credit card debt, consumers are not reducing their balances, indicating financial stress.
  15. In highly competitive real estate markets, buyers often face bidding wars and rising home prices. As an agent, you should educate buyers on the financial benefits of bidding slightly above asking price, such as faster break-even periods and long-term appreciation gains.
  16. Waiting for lower mortgage rates may not be the best strategy, as increasing interest rates can reduce affordability. Explaining to clients the financial benefits of buying at higher rates, such as greater choice and future appreciation, can motivate them to act now.

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Barry's Instagram: @iambarryhabib