Pod Insights The Moneywise Guys 2/19/25 Money Apps, Mortgage Markets, and Dave Ramsey's Debt Philosophy About this episode The Moneywise Radio Show and Podcast Wednesday, February 19th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Guys" podcast call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Management instagram: MoneywiseWealthManagement Guest: Allyn Medeiros, Agape Mortgage website: https://lo.sierrapacificmortgage.com/allyn-medeiros?utm_source=GMB&utm_medium=Yext
Transcript 0:00 Speaker 00 From the padded radio room off Stockdale Highway, here is Money Wise. Call or text in at 661-396-1000.
0:09 Speaker 01 I need the dollar, dollar, dollar, that's what I need. Hey, hey. Well, I need the dollar, dollar, dollar, that's what I need. Hey, hey. Said I need the dollar, dollar, dollar, that's what I need. And if I share with you my story, would you share your dollar with me?
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0:40 Speaker 00 Now, let's start the Money Wise Show.
0:43 Speaker 03 Welcome to the Money Wise Show. We are live from the Gero Ellis padded radio room off Stockdale Highway on ESPN Bakersfield, 1230 a.m., 101.1 FM, and always streaming at MoneyWiseGuys.com. You can text into the show 24 hours a day at 661-396-1000. Today, we're your hosts. I'm Sharad Waite and?
1:04 Speaker 04 Frank Lee.
1:05 Speaker 03 Frank Lee. Welcome, Frank. Good seeing you.
1:08 Speaker 04 Good to be back. Good to be back.
1:09 Speaker 03 We had a good show yesterday. Chad Hathaway, you heard, maybe you heard down the hallway.
1:15 Speaker 04 Yeah, through the grapevine.
1:17 Speaker 03 Through the grapevine. We had a nice little debate yesterday with Chad, and it did spur some comments and questions. One of the things we also talked about yesterday that spurred a question was, I made a comment about these cash apps, or like, what do they call them? Venmo, PayPal, those types of apps. And it spurred a question. So I'm going to read this, and I want us to talk about it. It says, "I heard you say Venmo, Cash App, and these apps will now be taxed? I know they didn't do that last year. Did it start up for 2025? If I send family and friends, quote, 'Is that something I will be taxed at the end of the year?'" So this is a great question, because we didn't get into this yesterday,
2:01 Speaker 03 but it has been a little confusing because it's been a slow rollout. What we're talking about is these payments received through third-party payment platforms like Venmo, Zelle. PayPal, Cash App, all of these are, can be subject to taxation depending on their nature. So the IRS categorizes these into two different categories. There's taxable payments and then there's non-taxable transactions. The taxable payments would be business or side hustle, self-employment income. Payments received for goods or services are considered taxable income and these payments are subject to income tax and potentially self-employment
2:45 Speaker 03 tax. So if you're running a business, for example, and you're getting paid that way, then it could be subject to self-employment tax. Platforms like Venmo and PayPal will issue Form 1099-K to the users and to the IRS if the, if certain thresholds are met. Now, the non-taxable transactions, these would be personal transactions such as you're splitting rent, or you're repaying a friend for dinner, or you're just gift, gifting. That is not taxable and these are not reported and they're not required to be reported on your tax return. So where does this all come from? In 2021, Congress, President Biden
3:25 Speaker 03 and Congress passed the American Rescue Plan Act. And at that time, you could, you had a threshold, you could essentially give money through these apps and there was no 1099 issued unless there was more than 200 transactions and somebody received over $20,000 in a year. So in a single year, if somebody's receiving more than $20,000 or more than 200 transactions, these payment apps would issue a 1099. Now, the new rule, which was supposed to start in 2023 but has been delayed to last year, to 2024, changed the new threshold
4:06 Speaker 03 to $600. And in fact, what happened is there was so much outcry that it was supposed to take hold in 2024, but instead, 2024, the threshold is $5,000. But now in 2021...
4:23 Speaker 03 25, it's $600. That means any payment that you make again for a business or for goods or services, that's over $600 this year, it's going to trigger a 1099, which means that IRS is going to get a report that that has been made. If you, last year, it would be for any payment over 5,000, or the threshold was 5,000 per person. So if he sent any individual more than $5,000 last year, well, you should have gotten a 1099 by now.
4:56 Speaker 04 Right.
4:56 Speaker 03 And that's going to have to be reported as income, or you're going to have to figure out a way, if it wasn't supposed to be reported, you got to figure out a way to go get that fixed.
5:05 Speaker 04 I don't use Venmo often. I use Zelle. And there's not really a way to categorize it.
5:11 Speaker 03 Are you sure?
5:12 Speaker 04 I had to double check.
5:13 Speaker 03 I'll bet there is. I've used them all, but sometimes it's a little, you have to...
5:19 Speaker 04 I wonder if it's because it's linked to my Wells Fargo app.
5:22 Speaker 03 Maybe.
5:23 Speaker 04 And because I link it through the phone number, and then I just send it.
5:27 Speaker 03 Yeah.
5:27 Speaker 04 So I wonder, so with transactions like that, I wonder how the IRS is catching that, or categorizing it, or if Zelle is able to categorize it. I wonder how that's...
5:37 Speaker 03 Yes, because, I mean, yeah, yeah. My guess is the default is personal.
5:45 Speaker 04 Maybe, yeah.
5:46 Speaker 03 And, you know, this obviously is going to spur the question, it was like, well, who's going to, who's going to, who's going to be honest? And who is going to really put, oh yeah, this is business?
5:56 Speaker 04 Yeah.
5:57 Speaker 03 You know, my guess is a lot of people are going to fudge. You want to be careful, though. You know, everybody's scared of the IRS for good reason, because you just don't want to get in a shouting match with the IRS.
6:10 Speaker 04 Yeah.
6:11 Speaker 03 And if you are putting these payments as non-taxable when they're actually taxable, now you're opening yourself up to fraud. And, you know, you don't want to do that, and certainly we're not encouraging anybody to do that. But it does still beg the question is, well, this is, you know, this is a pretty simple, easy way for people to skirt some taxes by just, oh yeah, this is... Personal, even though they really just sold them something.
6:35 Speaker 04 Yeah.
6:35 Speaker 03 When that's now, okay, that should be potentially taxable, or at least it's going to trigger a 1099. So you and I were talking before the show because, you know, it's a matter of time before this sort of changes is my guess. Right now, with banks and financial institutions, for example, they're all subject to the Bank Secrecy Act. And it was just part of FinCEN. Us as financial advisors are also reporters to FinCEN. Which means if we see anything that's fraudulent, that we that we suspect is fraudulent, we have to run it up the flagpole. You know, and this is an effort to do away with, you know, human trafficking and, you know.
7:12 Speaker 04 Elderly, elderly abuse.
7:13 Speaker 03 Elder abuse. So banks and financial institutions, if they, they must report cash transactions of $10,000 or more. And they report that to the Financial Crimes Enforcement Network. That's, that's FinCEN. And they do this through Form 8300. This rule applies to deposits and withdrawals and transfers, but not all electronic transfers. So Venmo and PayPal and these cash apps, unlike banks, they do not have that automatic $10,000 cash reporting rule. However, if they suspect that there is fraudulent, fraudulent activity, or there's something is suspicious.
7:54 Speaker 03 They might report it because they're, they are subject to anti-money laundering laws. And so if a user is regularly moving large sums of money, even if it's under $10,000, the platform may flag the account for a review. And so, you know, I would suspect that that's going to become more and more strict. So.
8:15 Speaker 04 Yeah, it makes sense. It makes sense if you can just easily move money from one person to another, using these third-party apps.
8:23 Speaker 03 Right.
8:24 Speaker 04 Kind of reminds me of another.
8:27 Speaker 03 Crypto. Oh, yeah. No kidding. Yeah. Which is now also, we talked about that yesterday. Yeah. Because now that is all reported. Any, any crypto is reported just like a stock or a bond. You know, so if, you know, these wallets that are holding them are also required to issue 1099s if something's bought or sold. Whereas before, the rules were, it was just up to you when you filed your tax return, to be honest, and say, "Yeah, I did." But there wasn't, it wasn't really being reported to the IRS. So a lot of people were just not putting it on their tax return. Yeah. But, you know, it does still, you still have the, well, no.
9:06 Speaker 03 I mean, I guess now with, with the reporting issues, it's, it's anonymous when you buy something, you know, with crypto. It can be more anonymous, but, but you still have these companies that are subject to the reporting rules. So, so that's a really great question. Listeners, thanks for picking that up and thanks for sending in that question. Keep them coming our way. You can text 661-396-1000. I want to go to another question here and I'll go ahead and read it. Says, "As a trader here in California, I've been closely monitoring these government downsizing plans. Looking at historical trends, how have markets typically responded to significant reductions in government workforce?
9:49 Speaker 03 Given the potential impact, should I be bracing for increased market volatility in my portfolio?" This is from nervous old man. Thank you, nervous old man. Okay, so Frank, let's discuss this. Historically speaking, the, the markets will generally react to any headline. Yep. And, and, or rumor. And this is a normal activity to see some volatility when there is, you know, some regulatory uncertainty, like basically what we're seeing now with, with the current administration's move to cut jobs and get rid of programs and those types of things.
10:33 Speaker 03 But this isn't the only time this has happened. And so. So we can actually go back and look in history and see, you know, what are, what are some other, what are some, what, how have the markets responded in the past when there has been other big changes in the government? And I want to take you back to 2013. In 2013, we had sequestration. I'm guessing it was the word of the year, uh, sequestration, which was this massive undertaking to, uh, bring down the federal budget. And that we did see some volatility and we did see the S and P 500 pull back during, during that era.
11:15 Speaker 03 However, it quickly recovered and by the end of the year, it was, it was strong. Corporate earnings were strong and they, everything remained stable. It's very similar. We had government shutdowns. So government shutdowns happened fairly regularly, at least it seems like in the last 10 years. And that is a big impact on the economy, at least temporarily on hundreds of thousands of workers. The, the grease that keeps a lot of the wheels moving in our, in our economy, that our, our federal government funds came to a halt. And again, if you go back and look in history, when we've had the threat of a government shutdown or actual government shutdown, yeah, there's some volatility.
11:57 Speaker 03 You, you see the markets generally react in a negative way. And then you generally see a recovery very quickly.
12:05 Speaker 04 Right. And I, I think it also goes with the fact that we know that the news is out there. We know that there's going to be some further downsizing or the, the government, there's going to be a reduction in the government workforce. What would really set us apart is if there was a, a black swan event. You know, that would really move the market. But Wall Street is, there's a lot of smart guys there. You know, they know, they work with probabilities and whatever news is out there and they, they analyze. That's what they do.
12:33 Speaker 03 Yeah.
12:34 Speaker 04 And so I don't think we're going to see big swings.
12:37 Speaker 03 Yeah.
12:37 Speaker 04 But definitely some volatilities in the meantime with any other news coming out. But they're running, they're running the statistics. They're running the probabilities. It's like, okay, this is probably going to play out if. Trump goes this way or this way.
12:51 Speaker 03 Right.
12:52 Speaker 04 So I don't think, like you said, there's volatility, but unless if there was something catastrophic that we, Wall Street did not foresee at all.
13:00 Speaker 03 Yeah, it's a, it's a perfect example. I think a black swan event or something that's just comes out of the blue.
13:06 Speaker 04 Yeah.
13:06 Speaker 03 That, that can have, even those events, you could consider the 2008 financial crisis or the dot com bubble, almost like a black swan event in some ways.
13:17 Speaker 04 Yeah, exactly.
13:18 Speaker 03 And yet what happened, you know, we, we recovered and recovered much quicker than a lot of people thought. And so like you've mentioned, Wall Street and traders, while they, they may, they may read about politics and they even care and they're personalized about politics, the good ones, it has nothing to do with the reason why they're buying or selling a stock, for example, or, or a certain security. They're, they're buying into a company generally because they're looking at the fundamentals of the company.
13:48 Speaker 04 Right.
13:48 Speaker 03 And they're taking into account the political risks or the regulatory risks that these companies have, certainly, but they're not, they're not, they're not trading off of that, off of, you know, the headlines, the, the political noise, the chatter. They're, they're looking more at, at, at the fundamentals of, generally the fundamentals of the company or the sector, whatever, whatever it is that they're analyzing. So, yeah.
14:14 Speaker 04 There's, there's a lot of noise, just like how Warren Buffett would say, there's what, like 90% of the news is just white noise or something like that.
14:22 Speaker 03 Yeah.
14:23 Speaker 04 Something, yeah, drastic, but it's crazy to see how people react based, you know, there's, there's a lot of fear involved and we, we get that, which is why like we're there to guide them and be like, hey, like this is just noise, like we've been through this before, like this is what's, this is what's going on.
14:39 Speaker 03 Yeah, the famous Warren Buffett quote of be fearful when people are greedy and greedy and be fearful.
14:46 Speaker 04 Yeah.
14:46 Speaker 03 We do have kind of an interesting mix right now of fear and greed.
14:50 Speaker 04 Yeah.
14:50 Speaker 03 Where there's a lot of. A lot of people on the street, a lot of those in Wall Street are very optimistic about the about the the markets and about the the future economic growth and but you you also have a lot of people that are are getting a little greedy because of that because they see now like today all time highs again in the S and P 500 two or three three trading days in a row.
15:19 Speaker 04 Third day in a row.
15:20 Speaker 03 Third day in a row, we have the S and P 500 at all time highs and anytime you get at an all time high and the longer that it that it stays and keeps in the at that high range, the more people become risk averse or risk tolerant, I guess, they become much more risk tolerant, meaning they're they're willing to take on more risk than they normally would because they haven't felt the pain of a pullback and and so you get a little bit of greed, but we also have at the same time, a lot of fear because of the uncertainties with the tariffs and uncertainties with which people are still people are still under the impression that we have high inflation when we don't like we have we have very healthy
16:05 Speaker 03 inflation rate right now, but people are still feeling the impacts from the high prices that inflation that we had from the high inflation that we had previously. So it takes a while for people to sort of adjust and go and they might get distracted by seeing the headlines of eggs or the price of whatever thing, but they're really it's, you know, no, we have a very healthy economy right now. It's shocking, in my opinion, how how really strong the economy is.
16:31 Speaker 04 Yeah, I'm interested to see what the because we have the consumer sentiment coming up this week, I think, Friday.
16:39 Speaker 03 Oh, good.
16:40 Speaker 04 Yeah, so we should see what the report's like and, you know, what everyone's thinking.
16:43 Speaker 03 Yeah, yeah. Well, this is a good time to take a break and get to our guest Al Maderos because also today, the Fed released their their minutes from their January meeting and the Fed, of course, the ones who decide interest rates, and they gave us some insight as to what they're what's going to happen with interest rates. Are they going to come down? Is borrowing going to get cheaper? Alan's a great person to talk to about this. When we come back, we'll be joined by Alan Maderos. We're Money Wise. We'll be right back.
17:10 Speaker 00 Money Wise Wealth Management is the only locally owned, independent firm that uses a comprehensive wealth, tax and estate approach, working closely with a highly trusted CPA and attorney. For information on how Money Wise can help you invest and plan for your future, call 661-847-1000. That's 661-847-1000.
17:40 Speaker 03 Welcome to the Money Wise Show. That song means we're joined by Alan Maderos. He's Senior Loan Officer, Branch Manager, Agape Mortgage, and he is our lending expert that we have on the show very regularly. Alan, thanks for coming back.
17:54 Speaker 05 Thank you, gentlemen. Good to see you.
17:55 Speaker 03 It's good seeing you. You came on a good day. The Fed released their minutes today. And of course, the Fed is in charge at the end of the day. They are in charge of setting the interest rates that we all pay to borrow money. Did you get a chance to digest any of that?
18:12 Speaker 05 Well, Fed minutes pretty much stated there's concerns about the impact of tariffs.
18:18 Speaker 03 Yeah.
18:18 Speaker 05 Inflation is one thing that they think is hopefully going to come down, but these PCE and CPI reports are really going to tell that. I think that the component of housing, you know, shelter is a big aspect of it. We are seeing in certain areas, prices reduce, specifically the ones that grew as quickly as they did.
18:38 Speaker 03 Outside of Kern County?
18:39 Speaker 05 Outside of Kern County.
18:40 Speaker 03 Yeah.
18:42 Speaker 03 Got a little word there.
18:42 Speaker 05 But you understand that the FOMC, Federal Oversight Committee, they, this is the whole nation.
18:50 Speaker 03 Oh, yeah.
18:50 Speaker 05 Yeah. So, and when you look at averages, it's going to be based off of big numbers. Large cities develop these averages and the United States right now, they're saying the average property value is 402,000.
19:03 Speaker 03 That's unbelievably nationally.
19:06 Speaker 05 Yes.
19:06 Speaker 03 The average.
19:07 Speaker 05 But look at, you know, the concentrated, no, yes. So your concentrated areas, you know, have high density.
19:13 Speaker 03 Yeah.
19:14 Speaker 05 Los Angeles, San Francisco, you know, San Diego, in California. But look at other cities. You can look at Houston, you can look at New York, you know, there's.
19:23 Speaker 03 Yeah.
19:23 Speaker 05 Different places that have high density populations, higher cost per square foot, but also higher average incomes as well.
19:31 Speaker 03 Well, the Fed has mentioned that it looks as though they're willing to just keep rates right where they are unless they start to see inflation tick up or employment, the employment market go down.
19:45 Speaker 05 Yeah.
19:45 Speaker 03 Or there was one other aspect that they're, that they're looking at. But, but, but this is frustrating because obviously I think you and I would, you'd want interest rates to come down, right?
19:57 Speaker 05 I would.
19:57 Speaker 03 Yeah, I would too. I mean, it's not, it's not, I don't know, it's, it's overall, I want to have money to be a little bit cheaper than it is today. That's because I've got, I still have loans, you know, I'm still paying, I'm still paying a mortgage and, and it affects, it affects things. Yeah, I'd like to see it a lot cheaper. But the Fed is, looks like they're willing to just hold tight. And so that's frustrating. Do you, it looks like forecasts have been shifting where predictions of where the rates were going to go. Of course, they've come down from their high at about five and a half. And then they dropped in the last, well, they started dropping in August of last year.
20:42 Speaker 05 They were never five and a half last year.
20:45 Speaker 03 Uh, yeah, they were.
20:46 Speaker 05 Are you talking about mortgage rates?
20:48 Speaker 03 No, I'm talking about the Fed rate.
20:49 Speaker 05 Oh, oh, oh, totally different thing.
20:51 Speaker 03 Yeah, it's totally, well, I mean, it's slightly different. I know it's, it's not completely connected to mortgage rates, but it eventually kind of trickles down. Uh, but the Fed rate was five and a half up until August, and then it dropped down in November to 5%. Then it dropped down a quarter percent later in November of last year. And now we're at four, we're at four and a quarter percent. But. Estimates were showing that we would be, you know, below 3% back in September of last year. We were estimating we'd be below 3% now, and it has just gradually ticked up to
21:29 Speaker 03 now the lowest estimate is maybe 4% and, you know, going into the end of this year or next year. Does that sound?
21:40 Speaker 05 Yeah, that seems in line. So another quarter percent reduction throughout the rest of this calendar year.
21:45 Speaker 03 Ah.
21:46 Speaker 05 But here's, here's the thing to always watch, and you mentioned it's unemployment, right? So the labor market is a big component that drives, you know, whether or not decisions are made to spend money. People tighten the wallets and start to put their homes on the market if they don't have gainful employment. So that's a number that I'm very, very focused on is what is the unemployment number and how does it affect our local economy?
22:10 Speaker 03 Yeah, right. And so if unemployment gets worse, and if inflation starts to tick up, then maybe we could see more than a quarter percent drop.
22:20 Speaker 05 I think you might see some additional tools pulled out of that, you know, belt for the feds, and they might, again, start doing some stimulus.
22:28 Speaker 03 So where do you think we will see mortgage rates? Where are they at? And where do you think mortgage rates will be?
22:34 Speaker 05 So right now, they're hovering in the high sixes. Depends on what metrics you look at, but they're hovering just below 7%. And I project if we continue down the path we're in, we're probably in the mid, mid sixes to maybe the low sixes. Now, your government loans like FHA, VA, and USDA, those might drop below 6%. They might be in the high fives to possibly mid fives. And if that actually happens, you might see a bit more activity because there's a psychological barrier when you have a five in front.
23:06 Speaker 03 Yeah.
23:07 Speaker 05 It actually is a motivating factor. When it's above six, there's some hesitation.
23:11 Speaker 03 Yeah.
23:12 Speaker 05 That's what we've seen.
23:13 Speaker 03 Right. And, but, I mean, six is better than a seven.
23:16 Speaker 05 Understood.
23:17 Speaker 03 Where did we, where did we peak?
23:18 Speaker 05 The lowest rates?
23:19 Speaker 03 Oh, eight and a quarter. Eight and a quarter was kind of where the high watermark is.
23:24 Speaker 05 And that was, I want to say that was in October of 2023.
23:27 Speaker 03 Oh, okay.
23:29 Speaker 05 I'll tell you why.
23:31 Speaker 03 Yeah.
23:31 Speaker 05 Volume was like virtually nothing that month.
23:34 Speaker 03 Oh.
23:34 Speaker 05 You know, and I always look at trends and I'm like, what is going on? Is there something like a storm coming? You know, the dog has gotten this weird feeling and starting to bark. You're like, what's going on? You know, so I always get these little spidey senses after looking at market activity and it goes quiet.
23:47 Speaker 03 Yeah.
23:48 Speaker 05 And the interesting thing is, is that everything within finance, unless you're in the market, is always about a day to day and a half late.
23:56 Speaker 03 Mm hmm.
23:57 Speaker 05 Because news is something that's already happened.
24:00 Speaker 03 Yeah.
24:00 Speaker 05 So people are responding to news, but the market's moving at all times.
24:04 Speaker 03 Yeah, buying the room or selling the news, right?
24:07 Speaker 05 There's these things that happen, you know, late afternoon, early evening. You're, you're looking at futures and you're thinking, what's going to happen next? You know, so, I mean, there, it's, it's international. It's always being, you know, influenced by something. So, I don't know. It'd be great if we could stay in that range of less than six and a half and we can touch the fives. But here's, here's to hoping. That's all I can say.
24:30 Speaker 03 You brought up international, which made me think of the, the new changes for real estate sales, where the contracts and realtors now are essentially going into contract with a negotiated rate.
24:45 Speaker 05 Oh, for what buyers agents are compensated?
24:47 Speaker 03 Buyers agents, yeah. Um, and, you know, which is very similar what they do in other countries.
24:51 Speaker 05 Sure.
24:52 Speaker 03 Which is actually dropped down. Um, in other countries, they pay a lot less in commissions, basically, than we do here. Are you seeing any impact yet here from this?
25:03 Speaker 05 No, here's the reason. Marketing with a particular property, if you have an agent that's going to be compensated for their work as a buyer's agent and professional representation, normally sellers are still knowing that they might have to pay compensation to a buyer's agent in the form of a credit or some other type of compensation agreement in order to get that deal to go to closing.
25:23 Speaker 03 Yeah.
25:24 Speaker 05 So. They may have dropped some small percentage, but on average, I think most listings are paying between 4% and 5% total to sell that house.
25:34 Speaker 03 That's slower.
25:35 Speaker 05 Well, the standard answer that if you ever talked to a real estate agent in the past would be, "Our listing is 6%."
25:41 Speaker 03 Yeah.
25:42 Speaker 05 You know, but we share 3% with the buyer's agent, 3% ours, or whatever split they've come up with, right? But now, I think that I see more regularly buyer's agent compensation around 2% to 2.5%.
25:53 Speaker 03 Uh huh, okay, okay. Well, that's, you know, it's a drop. It's, I mean, sorry, selling agents out there. But it's, you know, good for the consumer in some ways. As long as they're getting a good service, that's really what matters. Well, good. Alan Maderos, we're going to take a break. We come back, I want to talk more about what's going on in the housing market. I know you've brought the Crabtree Report, which kind of narrows down what's going on in our market here. I'm really curious about how we're sitting, how are home prices, and where do we see them going? We're Money Wise, we're going to be back after this quick break.
26:23 Speaker 00 Are you curious to learn more about how you can be money wise? Check out the Money Wise website at MoneyWiseGuys.com to get more info about what we do.
26:38 Speaker 03 We're Money Wise, thanks for tuning in. I'm Sharad Waite here with Frank Lee. Frank's taking a little nap here, a little sway nap.
26:45 Speaker 04 A little dozen off air.
26:47 Speaker 05 Steve with the magic music.
26:49 Speaker 03 Yeah, we're joined by Alan Maderos. He is a Senior Loan Officer and Branch Manager at Agapi Mortgage. Been in the business, how long you been in the lending business?
26:58 Speaker 05 22 years now.
26:59 Speaker 03 Good night. Come on, Alan.
27:00 Speaker 05 I know, I know. We both had black hair, you had dark hair.
27:04 Speaker 03 We both had darker hair back in the day. And we've known each other for close to that, 15, at least 15 plus years.
27:12 Speaker 05 Yes.
27:12 Speaker 03 So Alan, let's talk about the current state of affairs at the real estate in Bakersfield. You brought the Crabtree Report, which I looked at, looks pretty good.
27:24 Speaker 05 Yeah, so this date is a little bit out of like current, but this is December. And January wasn't that much different, and we started out the year kind of slow. So I'm going to go ahead and get some stats here real quick. So in the December month, there was a total of 715 listings.
27:42 Speaker 05 The total number of sales, okay, was roughly 400. Okay, so they blew through over half of the sales. And the month prior, it was 823 units. So the amount of houses for sale went down, but it's a seasonal thing. So in December, you're not going to have as many listings as you probably would have in, say, September.
28:03 Speaker 03 Right.
28:04 Speaker 05 But here was the change year over year. In December of 2023, there's only 521 units on. In December of 2024, there were 715, which was an increase of about 37%.
28:15 Speaker 03 Yeah.
28:15 Speaker 05 But the inventory is still being consumed, meaning they're still selling homes.
28:22 Speaker 03 Quickly, and they're still, historically, that's not a lot of listings.
28:25 Speaker 05 No, so a balanced market is generally when you have equilibrium between buyer and seller as far as negotiation abilities.
28:33 Speaker 03 Yeah.
28:33 Speaker 05 But because there's still low inventory, if the home is priced right, the seller's still in an advantage position.
28:38 Speaker 03 Still a seller's market.
28:39 Speaker 05 Yeah.
28:40 Speaker 03 It's been a seller's market since forever.
28:43 Speaker 05 Yeah, so our housing inventory is less than three months. And typically, when it hits three months is where that balance normally happens. So we're at 2.68 months. Now, here's the thing that's kind of telling. A lot of people have been waiting, and I've heard people say over and over, I'm just waiting for the crash. I'm waiting for the crash.
28:59 Speaker 03 Yeah.
29:00 Speaker 05 Well, here's the crazy part. The median sales price in December of 2023 was 375,000.
29:09 Speaker 05 In December of 2024 is 395,000. So things are getting more expensive, not less expensive. And even with interest rates over 7%, houses are still selling. So what that tells me is, is that the buyers that can buy are buying. The sellers that can sell, take that equity and buy something else, are taking action.
29:30 Speaker 03 Yeah.
29:31 Speaker 05 Okay, so.
29:32 Speaker 03 I, I, I hope that you tell people, if they say, well, I'm going to wait for the crash, you just say, don't wait for the crash.
29:40 Speaker 05 Well, the, the truth is, is that if anybody knew when that time was, everybody would wait.
29:44 Speaker 03 Yeah. And, and if you, like, if you've been waiting, you've been, you would have been waiting for, our last crash was in 2005. Or 2006, right? That's when we had the last, really, if you want to look at the, that's when we, we sort of started to crash. It bottomed out maybe in 2009, right? The home prices. So essentially, we've gone 15, 16 years. You'd been waiting for 15 years. And what have home prices done in the last 15 years?
30:12 Speaker 05 But see, one of the things that's kind of crazy about that is, is that the big push in the momentum of that crash was housing. It was bad loans.
30:21 Speaker 03 Oh, yeah.
30:22 Speaker 05 It was poor decisioning made by the markets.
30:25 Speaker 03 Yeah.
30:25 Speaker 05 And we don't have that kind of landscape anymore.
30:29 Speaker 03 Right. Thank you to the CFPB, right?
30:32 Speaker 05 Correct. And we're gonna take us to the next point that I want to talk about. So the CFPB has effectively been closed down or dismantled. Literally, if you go to their website, you're gonna get an error 404.
30:43 Speaker 03 Yeah.
30:44 Speaker 05 Okay.
30:44 Speaker 03 This is as of just right now, like the Doge cuts that are happening?
30:48 Speaker 05 So the initial design of the CFPB.
30:52 Speaker 03 Well, let's explain. CFPB was created after the, the financial crisis and it's the Consumer Financial
30:59 Speaker 05 Protection.
30:59 Speaker 03 Protection Bureau or Board?
31:01 Speaker 05 Yeah, Bureau or Board. I think it's Bureau.
31:03 Speaker 03 Essentially, it's the, it's the program that oversees lending and somewhat of what the banks do to protect consumers.
31:11 Speaker 05 Yes. It provides oversight, advocacy, education, and basically penalizes those bad actors.
31:18 Speaker 03 Yeah.
31:18 Speaker 05 So to take that out of play, there are some people celebrating the streets and others that are like, wow, this was a bad decision. So I'm kind of in the middle and I'll explain the rationale behind that. The first thing is, is that when they started to try to do enforcement actions in 2010, there was very quick action in pointing fingers on things that they had no real data on.
31:43 Speaker 05 Then they started to attack things and start to fine companies for activities that they later found were okay.
31:51 Speaker 03 Hmm.
31:51 Speaker 05 Okay. But they did catch enough bad people or bad banks or bad practices, specifically predatory lending payday loans.
31:59 Speaker 03 Mm-hmm.
32:00 Speaker 05 You know, short-term interest things that were really, really bad for consumers. But here's the, the rub. When you go through and you eliminate a program like that, that automatically opens up those soft, fleshy parts that are vulnerable.
32:18 Speaker 03 Mm-hmm.
32:19 Speaker 05 Within our, our system. And it's not good. There are some wonderful things that came out of this. Number one, it provided transparency in the process of lending. It provided protections for people from being taken advantage of. And it, lastly, probably more importantly, provided a voice for those people that didn't know they needed a voice. So that's my take on it.
32:39 Speaker 03 Yeah.
32:40 Speaker 05 So, good and bad, but yeah, right now it's a, a page 404.
32:44 Speaker 03 It, it, yeah, it'll be interesting to see if it, what, what happens to it, but it, you know, going back to the financial crisis of 2008 and, which was brought on by a really bad lending standards. They were just, you, you know, you, you didn't even have to fog a mirror to get a loan.
33:02 Speaker 05 No.
33:03 Speaker 03 And you could have stated income. It was so easy to get a loan. It was crazy to think about those days. But there have been some lasting, like, did we, did we swing too far to being too strict? And, or where are some of those areas where we're just now, the, the lending standards are just not?
33:20 Speaker 05 No, lending standards today are strong. They're healthy. I think there's certain restrictions that could be more cost-effective for consumers that could be lifted, but I don't think the restrictions are bad.
33:30 Speaker 03 Yeah.
33:31 Speaker 05 I, here, here's the reason why I say we're much stronger than we were in the past is because the regulatory oversight that was put in place, okay? Started actually with Dodd-Frank Financial Reform Act in 2010.
33:40 Speaker 03 Yeah.
33:41 Speaker 05 And the whole idea was, we need to have transparency and standards. You should not be paid more for one loan versus another, or compensated differently because you like this bank versus another bank. Okay, so you've probably heard this phrase, brokers are better. Okay, great, well, it's because they're selecting banks based off of pricing, right? It doesn't mean that they're better so much as that they think that they have more choice. The reality is, is if you establish a relationship with the bank, you may say that I can shop 25 different banks, but you wind up going to the one or two that you actually bank with all the time because you have a relationship with them. They're gonna pick up the phone when you call, they're gonna respond when you email. There's gonna be a sense of urgency because you send them business.
34:19 Speaker 03 Yeah.
34:20 Speaker 05 So are you truly getting a full brokered relationship? No, you're getting a smaller pool of people. But then you also are running the risk of having situations where your loan is being sold to a point where you don't even have contact with the original loan officer. It's serviced with whatever company, but you know, they're pushing this idea of brokerage. So, relationship after the sale is such an important piece. For example, MoneyWise is your business name. However, with the new transition to LPL Financial, that is the infrastructure behind you that gives you the ability to offer products and services. But if they have a problem, they're gonna come to your office. They're gonna sit down and talk with an advisor, they're gonna have a one-to-one contact point.
35:04 Speaker 05 That's gonna take them through that process. When some brokered relationships, they call this 800 number, they don't know who they're talking to, and there's no real relationship because the loan has been sold off.
35:14 Speaker 03 Yeah, right.
35:16 Speaker 05 So, there is value in service after the sale as well.
35:20 Speaker 03 Yes, and there's definitely value in working with somebody who understands a little bit more than just mortgages. Understand sort of, you have to understand a lot of personal finance because it's a very important decision that you're making. And it's, for most people, it becomes their largest asset. It's their biggest piggy bank over time. So it's very important, I think, for people to get into a home, get into their residence as soon as they can afford it. And that takes somebody understanding a little bit more than that. We've got a couple of messages here for you, Alan, a couple of questions. Here's the first one, says if rates drop significantly after I lock in, what are my options?
36:03 Speaker 05 So if you're under an active escrow. Call the lender and ask them if they can renegotiate that lock. Because basically, when they do a trade order, if you will, same thing for you, okay, it's done. Okay, they've already committed to the market. Well, the lender is in the same boat. They're locking that money up, so good or bad, they are promising to pull through. So they may have a little bit of latitude if there's enough change in the market that they'll split the difference, give you a better rate, better costs. And the worst-case scenario is, is that if you have enough time and they're not able or willing to do it, and you're really focused on that, then you potentially could switch lenders.
36:43 Speaker 03 Just drop them.
36:44 Speaker 05 Yeah, I hate to say that, but you know, that lenders worked hard for that relationship and also to make sure that they're following through on these things, so. And I've been on both sides of the boat and it's not fun.
36:52 Speaker 03 No, I can imagine it wouldn't be fun because, you know, you do have to, you know, there's some commitment, somebody has to make a commitment at some point.
37:00 Speaker 05 Correct, because what if it had gotten way worse? Like it went up a half percent overnight, which I've seen happen for rate.
37:04 Speaker 03 Yeah.
37:05 Speaker 05 And you look like a hero.
37:06 Speaker 03 Oh, yeah, well, that's good, but if it goes down a half a percent, you're just getting ready to close. You're going, hold on a minute.
37:10 Speaker 05 Yeah, no, I know, and that's why we work on active renegotiation on those, but.
37:16 Speaker 03 It seems like I don't understand that system. I've never fully understood the lock-in rate system, but it seems like there would be a huge advantage for a company to be able to be flexible, somewhat flexible with that.
37:28 Speaker 05 But they're always hedging, so their analysts on the backend are always looking at price points, and there's a certain level of margin, but if the market is negatively affected by changes, they're going to want to lock in a certain amount of money at that point and then offer those rates. So again, it's case by case.
37:46 Speaker 03 I mean, we're in theory in a dropping rate market, so this is the time where people would be like, hold on, why did I lock in potentially? Here's another message for you, Alan. It says, also, can you explain the float down option and when it might be beneficial to use?
38:01 Speaker 05 Yeah, so float down is the same as that concept that they're talking about right there. But it normally happens when there's enough change in the market that that lender can renegotiate with their secondary market that are hedging. Now, you hear the word float down more often in. New construction because the time to completion is so long. So many times your locks are greater than 90 days. They go up to 180 days on average.
38:24 Speaker 03 Oh, wow.
38:24 Speaker 05 And in those cases, the float down option might be the best because if the market improves, they can naturally float you down.
38:31 Speaker 03 So you would pay a little bit more to have a float, the option to float down?
38:35 Speaker 05 Depends on if you locked it up front with a certain fee. Like sometimes they pay an advance lock fee.
38:43 Speaker 03 I see.
38:43 Speaker 05 Then the bank will renegotiate.
38:45 Speaker 03 If somebody was feeling very confident that rates would continue to go down and there was an option to not lock it in and save a little bit of money, they can do that.
38:53 Speaker 05 Of course. Yeah, that's just called floating.
38:55 Speaker 03 Let's float it. Let's float, Alan. That's good. I like the consumers can take some risk there. I mean, that wouldn't have been fun to do a couple of years ago when rates went way up. That's when you do not want to float. You want to, you want to lock that in. But I mean, it's hard to say what's going to happen with interest rates. We're just talking about what the Fed is saying and.
39:13 Speaker 05 Yeah, well, they're uncertain too.
39:15 Speaker 03 Yeah.
39:15 Speaker 05 Right. So their literal conversation points have changed over the last six months. And what they were saying they were potentially going to do. And then what has happened and kind of now it's a wait and see.
39:28 Speaker 03 Yeah, we're going to take a break. But when we come back, I want to ask you about Dave Ramsey. You have an article you brought with you that says paid, a paid off mortgage is the new status symbol, not a BMW. I have some issues with Dave Ramsey's stance on debt. And, and so this is, this will be an interesting conversation. I want to talk to you about that when we come back. I'm here with Frank Lee. I'm Sharad Waite and we're going to take a quick break.
39:53 Speaker 00 Are you an employee with a company sponsored retirement plan? Do you fully understand how you're invested? And whether or not you are maximizing your retirement plan's options? For more information on a free assessment, contact MoneyWise's 401k specialist, Justin Leland at 661-847-1000. That's 661-847-1000.
40:20 Speaker 03 We're Money Wise, I'm Sherrod, that's Frank, Alan's joining us right now. Alan, we were just talking up here during the break, and we were speculating, and I've looked it up, the percentage of Americans that live paycheck to paycheck, I said it was about half, it's a little bit more than that, actually depending on what source you're looking at, according to payroll.org, they did a survey last year, around 77% of American workers would face financial difficulty if their paychecks were delayed by a week. Investopedia reported in June of last year that over 66% of Americans live paycheck to paycheck, with many feeling financially stretched due to rising living costs and limited financial planning.
41:05 Speaker 03 That is staggering. And now we're in a position in Bakersfield, we said the median home price is near $400,000, which means you need to have how much in income?
41:19 Speaker 05 Roughly $9,000 a month total.
41:22 Speaker 03 Okay, so $100,000 roughly, over $100,000 a year?
41:27 Speaker 05 Yeah, for a $350,000 house, I did the math, and this just having very minimal debt, would be about $115,000 total household income.
41:36 Speaker 03 $115,000 total household income, and that's to get the median?
41:40 Speaker 05 Well, that's above median at 450, but to get down, like I said, around 197, right in that range.
41:47 Speaker 03 That is just a lot of money. I think when we bought our first house, I was maybe making $50,000 a year. And if you look at the median home price in California, right now, it's $838,000.
42:05 Speaker 05 Nope.
42:06 Speaker 03 $838,000. It's actually come down in California, this probably comes back to what you were saying earlier about home prices nationally, and the home prices in places like LA, where they went up really high, well, they also come down really quickly, because in December, it was $861,000.
42:23 Speaker 03 Was the median home price in all of California, which we're really getting close to that million-dollar median home price. That's, that means you're paying over $10,000 a year just in property taxes.
42:34 Speaker 05 Oh, yes.
42:34 Speaker 03 So you're paying almost $1,000 a month just in property taxes. That's just going to, going away to taxes. And even if you pay your home off, you still got that bill.
42:46 Speaker 04 It's, it's crazy to hear that because you would think you only find those type of home prices in Los Angeles, Silicon Valley, Sacramento, San Diego. But there are some houses here in Bakersfield that are close to that 800,000.
42:59 Speaker 03 Oh, oh, for sure.
43:01 Speaker 05 There's plenty of them.
43:02 Speaker 04 But Bakersfield out of all places, we're like.
43:04 Speaker 05 But if you take that same 800,000 dollar house here and you move it nine minutes south, you're looking at probably 1.9 to 2 million.
43:10 Speaker 03 Yeah, yeah. An $800,000 house here is a pretty nice house.
43:14 Speaker 05 Yeah.
43:14 Speaker 03 It's a very nice house, but it's not, it's not a nice house in LA.
43:19 Speaker 05 No.
43:20 Speaker 03 Or the Bay Area, anywhere.
43:21 Speaker 05 Certainly not.
43:22 Speaker 03 Anywhere else. All right, let's talk Dave Ramsey. Uh, Dave Ramsey is an advocate of, of not having debt. And I don't, I, last I understood, he, he wasn't for, I guess he, he's okay for a mortgage, but you get, you pay that mortgage off as quickly as possible at all costs.
43:40 Speaker 05 Yes.
43:40 Speaker 03 Is that, is that still the case?
43:41 Speaker 05 Yes.
43:42 Speaker 03 So what do you think of that?
43:44 Speaker 05 So I would agree for most Americans, paying your mortgage off as soon as you can will get you out of that monthly debt. So here's the biggest impedance to retirement for most people is they don't have enough money in retirement to take care of the living expenses. So if they retire, they need to have enough cash flow to cover those expenses. The house is generally the most expensive thing that you have monthly ongoing. Now, if you have a sufficient retirement and you have something that's going to cover those expenses, then don't. I mean, it is probably the cheapest money you're going to borrow, right? Because of the rate. However, if you don't, the sooner you can get out of all consumer debt, including your mortgage, the better off you're going to be.
44:23 Speaker 03 Yeah, that's the caveat. And this is this, I would say this with his stance as well on paying off the mortgage is if you, or like he has stance on credit cards.
44:33 Speaker 05 Sure.
44:33 Speaker 03 I think if you can, if you're responsible credit card user, then it's better to use credit cards. Responsible means you don't pay anything to the credit card company. You pay it off.
44:42 Speaker 05 Correct. No interest.
44:43 Speaker 03 No fees. Then you're winning the game.
44:45 Speaker 05 Yeah, because they pay you money back for using the card. I got a pretty healthy Costco rebate. I literally went to the back counter and the guy says, whoa, you know, he started and I thought, I spent a lot of money this past year.
44:56 Speaker 03 But you didn't pay in interest, right?
44:58 Speaker 05 No, I didn't. No.
44:59 Speaker 03 So you're winning the game and so numbers wise, mathematically, you're ahead of the game. But I get it. There's some people that can't get past that.
45:07 Speaker 05 Majority don't. See, that's the benefit of being the house is that, you know, the house always wins. Well, these banks rely upon the fact that you will not pay the full balance. And the other thing too is they may give you some teaser cash back of one and a half percent.
45:23 Speaker 03 Yeah.
45:24 Speaker 05 But you just paid 29.9%.
45:26 Speaker 03 Right. It doesn't make any sense. And it also doesn't make, you know, the person that would pay off their home quickly because they don't have the discipline to pay into a retirement plan that's going to pay them twice the interest rate is likely also going to have to fall into the problem of pulling out equity and getting an equity line of credit off their home and never really getting ahead that way. You know, it's like you pay off the home and now you've got this huge asset that's illiquid and you can't do anything with it, you know, so there's some, there's some issues there, but you've got to be smart. Do the math and get good advice, not from your uncle next door that doesn't know what he's talking about. Maybe he knows, but if he's a financial advisor, he might know, but
46:10 Speaker 03 get, get good advice from people who have some experience in that. Alan, thanks so much for coming.
46:15 Speaker 05 Thank you, gentlemen. Great to see you both.
46:16 Speaker 03 You did a great job. It was a good show. I want to remind our listeners, if you missed any of this or previous shows, you can find us on Spotify. You can find us on Apple, wherever you listen to your podcasts, there we are. Just go to MoneyWiseGuys.com. In the meantime, remember these three things. Be smart, be safe, and always be money wise.
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