7/31/25 Level One Financials' Take on Rates, Plus Sticky Inflation & Lifestyle Creep

The Moneywise Radio Show and Podcast Thursday, July 31st 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 LinkedIn: Moneywise_Wealth_Management

• 0:00Speaker 00

  From the Garret Ellis padded radio room off Stockdale Highway, here is Money Wise.

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  Call or text into the show 24/7 at 396-1000.

• 0:39Speaker 00

  Here is Money Wise.

• 0:40Speaker 01

  Money, money, money, money.

• 0:45Speaker 00

  Welcome to the Money Wise Show. We are in the Garret Ellis padded radio room off Stockdale Highway. It's a little bit of a different Thursday for you. It is myself, Chris Pelster, joined with?

• 0:56Speaker 02

  Frankly.

• 0:57Speaker 00

  Frankly. Frankly, and you've probably heard that a few times on the show so far?

• 1:02Speaker 02

  No, I've never heard that before.

• 1:03Speaker 00

  No? Has anyone ever? Because what they're doing Frank is they're taking your first name and your last name and they're acting like it's a Y at the end, not double Es.

• 1:11Speaker 02

  Yep.

• 1:12Speaker 01

  Is this the first time I've put you guys together?

• 1:14Speaker 02

  No.

• 1:15Speaker 01

  Okay.

• 1:15Speaker 00

  It's been a while. It has been a while though. It's been a while. And let me tell you what, Frank is on fire.

• 1:22Speaker 01

  Yes, frankly he is.

• 1:23Speaker 02

  Not literally.

• 1:23Speaker 00

  Frankly, honestly, he is killing it for clients. He is doing awesome on the show. I've heard great things and I'm really excited to do a show. So, how's it going?

• 1:34Speaker 02

  Pretty good, pretty good. Yeah. I know you had to read that off a script, so you know, you can say honestly.

• 1:39Speaker 00

  They made me say it. And so I got that out of the way, done. I will say he has also stolen the hearts and minds of clients and coworkers with beautiful pictures of his-

• 1:51Speaker 01

  He's got mine.

• 1:52Speaker 00

  Of his son.

• 1:53Speaker 02

  Yeah.

• 1:54Speaker 00

  Yep. He has this huge TV in his office scrolling with just this magnificent looking child and he has stolen the hearts of everyone. So, very, very happy for you and what's going on. So, we have a great show today. We're going to actually be joined and talk a little bit about-

• 2:16Speaker 00

  Interest rates and especially interest rates in the focus of lending and we're going to have Scott Hanson, Chief Executive Officer, Level One Financial. Feds came out and spoke. We'll talk about that in just a second here. He has over 20 years' experience in the real estate industry, lending, and he himself, you know, has participated in the growth of the real estate industry since 1996. Lender, broker, investor, property management, development. Stick around and we can get his two cents on what he thinks about Jay Powell and what the feds chose to do today. So, let's talk a little bit about the markets before we get into too many topics. We have a couple of great questions that came in too. So, just to throw it out there, if you have a question, comment, want to participate, tell

• 3:01Speaker 00

  Frank how gorgeous his child is, you just send a text message or a message to us, 661-396-1000. You are what make the show podcast great. So, again, the feds did come out and talk today. I think they, they broke a couple hearts out there.

• 3:20Speaker 02

  They did, they did.

• 3:20Speaker 00

  They did, because they said, "I know you guys are wanting an interest rate break or a decrease, pullback." Nada.

• 3:28Speaker 02

  Nope.

• 3:29Speaker 00

  No cheaper money.

• 3:31Speaker 02

  Not after the core CPI.

• 3:33Speaker 00

  That's right.

• 3:34Speaker 02

  Reports.

• 3:34Speaker 00

  So, there's, which, my first comment, because sometimes we get busy and we don't get to look at markets and I go, "Oh, what did the market do?" You know, you know, when we were talking about it earlier, it's like, if, if they didn't do that, I was kind of anticipating the fact that the market has kind of baked that in over the last couple of weeks. I don't know if people have been paying attention. There's been a little bit of a run in the market over the last couple of months.

• 3:56Speaker 02

  It's a hot market.

• 3:57Speaker 00

  It is. And so, you go, "Okay, well, maybe they're pricing in the fact that the feds are going to decrease interest rates." Well, lo and behold, nope, they didn't. So, you would anticipate, "Hey, the markets are going to really react negatively." Well, they did pull back, but at a very modest, modest session today. S and P 500 closed approximately 6,339. Remember, these are the 500 largest companies that trade on the exchange. S and P Standard and Poor's, down about .4%. So not even necessarily a big move. Obviously, when you get up to the 1% range on a day, that's where we're talking about some major volatility. And one of the things that Frank talked about was CPI was high,

• 4:38Speaker 00

  which means, you know, some of these, you know, inflation numbers and things we look at were obviously a little bit higher than what the feds liked. But it's also balanced out with what else is coming out right now.

• 4:50Speaker 02

  Yeah, I mean,

• 4:51Speaker 00

  Tech.

• 4:52Speaker 02

  A lot of tech earnings.

• 4:53Speaker 00

  Earnings.

• 4:53Speaker 02

  Microsoft, Amazon, Apple, your Mac 7, really, that's kind of holding the market up a little bit.

• 5:01Speaker 00

  There you go. You know, so, so again, it's always like, you know, people, oh, if they don't lower interest rates, the market's going to crash. Well, when you start, you know, you're still seeing good earnings on certain sectors and certain things. You know, we, we did see a little bit of a drag, or I'm sorry, major drag despite strength in the tech shares like Meta. I think Facebook was up 11%, Microsoft 3.9, big, big days, but healthcare did show some weakness. So I'm not sure if healthcare was really concerned about interest rates, but healthcare sector took a little bit of a hit today.

• 5:36Speaker 02

  And I stand corrected, it isn't the CPI, the PC, corp PC.

• 5:40Speaker 00

  Okay. Good deal. Well, though, and one of the things that we always love to do is just perspective. Okay. So you want to take a look, we talked about the S and P 500, it's at 6,339. I remember sitting down with clients years ago and wondering whether or not it was going to go over 3,500 or not. So just for perspective, long term, as of the close of December 31st, it has risen from 4,835 to 6,339. That is about an 8% move there year to date for the S and P 500. You look back over a 12-month period, one-year performance, we're up about 16.9%. We were at about 5,460 a year ago today. So the high that it's hit is 6,427,

• 6:26Speaker 00

  near its current price. So it's pulled back a little bit from its highs, but still, some of these numbers, again, it's not even necessarily a recommendation to throw money at the S and P 500. Anything like that. But again, S and P 500 is a scoreboard. It's a way to look at what are the 500 largest companies doing? What's going on in the stock exchange today? It would take you a long time to get all 500 numbers and do some calculations. The S and P 500 does it for you. Many people now have investment options that basically just track the S and P 500. Because people are saying instead of paying for a mutual fund expense or something like that. But then there's active management, passive management, some of these different things, but I love to get perspective. So if a week from now or three weeks from now, the market pulls back 5% or 10% even, or maybe more.

• 7:11Speaker 00

  You have to remember, we're just sitting here telling you that just in the last 12 months, S and P 500 is up 17%. So it's, it's sometimes we have a mentality where if you're a person that thinks you lose money all the time in the stock market. And you see it go down and you're like, I always lose money, you know, and this and that. And it's like, it's hard. You have to keep perspective. You have to think about the times that the market's trending up and when the markets go up, participate correctly for your situation. And when they come down, depending on your situation, and if you have a plan and you, you've thought about things, it's okay. It's okay that your account goes up and down. It's a very hard thing to get comfortable with, but you know, that's what hopefully working with an advisor does.

• 7:52Speaker 00

  Or if you yourself have gone through some of these and have your own disciplined plan or approach yourself, stick with your plan. Uh, don't, don't get too, uh, too aggressive or too greedy, they would call it. Don't get too conservative, too fearful, they would call it.

• 8:06Speaker 02

  It's easy, it's easy to just lose money if you're always trying to time the market. So as we're saying here all the time, it's not about timing, but time in.

• 8:14Speaker 00

  Yeah. Time in the market. Let it sit in there. Let it cook. I think the, the youngins are saying nowadays, is that right? Let it cook, isn't it?

• 8:21Speaker 02

  I'm not that young.

• 8:22Speaker 00

  Oh, come on, come on. You're, pretty soon your boy's going to be telling you all the cool sayings and stuff. And I'm going to be grandpa 10 years down the road. I'll have no clue what, what the youngins are saying nowadays. So. Uh, but yeah, so that's the markets. That's what's going on. The feds did speak today. Um, they came out and they said that they are voted, uh, they're, they're basically voting to maintain the federal funds rate target at around 4.25 to 4.5. So we are excited to have a genius, a professional in the studio here in just a little bit to kind of talk about Jay Powell. What he's doing with interest rates, what's that mean for real estate and borrowers?

• 9:01Speaker 00

  Um, so, so yeah, he is stressing, uh, Jay Powell I'm talking about now. He is stressing a data dependent approach.

• 9:09Speaker 02

  Jay Powell.

• 9:10Speaker 00

  Jay Powell. He's, he's really crunching numbers and looking at the data. Um, so, uh, he's, uh, he's saying more on inflation, labor, economic growth is needed before any decisions on rate cuts. Uh, premature to assume a September cut. So we shall see. All right. Any other thoughts on all that stuff?

• 9:31Speaker 02

  No.

• 9:32Speaker 00

  Yeah. Persistent inflation, sticky inflation.

• 9:35Speaker 02

  Sticky. Um.

• 9:37Speaker 00

  Yeah, there you go. Just seeing if there's anything else to go over. So before we do that, we can jump into one of our wonderful, uh, listeners questions. Um, let's see here. First question came in. It said, great show. My question is how early can a child start building? Credit. Actually, you know what? We're going to move that one forward because we might even cover it with a lending, uh, specialist on that. Here's another one. It's actually got a little bit of a, a story to it, but we love our listeners. So I'm going to go through it. Hello, Money Wise. I retired at 62, January 2024, moved to the coast, into our smaller, more manageable vacation home. Good decision as our two kids did not stay in Bakersfield.

• 10:20Speaker 00

  We are now within 40 minutes of our grandchild. I would say that's a good choice. I really miss many aspects of Bakersfield, often topics you cover, cover friendships, work ethic, community, loyalty, and even warm weather. Well, come on back because it's very warm right now. Anyways, back to the comment. It is often gray and gloomy at the coast. Love the Money Wise podcast. It keeps me in touch with Bakersfield, particularly enjoying the local business segments. So the question, thank you very much for all those, uh, comments. By the way, I had to share them self, selfless plug. Um, question though is, I know you cover this topic from time to time. Can you please cover limits for individuals earning payments via cash payment?

• 10:59Speaker 00

  Zelle, Venmo for gig type services. I know it's an amount, uh, $600 that can quickly add up. If there are multiple transaction, it's important for retirees who may also do side work to be aware of evolving tax rules. I know there are variables such as age, social security, income total received. Do you anticipate any changes? 2026. Well. I'll say this, we can go over it a little bit, but you, you, you covered a lot of it as far as some of the tax issues and gig work and those kinds of things. The thing I'll tell you is what you would hope is that they would adjust that for inflation. So we sat here and just said that they are keeping interest rates or interest rates the

• 11:42Speaker 00

  same because of some of these sticky inflation considerations. So they may end up increasing how much you can make possibly kind of a situation because that should follow inflation is what my thought would be. Same reason why every year you can put a little bit more into your IRA or they up the 401k limits because they kind of tie those limits to inflation numbers. And so if inflation is high, they're going to increase the amount that you can stick into 401ks, IRAs and those kinds of accounts. And I think that the taxes, some of these restrictions or minimums or maximums that you can do, they're going to kind of do the same thing and follow inflation numbers. So if inflation is up a little bit, maybe they'll increase.

• 12:26Speaker 00

  I don't know if there's going to be a major focus on it. I don't know how much of an issue it is as far as that. Did you read anything on that?

• 12:34Speaker 02

  There's no big issues or talks about it within the markets or anything like that. But I think overall it's important that if you're utilizing this for a side gig for additional income, IRS mandates that you reported, any earned income, whether you are retired or not.

• 12:52Speaker 00

  Yeah. And, and you mentioned it yourself that if you have gig work or you're doing things, especially like as a retiree or something, you know, a few small transactions can really add up. I know some, some retired teachers and professionals that go into like tutoring and stuff and it doesn't take a whole lot to get up to some of those numbers. I do throw out there that, that most of the time you want to try to avoid taxes at all costs. I mean, that's our jobs as Americans, but legally, I should throw that out there. That's what I'm meaning when I say that, that issue. But one of the things to remember is.

• 13:28Speaker 00

  Is, I completely forgot.

• 13:29Speaker 02

  The 1099, the, so Venmo, PayPal, Cash App, they're actually gonna be, these apps are, will issue you the 1099K and to the IRS.

• 13:41Speaker 00

  Yeah.

• 13:41Speaker 02

  Versus Zelle, there's no IRS reporting. Because they claim that it is a bank transfer rather than a cash app where you're providing income or, or things like that.

• 13:56Speaker 00

  So have you noticed with any of these things, if it switches then?

• 14:01Speaker 02

  No.

• 14:01Speaker 00

  As far as like, oh, we're taking Zelle now.

• 14:04Speaker 02

  Oh, yeah, actually my barber.

• 14:06Speaker 00

  Yeah.

• 14:06Speaker 02

  Yeah.

• 14:07Speaker 00

  Well, we, we, we occasionally, um, cause I don't know about you, but my wife does not let, let me buy stuff and store stuff, cause I've done that for too long. So, we don't have a bunch of tables and chairs, so every time we do an event at our house, we rent them. And so, all the rental and bounce house rental places, they all seem to take Zelle, which I actually kinda like, cause it's, it's usually tied to a bank and different things, but maybe that's why they do it, because then they don't have to possibly have a biggest tax bill, maybe?

• 14:36Speaker 02

  Yeah, maybe. And all that in the future might change too, especially with the Genius Act and the stablecoin. If there's gonna be huge tokenizations, these banks are probably gonna switch to that. I mean, we'll see. That, that only relates to transactions and, and the speed of transactions, not to income or like taxes, but.

• 14:55Speaker 00

  Yeah. And one of the things I think I was going back to earlier is the fact that you're, you're always better off making more money, even if it impacts your social security. And I think sometimes there's a big misconception that if I go into a different bracket, I'm gonna, I actually would have been better off, like, not even making that money. And I kind of understand that to a, to an extent, but sometimes there's a misunderstanding about our tax brackets and how they work.

• 15:21Speaker 02

  Yeah.

• 15:22Speaker 00

  Once you spill over into the next tax bracket, it's not that all your taxes are gonna go up now, it's just on those dollars moving forward.

• 15:29Speaker 02

  Exactly.

• 15:30Speaker 00

  So you're usually never going to be worse off by making more money.

• 15:33Speaker 02

  Yep.

• 15:33Speaker 00

  Now, you could go back and say, well, if I'm having to pay this much more in taxes, maybe it's not worth it to work hard, which I think a lot of people feel that. As you move up through the wealth ranks, or maybe your income goes up. I've joked all the time that the first $80,000 feels a lot better than the second $80,000 because Uncle Sam reaches in and takes a lot more of that second 80. And that's why getting ahead with money can be difficult. And that's why we talk about lifestyle creep because you start spending money like, well, I'm making twice as much money. Well, no, you're not because Uncle Sam keeps a lot more of your second 80. And lo and behold, you have to work hard and tell those dollars where to go. Or else you're going to be like most Americans and you're going to wake up and you're going to say, I've actually been making pretty good money for the last five or 10 years and I don't know where it went.

• 16:18Speaker 02

  Yeah, exactly. You highlight a good point. It's like, it doesn't matter how much money you're making. If you're spending it recklessly, if you're, if you're making 80,000, 160 or 200,000, it doesn't matter. You want to budget.

• 16:31Speaker 00

  It's not how much you make, it's how much you keep.

• 16:32Speaker 02

  Yep.

• 16:32Speaker 00

  So there you go. We, we polished off that. Thank you very much for that comment and the nice words. And hopefully that helps you plan your, your side hustles there over at the coast. Send some cold weather our way. And if you are missing the heat, we have some for you right now. Stick around, we'll be right back with Scott Hanson.

• 16:49Speaker 01

  If you're a business owner who provides a retirement plan for your employees, contact Money Wise Wealth Management to see if you're maximizing your options and minimizing your liabilities. Money Wise 401k plans are customized to you and your company's needs. 661-847-1000.

• 17:11Speaker 00

  That's right, welcome back. Man, 60 years of collective experience, must be some old folks around here. Actually, I'll throw it out here. Heard this statistic the other day, the average financial advisor age is like 61 or 62.

• 17:28Speaker 02

  That's insane.

• 17:29Speaker 00

  So some offices might have like 180 years of experience, of collective experience. But you might want to rethink who you're working with if they are 60 because they're probably eyeballing retirement. I'm just going to throw that out there, just saying.

• 17:44Speaker 02

  What is that?

• 17:47Speaker 00

  Yeah, they're already looking for some side hustles for retirement. But anyways, we are going to be joined right now. He is in studio, Scott. How are you doing, Scott Hanson?

• 17:56Speaker 03

  I'm doing great, guys. Thanks a lot for having me.

• 17:58Speaker 00

  Yeah, he is the Chief Executive Officer at Level One Financial, a friend of the show. Been on a long time. When was the last time you were in? I wasn't on with you.

• 18:05Speaker 03

  It's been a few months. It's been a little while, yeah.

• 18:07Speaker 00

  Yeah, so I'm only on Thursdays. Busy, busy season. We've had some changes in the office and so we're all getting to work. So it's typically just Thursdays.

• 18:15Speaker 03

  I love coming in here because every time I do, I learn something. I already learned something on that first segment.

• 18:19Speaker 00

  Yeah.

• 18:20Speaker 03

  So I'm glad to hear that in America, you can still, you still benefit from making more money despite more taxes. Right? That's good to hear.

• 18:26Speaker 00

  Yep.

• 18:26Speaker 03

  What I need, though, is I need you guys' help educating my wife on, what was it? Lifestyle creep? What was that term?

• 18:32Speaker 00

  Lifestyle creep is real.

• 18:33Speaker 03

  Is there any way I could have her get with you guys for a little bit? And maybe you could help me?

• 18:36Speaker 00

  It is, it is so real. You know, like I've, I've told people that sometimes moving up, moving up your financial plan and moving forward is like trying to swim out and grab a beach ball in the ocean. And every time you get to it, you hit it and it goes out a little bit further and then you swim out.

• 18:52Speaker 03

  Story of my life.

• 18:53Speaker 00

  Yeah, that, that's what it's like. So that's lifestyle creep and it happens to all of us and it's real. We've talked about it before and I'll educate you on this, that they say that like up to like $80,000, there actually is a major happiness increase with money. Because if you're making, you know, if you're a family and you're making 60 grand, there are some basics that are really, really hard to make, make the numbers work. And so it's happiness increase, happiness increase, happiness. But once you get up to about 80, 85,000, and I don't know what the numbers are now, maybe a little bit higher with inflation, but it's like, once you get up to that number, some of the basics are met. And now you start making more than that. Like I said, you're now paying more in taxes and you have just enough money to maybe get yourself in trouble.

• 19:37Speaker 00

  Credit lines might open up to you and all of a sudden you get yourself in trouble. You know, so it's one of those things where it's not how much you make, it's how much you save and what you do with whatever you do get. And I've seen people not make a whole lot of money, maybe on some scales, but, but have a wonderful financial plan, picture, future, very comfortable lifestyle based on, on, on what their needs and, and hopes and desires are. So yeah, lifestyle creep is real. As a matter of fact, that's like the good and the bad of our economy. Lifestyle creep is what allows businesses to thrive because people don't know how to keep money in their pocket.

• 20:12Speaker 03

  Sure.

• 20:12Speaker 00

  Right? But yet, at the same time, you have to rise above that. You have to go, okay, I'm going to keep myself in check, enjoy the benefits of our economy, which would be investing in stocks or buying, appreciating assets like real estate.

• 20:27Speaker 03

  Yep.

• 20:27Speaker 00

  Uh, while everybody else is spend, spend, spend, spend. Um, it goes all the way back to, for me, my early days of learning about finance. Ben, what's his name? Ben Stein? Right?

• 20:38Speaker 03

  Oh, yeah.

• 20:38Speaker 00

  Ben Stein?

• 20:39Speaker 03

  Yep.

• 20:39Speaker 00

  He, uh, a lot of people don't know, they just know him as Bueller.

• 20:42Speaker 03

  Yeah.

• 20:42Speaker 00

  Bueller, you know, Visine commercials.

• 20:45Speaker 03

  That's pretty brilliant.

• 20:45Speaker 00

  He is very brilliant. I don't know if he's a CPA or if he himself was a financial advisor, but I read a book that he wrote called like, "You Can Still Retire Comfortably Rich," or something like that. It was some book like that. But that's what he talked about. He's like, not only do you have to be, like, you have to rise above that, put yourself in a good spot, and if you don't want to be a jerk, you almost have to plan for the fact that all your friends and family aren't going to do what they're supposed to do.

• 21:08Speaker 03

  Yes.

• 21:09Speaker 00

  And so you need to learn to be generous because if not, you're going to end up never wanting to do anything with anybody because most, unfortunately, most Americans aren't doing what they're supposed to be doing.

• 21:18Speaker 03

  We love having conversations with our borrowers when they're shopping for a house. And our question to them is, what do you want to afford? Not what can you afford? You know, a lot, a lot of times we get the question of how much can I afford? What is my maximum? And those questions are great too, because let's answer that question. But a lot of times for a lot of people, they're earning, uh, they make good salaries, they have, uh, good jobs. It's really a question of what do you want to afford? What, what's the right amount to be spending on this next purchase?

• 21:43Speaker 00

  Yeah.

• 21:43Speaker 03

  As opposed to what you can. Because if you max it out, yeah, sure, it'll limit you on a lot of other things.

• 21:47Speaker 00

  Do you, do you feel like most people are like, give me the limit, Scott? I want to go right up? Are, are they?

• 21:52Speaker 03

  You know, it really, uh, coincides with your 80 number. I think you're pretty accurate on that 80 number. Uh, you said that was from a stat or from a study or something? Yeah, I could see how that's very accurate. Under that number tends to be the question of how much can I afford? What is my max? How, what can I go shopping for? Uh, I don't think it's necessarily because, um, that borrower is just intentionally trying to max out. It's just simply that they, if they're usually a first time home buyer. Um, maybe they are growing family. They're trying to get those that extra bedroom in there, some other amenity that they want. Uh, after that 80 mark though, it tends to be more like, I know we can afford more, but here's what we want to spend. So the conversation does shift to what do you want to afford? And so, yeah, I can write you a prequal letter for, you know, a million dollar home, but you know,

• 22:37Speaker 00

  But if you want to enjoy life.

• 22:39Speaker 03

  You really want to, you know, 650, 700,000 dollar home. Okay. That's great too.

• 22:42Speaker 00

  Yeah. Yeah. Is, uh, so ma- many times, you know, and I've talked to a lot of people and I myself am a recent grandpa. So got kids with kids.

• 22:53Speaker 03

  I'm in that club.

• 22:53Speaker 00

  Yeah. Congratulations. I love it. I love it. But you know, those kids are like, they're doing their jump into homeownership.

• 23:00Speaker 03

  Yes.

• 23:01Speaker 00

  And a lot of people are talking about what the numbers are to even get into a beginner home or a starter home and, and they're pretty big numbers. Um, nowadays, is it a lot different than what it was like 15 years ago as far as making the jump from renting to buying?

• 23:17Speaker 03

  Oh, I don't think so. I think that that equation has ebbed and flowed over the years where rents will be a little higher than mortgage payments, payment and mortgage payments will be a little higher than rents and that will, uh, vacillate between the two. But typically they're, they're going to revert to the mean between the two of them. You know, either rents are going to go up because this becomes the only option that people have when mortgage payments are going up. And so those rents, uh, rise with the mortgage payment or it's the other way around, you know? Uh, if rents are much lower than the, it, it does have an effect on the cost of housing to purchase a house. House prices tend to settle down into a level where the rent payment and the mortgage payment tend to be pretty close to the same.

• 24:02Speaker 00

  Really? And then, then if it, if it is that way, is it just some people not wanting to buy at that level? Meaning what, what the rents would be the same as a mortgage is not the house that they want to buy? Or is it?

• 24:14Speaker 03

  Well, you bring up a good point because it also has to do a lot with price points. So say a $200,000 or $300,000 house, you can probably get in and have a much better mortgage payment than you would a rent payment. But you start to get above that. You start to get into the $500,000, $600,000 range. And you can actually pay more in a mortgage a lot of times than you would to rent the same property. But at that level, what you see is that people don't want to rent at that level. They say, okay, I want to live in a $5,000, $6,000, $100,000 house or more. And I want it to be mine. You know, I'm building equity. There's a lot of other reasons to own that.

• 24:43Speaker 02

  Right.

• 24:43Speaker 03

  At that point, you know.

• 24:44Speaker 02

  It's like, it's like why pay this much in rent when I should.

• 24:47Speaker 03

  Yes, the, the, the thinking, the, the strategy changes at that price point.

• 24:52Speaker 02

  Yeah. If I'm going to be living in a house that costs $500,000 with this much in rent, I might as well just buy it.

• 24:57Speaker 03

  That's right. And especially when you look at the rent versus buy calculation, you go, oh, okay, it's not even that much different. It's actually pretty similar.

• 25:05Speaker 00

  Yeah. So we came into the show talking about the feds and, uh, holding interest rates steady. So what does that mean for mortgage rates right now?

• 25:12Speaker 03

  It's a big topic this week.

• 25:13Speaker 00

  Yeah.

• 25:14Speaker 03

  This was a highly anticipated Fed meeting.

• 25:17Speaker 00

  Did it surprise you?

• 25:18Speaker 03

  No, it really didn't. I got, I gotta be honest. It really did not. Um, I'm sort of in the, uh, I guess I'm, I'm callous now because I'm just in the permanent wait and see, wait and see, wait and see. Because we, I, I feel like it's something that is building. We, we know rates are going to come down at some point. I mean, this is a huge anticipation. There's a lot of reasons why it will, um, however, the signaling that the Fed has given, Jerome Powell's comments have given over the last few months, last few quarters, say that this isn't entirely surprising. And with that PC data, I think you guys were talking about it, the, you know, the, the data that they're looking for, you know, just hasn't come out yet. And I don't think it's, I don't think it's a complete game changer. I think it's just kick the can down the road, one more meeting and maybe two more meetings.

• 26:01Speaker 03

  Um, what, three more meetings before the end of the year. So there's still.

• 26:04Speaker 00

  Yeah.

• 26:05Speaker 03

  There's still a hope.

• 26:05Speaker 00

  Well, he's already, he's already trying to throw it out there and, and, and give himself a loophole that he doesn't have to do anything in September. He's already like using that verbiage.

• 26:13Speaker 03

  Yeah, that's what he did last time too. And so we see the result. Uh, he is due to expire out of that position.

• 26:20Speaker 00

  Hey, be careful with that word, dude. When we're talking about, you know, 80 year old. Public servants, dude, come on, expire? Man, Scott.

• 26:28Speaker 03

  So I do tend to think that there's gonna be some sort of change. I think it's next year.

• 26:32Speaker 00

  Next year?

• 26:32Speaker 03

  I don't know what.

• 26:33Speaker 00

  Yeah. Well, I mean, I'm surprised. I mean, him and him and Trump seem to have such a great relationship.

• 26:38Speaker 03

  Well, they are really, really best buddies.

• 26:40Speaker 00

  Really buddies, you know? And that's what's funny is so we can talk all the numbers and what what he's saying and this and that. And like, so on the gossipy side now, let's talk about this.

• 26:48Speaker 03

  Let's get right down to it now.

• 26:49Speaker 00

  How much do you think Jerome Powell's feelings about Trump plays into his decisions? He says he's looking at.

• 26:57Speaker 03

  You know, it's supposed to be zero, right?

• 26:58Speaker 00

  Yeah, he says he's looking at data, right? I told you he's data driven, but come on, let's, you know, let's get the gloves off.

• 27:05Speaker 03

  Not at all.

• 27:06Speaker 00

  Yeah, yeah, it's supposed, and people don't realize that, like Trump, even some of the stuff he's saying. It's just, people need to understand, you don't want a Fed chair making decisions for political reasons or because a president says this or that, because it's like, that's not what you want to be driving those decisions, but you kind of scratch your head sometimes and go, well, when you have somebody like Trump in office and if he doesn't like Trump or he does like Trump, how much does that play into some of his thought processes?

• 27:32Speaker 03

  Well, and you're, you're gonna hear about it from Trump, so, yeah. If he does approve or doesn't approve, you're gonna hear a lot of chirping out of him.

• 27:38Speaker 00

  Yeah, yeah, so, hey, well, let's take a quick break. I love the discussion, Scott, thanks for being here. We'll be right back, talk about this more.

• 27:44Speaker 01

  Have you been putting off your finances? Seize the day, call the Money Wise office at 661-847-1000, or email [email protected] for more information.

• 28:02Speaker 00

  Oh, this is my first show with Frank.

• 28:05Speaker 02

  Is this your playlist?

• 28:08Speaker 00

  I believe they call this K-pop.

• 28:11Speaker 02

  I don't know, I've never heard that before.

• 28:13Speaker 00

  No? No, well, I've never heard of it until you started working here, so that if that tells you any indicator where this new playlist edition has come from. Hey, we're trying to bring in, you know, new listeners, younger listeners. They know what that is.

• 28:25Speaker 02

  They're trying to be cultured.

• 28:26Speaker 00

  Yeah.

• 28:27Speaker 02

  Oh yeah, that young demographic just fight.

• 28:30Speaker 00

  There you go.

• 28:30Speaker 02

  Yeah. Bumper music.

• 28:31Speaker 00

  There you go. Again, we are joined by Scott Hanson. He is the Chief Executive Officer at Level One Financial, friend of the show, been on a long time, helping our listeners be money wise and, and think through financing, lending, even talking to real estate a little bit. And the one thing I was gonna jump in there and mention on your notes there, Stephen, I don't know if you noticed this, let me see where they're at. Here, right here. Earlier, I was talking about that it's our job as Americans to pay the least amount of taxes as possible. But I threw out what caveat. Legally, speaking of, today's Wesley Snipes birthday, turned 63.

• 29:12Speaker 00

  If you don't know Wesley Snipes' story, he got in trouble with the IRS for a few years for just saying, not gonna pay any taxes, and he was making pretty good money. So anyways, just had to throw that out there. Happy 63rd birthday, Wesley. I don't know, you may be in jail still. I don't know how big of a tax.

• 29:25Speaker 01

  He's out, he's actually doing movies again.

• 29:27Speaker 00

  Yeah?

• 29:28Speaker 02

  He was out in that Deadpool movie with...

• 29:30Speaker 01

  He's playing Blade.

• 29:31Speaker 00

  Blade?

• 29:31Speaker 01

  Yeah.

• 29:32Speaker 00

  Are him and Joe Rogan ever gonna fight? Was that, was that those two?

• 29:35Speaker 01

  I believe so. I don't think that's gonna happen.

• 29:37Speaker 00

  Why not?

• 29:38Speaker 01

  Uh, I don't wanna see that.

• 29:40Speaker 00

  Senior bare knuckle fighting? I don't know.

• 29:42Speaker 02

  Oh my gosh.

• 29:43Speaker 00

  Anyways, happy birthday Wesley Snipes. Um, wanted to jump back into this, uh, and it does go along. So, somebody did throw out there, down here, it says, uh, is the, is that because the Zelle app doesn't tax you when you send payments like it does other apps? And I believe that was what we read. I'm not a Zelle specialist, but because it is bank transactions, it is not keeping track in the same way that some of the other apps do with some of those other transactional apps.

• 30:12Speaker 02

  Yeah, I, I think this is just, uh... We'll have to do some more research on, but how it's coded between the apps.

• 30:19Speaker 00

  Yep.

• 30:20Speaker 02

  So if you're sending money between yourself or someone else, it's just, it depends on the, the app, on how they code it in the backend.

• 30:28Speaker 00

  Yeah.

• 30:28Speaker 02

  So Zelle might be in the case where like, oh, this is just money transferred from one bank to another. That's it. We're not going to code it, anything else.

• 30:36Speaker 00

  There you go.

• 30:36Speaker 02

  So that could be it.

• 30:38Speaker 00

  Yeah. So somebody else, or I don't know if Steven threw this in there, but Jay Powell's term ends May of 2026. Some people have used the, the, the expression, he expires, May of 2026.

• 30:50Speaker 03

  I've never heard that.

• 30:50Speaker 00

  Yeah, no, no, Scott, okay. Uh, there is, and somebody else, uh, threw this in there that there is an AI video going around with Powell and Trump, holding hands and singing like the old Wayans Brothers intro. So I don't know if we're going to play that for you, but if you have a minute and you want to, um, uh, you know, there you go. So, oh, can't, okay, never mind. It's not radio appropriate. So we have to keep, even though we have some K-pop listeners, that's probably why we have to keep it appropriate. We gotta, we can't show the Raines Brothers intro. So there you go. Uh, and then where did you say your guest is from? May need to meet with him soon.

• 31:27Speaker 03

  Where from? 1600 Mill Rock Road. Come see us.

• 31:30Speaker 00

  There you go. Level one. Uh, so somebody did bring in this question, so we can talk about it. I'd love your input on it. It says, great show. My question is, how early can a child start building credit? I've heard some people starting as young at 16, but wanted to see if that's legal. And if so, how would we start that process?

• 31:48Speaker 03

  That's a great question. So credit card is the best way, or debit card. And that sounds pretty dangerous as a parent when you are introducing your teenagers to credit for the first time. And here they have a credit card that they can go use. But you know, it's probably better that if they are going to make a few mistakes, they do it earlier and in a kind of a controlled environment, hence the debit card, which typically is like a $200 or $300 card. If you apply for that type of card, Capital One, for example, you go on their website and you apply for a debit card, it will usually talk about what the possible limit is. And it's usually just a few hundred dollars. Even in some cases, I think you actually pre-fund the card by sending in, uh, that $200 or $300 pre-funding the card. And then the card only works if there's still money available.

• 32:33Speaker 03

  It does build credit. There are cards that don't build credit, but when you apply, you can actually ask that question and get a good answer, depending on who you're going through. I think there's even a better solution in a lot of cases, and that is, Taking an existing credit card that you have very good credit on and adding your child, someone who you're helping out build credit as an authorized user. Uh, surprisingly enough, they get full credit on that on their credit report as um, as credit history. And so uh, they, as, as the months roll by, uh, and they, you are continuing to make payments on time and having good standing with that credit card company, so are they. And so they're reaping the benefits.

• 33:09Speaker 00

  So what if the parent's credit score is like a 425?

• 33:12Speaker 03

  Don't add your child as an authorized user.

• 33:16Speaker 00

  Let, let them build their own credit.

• 33:17Speaker 03

  Come over and talk to Chris and ask him if he's got room on one of his cards.

• 33:21Speaker 00

  Uh, credit repair, but uh, you know, and I'm not making light of anybody that, that's dealing with credit because you, you gotta work at it. You gotta make good decisions on a long basis and we've all had issues in our life. But uh, but yeah, it's kind of something to say like, you know, don't necessarily attach your child to your credit card if you do not have a good credit score.

• 33:40Speaker 03

  Well, and it happens in reality, Chris. We've had people where they come in and they have bad credit. They're trying to figure out why they have bad credit and they realize that they are an authorized user on some family member's card. And our solution for that is simply get off of that card immediately.

• 33:52Speaker 00

  There you go.

• 33:52Speaker 03

  And credit improves dramatically, quickly, like weeks, months, and it doesn't take very long. But a lot of times that can be what's holding somebody back as well.

• 34:00Speaker 00

  So, so for as long as you've been on the show and, and we've done stuff, it seems like there's been a, a big change with credit scores. Like so many more banks, credit cards, and different people are giving you your score. They're giving you access to that. Has that lended, do you think, to more positive behavior for a lot of folks? Or is it kind of still just business as usual?

• 34:19Speaker 03

  Well, there is a particular mortgage score. So FICO puts out uh, numerous different types of scores. And there's an auto one. There's ones for credit cards and different things that you're applying for. And ours is in the mortgage industry across the board. It is a mortgage credit score. And so a lot of times the credit karma or the, some of the other uh, apps and, and uh, sources for your estimated credit score is really just an estimate. It's, it's remarkably close. Most of the time, it's not absolutely accurate. So we still run a credit report. We still have to use the credit that we run. But typically, it is pretty close. Sometimes I we do get borrowers who are surprised by how much lower their credit score is. But usually, that's only in the case where they're already

• 35:04Speaker 03

  in a good credit bracket. And so we're talking about 10 points off of a 750 score or something. That's not the end of the world. That doesn't even change pricing or anything. However, those they're useful. They're a good thing. I think more than anything, it brings the public back to the idea of monitoring their credit where that really wasn't a thing before. People would get their credit ran twice, you know, in their lifetime or every five years or something like that when they were doing a transaction. And and that wasn't great because things could slip in there or things could get away from them. And so now with them constantly monitoring it's probably a net positive. It's just not something to take to the bank, no pun intended, because they you know, you will get your credit rerun at the time you're doing a mortgage.

• 35:46Speaker 00

  There you go. So I hear a lot of right now, everybody's kind of talking about this whole issue where there's obviously a lot of homeowners still locked into those super low rates from 2020, 2021. I'm sure you talk about it a lot. So so what do you on that discussion and that thought? Kind of big picture? What are you saying? What do you think that that's going to end up doing?

• 36:09Speaker 03

  You know, so I heard an interesting stat today that 48% of mortgages right now are first time home buyers. And I think that that is that is relevant in the discussion of what are existing homeowners doing? Why are they not transacting? And I think it has everything to do with everybody locked being locked into an amazing mortgage rate from back in the day when you could do that.

• 36:32Speaker 00

  Yeah. Where do you where do you think? Where do you think that sweet spot is as far as interest rates till finally people will say, all right?

• 36:39Speaker 03

  That's a good question. So if we do a little prediction segment here, and maybe we can revisit this because I love being right or wrong.

• 36:47Speaker 00

  We have an eight ball.

• 36:48Speaker 03

  But I really do like to know how. Yeah, how clear my crystal ball is here. So I think it's about 1%.

• 36:57Speaker 03

  One percentage rate from where it's at right now. So I think that if we could get a full one percent lower than we are now.

• 37:05Speaker 00

  Yeah.

• 37:05Speaker 03

  It wouldn't be a refinance revolution, but it would be the time where the borrower who's on the bubble and really wants to do a little cash out, for example, might start to make sense. It's probably more where the move starts to make sense. Right now, a lot of people aren't completely happy with where they're at. They'd really like to be in a little bigger house, different house, smaller, different location. But they're not making the move because of the mortgage. And I think that if we got a full percent reduction across the board in mortgage rates, I think it would pull some people off the sideline.

• 37:38Speaker 00

  Right.

• 37:39Speaker 03

  Now, you go down two percentage points and I think we're back in a booming market. But you know what happens then is that real estate prices will go up.

• 37:48Speaker 00

  Your eyes lit up when you said two percent.

• 37:50Speaker 03

  Prices will go up, you know, so the borrower.

• 37:53Speaker 00

  Do you think that'll be short term, though?

• 37:56Speaker 03

  Well, it wasn't short term during.

• 37:59Speaker 00

  Like I'm saying, like, because there would be such a flood of inventory, like if it went down that much, like, do you think there'd be just too much inventory?

• 38:07Speaker 03

  You know, it fed low interest rates fed the fed a healthy real estate, a booming real estate market for about a 10-year stretch.

• 38:18Speaker 00

  Yeah.

• 38:18Speaker 03

  And as much as I thought, okay, it's got to be coming to an end here soon. When money was near free, it had an impact.

• 38:26Speaker 00

  Yeah.

• 38:26Speaker 03

  Across the board. And so people moved more often, you know, they found it easier to.

• 38:32Speaker 00

  Yeah. I mean, I remember, it's so funny when the rates were that low, how much we like took that for granted. I mean, you just didn't even think twice about moving here to moving there to moving there. But then now there's been such the move where, man, it's a big, big decision. I mean, I like it in the sense that it's expensive to move and you move too many times too fast. You don't realize how much money gets lost in translation and having to rebuy couches. Cause you know, there's just so many things. So, but it'll be nice to, I think, light that up a little bit. So, and I know you'd probably like to see that, but especially for people that are. Feeling like they're locked into a house that I never intended on being in this house forever, so.

• 39:11Speaker 03

  There might be a lot of people who would love to convert that existing home to a rental. Keep it, keep that equity in there, keep a nice low payment where you can rent it out and probably make twice as much in rent than your mortgage payment is, but then they're faced with going out and buying another house at today's interest rate. So that they're kind of in that maybe a 1% lower, 2% lower bubble where they would make that move. They would say, okay, well, I do, I'm not going to get rid of my existing mortgage, but I have a solution that involves converting that to a rental, keeping it, and then getting a new mortgage, going ahead and moving, but now it makes a lot more sense financially because I can afford to do that at a slightly lower interest rate than where we are today.

• 39:45Speaker 00

  Yeah, so we, uh, we kind of jumped around, but we were talking about interest rates earlier. Um, how much does credit, well, like with the interest rates higher, does your credit score impact your interest rate more now? Or does it kind of always move in line?

• 39:58Speaker 03

  That hasn't changed a lot, so your, your credit score will always be a factor. You know, there are tiers that, uh, above and below 680, 650, 750, 700. Uh, it will have absolutely have an impact. As a, as a factor of how much that has changed now, it, it is about the same amount of effect on your interest rate. So interest rates, you know, so the, I think a common misconception for the public out there is that, that, you know, people are always asking, well, what are the interest rate today? Or, you know, what are the interest rates or what is the interest rate today? And there's so much that goes into that because it isn't just what is the FHA rate today or what is the conventional rate? But it has everything to do with how much are you putting down and what is your DTI? And what is your credit score and things like that?

• 40:43Speaker 03

  And so there is a wide range. And so your interest rate can swing, you know, a whole percent simply based on the one factor of credit score alone, not to mention, is it owner occupant or non-owner occupant? Or so many other factors that go into it.

• 40:56Speaker 00

  Yeah. So is, is, uh, so you're, people asking you, what's the interest rate is like the equivalent of me at a cocktail party and being asked, what's the hot stock? Or what should I do with my money? It's like, wow.

• 41:10Speaker 03

  I heard about, I heard about Coinbase.

• 41:13Speaker 00

  Yeah, there's so much that goes into what should I do with my money? Okay, well, let's. Let me unpack this. But what is your answer like when people ask you what the rate is? What do you kind of go off of?

• 41:23Speaker 03

  I love to know more about what are you trying to do? Like I want to just, I gotta have more information to be, well, first of all, you just can't answer that question. It's not that I'm being difficult with you or I know the rate and I'm never going to tell you. It's really, I just simply can't answer it based on the information I have. All I have is, you've asked the question is, what is the interest rate? I'm going to buy a $500,000 house, what is the interest rate? Those are two of 100 components that I need. So I just need more information. So, you know, usually that leads to a great discussion about how much are you going to put down? And what would you like your payment to be? So I get a gauge of are we in the same ballpark of what can, what you can afford? And then it starts to take a direction of is it going to be an FHA loan or is it going to be a conventional loan? And then we go into the discussion of mortgage insurance.

• 42:07Speaker 03

  And there's all these other components that you start to talk about to try to get, to try to get, once I hear, really tell me about what you're trying to do, I really, we really work hard to now let's go do that. Let's go get you into the thing you want to get into.

• 42:21Speaker 00

  Yeah. Good deal. Well, hey, let's take a quick break so we can have at least a little bit of a good discussion when we come back. Stick around.

• 42:28Speaker 01

  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.

• 42:55Speaker 00

  Welcome back. We're going to finish out this great show. Thanks to our wonderful guest, Scott Hanson, Chief Executive Officer at Level One. And of course, we've had K-pop music and Frank Lee and Chris Pelster joining forces for the first time in a while. So, so thanks. It's been, it's been wonderful, Frank. I was going to ask you, with higher interest rates, do you see an increase in like? Like HELOCs and people doing ADUs rather than selling their house, is that increasing? Or maybe even thinking instead, I'm going to buy a cheaper investment property?

• 43:31Speaker 03

  You know, I see a lot of number running on, on those kind of concepts. And what I end up seeing is a lot of kind of false starts on that because a lot of times the numbers don't work out like people think they are. You know, construction costs are still very expensive.

• 43:45Speaker 00

  Yes.

• 43:46Speaker 03

  And so when you start talking the ADU route, I wouldn't want to talk anybody out of it. I'd want to encourage them and, and go through the homework to see, does it pencil? But a lot of times what I end up seeing is just the, simply the cost of construction to get that done and the time involved and the hassle involved. It doesn't pay off as big a lot of times as people may think, at least in this market, you know, in more of a vacation rental market, um, where you can ban a lot higher rents through short-term rental rates and things like that. I think that that ADU concept plays a lot better.

• 44:15Speaker 00

  So, you know, you've heard the, you know, uh, marry the house, date the rate. You've heard that?

• 44:19Speaker 03

  Oh, yeah.

• 44:19Speaker 00

  I mean, that's, that's, that's the common thing I've heard. So like in that situation, you can almost say like i- i- if instead of doing ADU route, buy the house, maybe if you're going to have an in-laws live with you or something, buy a house that is accommodating to that, even though your interest rate's higher, even though you're going to pay a little extra in interest, when the rates come down, you refinance, um, that kind of a thought process.

• 44:41Speaker 03

  We almost always see that being the case. So, uh, with a HELOC or with any kind of second, uh, subordinate financing that you put on the, that you're the, the property, you are going to pay a higher interest rate even still for that. So you're not going to pay current rates, you're going to pay another two or three percent for that. And that's where it makes it difficult to pencil. You start to, to realize really my best strategy is to get a new first mortgage and you go, well, hold on, I have a three percent mortgage right now. What do I do about that? Well, that, that is where we have a lot of people sitting on the sidelines with these great ideas that they want to execute on and, and just having interest rates where they are, are just kind of holding back a little of that ambition when they start to actually pencil it out. It doesn't work out as well as maybe they're imagining, but we're not far off. I don't think we're far off.

• 45:24Speaker 03

  I think that's a very small interest rate decrease would start to improve that as a possibility.

• 45:30Speaker 00

  And if ADUs are way too expensive, tough sheds at Home Depot?

• 45:34Speaker 02

  I saw some.

• 45:34Speaker 00

  You throw, yeah, I've seen, I've seen some TikTok videos. I mean.

• 45:37Speaker 02

  Yeah. Sorry, mom, we're going to have to downgrade.

• 45:40Speaker 00

  Yeah.

• 45:42Speaker 00

  So another question along the same lines as far as interest rates and kind of some of the people locked into different things, do you see a lot more contingent offers needing to be, you know, part of the process because, you know, not wanting to get stuck in a situation? Do you think it increases contingent offers?

• 45:58Speaker 03

  I don't know that that's increased. I think that that, I'd love to see the stat on that myself. I don't know that off the top of my head. And I think that the feel of it anecdotally, I would say that it's about the same, that there are the same, generally the same percentage of buyers, sellers are trying to navigate this concept of I don't want to move twice. I don't want to move into rental. I want to move from one house to the next. And so that's what drives that contingent offer.

• 46:22Speaker 00

  Yeah.

• 46:22Speaker 03

  I will say that, you know, the inventory has grown quite a bit here lately in our local market. And so I think sellers are probably a little more open to a contingent offer for those buyers who are wondering if it's possible or not. I'd say it's possible. Give it a shot.

• 46:34Speaker 00

  Maybe not rock bottom, but you might have a little bit of leverage.

• 46:36Speaker 03

  I wouldn't say low bottom, but if you're going in with a contingent offer, you probably have a really good chance.

• 46:40Speaker 00

  Yeah. Well, thank you very much. Again, that's Scott Hanson. He is CEO of Level One Financial, bringing his 20 years of experience to our listeners. Thank you very much for coming on and sharing. Excited to hear about your travel that you have planned in September. We'll hear more about that later. But thank you, listeners, for making Money Wise what it is. Be smart, be safe, be money wise.