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Barry Habib, CEO of MBS Highway, TV commentator and author, made his return to the Mortgage Leadership Outlook on Wednesday. Habib and series' host Andrew Berman, head of engagement and outreach for National Mortgage Professional magazine discussed the possible impacts on the housing industry following the 2020 elections and 2021 predictions on rates. In an extensive interview, Habib also shared lessons for mortgage professionals from his newest book Money in the Streets.
Habib is an American entrepreneur and frequent media resource and appears monthly on CNBC and FOX. MBS Highway is a company and platform that helps mortgage professionals and real estate agents articulate the opportunity in the housing market for their clients, along with a better understanding of the interest rate environment.
Highlights from the interview:
- “The real concern was if Joe Biden were to win and the Democrats had control of the Senate as well. Then, it would probably be a clear path to implement some of the proposals that were scaring the bond market and the stock market,” said Habib.
- “If you’ve noticed of late, you’ve seen stock prices on the downside. You’ve seen interest rates start to increase. That’s because there were fears of a lot of spending plans that might be difficult to be sustainable. The big one for the stock market was fear of the increase in taxes.”
- “When you take a look at what used to be the great recession that turned into the Great Depression in the 1940s, it was triggered by an increase in the tax rates, so that’s what the big fear was. One of the fears also was the capital gains rate, which currently the top … rate is at 23.8% [and] would be at an excess of 45%. So, the thought was a lot of people would try to exit [by] the end of the year and save over 20% or preserve over 20% of their profit instead of paying it in taxes … in January 2021.”
- “The other thing that could’ve affected the rally in the stock market and bond market was the proposal for a tax credit to purchase a home. In 2010, in an effort to spur the housing market, a tax credit was issued. So, people who were qualified and want to buy a home, … had to rush to purchase a home.” Habib added that all the credit did was take the purchase that would have happened over the summer of 2010 and moved it to the spring of 2010, leaving a void in the summer. “Meanwhile, by rushing all of those people in, it actually pushed home prices higher. This is a market where the housing market was soft and where you didn’t have inventory for a period of time because there was a rush of buyers who had a deadline to meet. Sellers knew that. They held firm on their prices, [which] went up. After the tax break was up, you saw home prices decline rather precipitously. People lost so much money, more money than they gained on the tax credit.”
- “Now the idea is far more dangerous because we have a super-hot housing market and no inventory to begin with. This would … exacerbate a shortage of inventory and home prices would rise. It would be a big mistake. There is a lot of relief out there that if the Senate is indeed controlled by the Republicans, these things wouldn’t come to be. I’m not trying to be political; I’m just saying what the markets’ sentiment would be.”
- “What [R. Christopher Whalen] has to contemplate is capacity,” said Habib, in response to Whalen’s appearance on MLO, where he predicted rates in the 1% range for 2021. “The same reason that we don’t see interest rates much below where they are right now just because you can’t fit it into the pipeline, is probably some of the obstacles that we will face next year.”
- “When we look at a 3% environment there are literally 20 million eligible transactions for refinance right now. We should consider that currently 70% of all mortgages have a rate below 4.5% and that number goes up every day. Every time somebody does a refinance, they take somebody from above 4.5% to below 4.5%. That number starts going up so there’s going to be more than 70% as time goes on. That means that the marketplace at around three-and-a-quarter to three-and-three-quarters, you’ll start to see a significant slowdown in … refinance applications.”
- “Don’t be fooled when you see Personal Consumption Expenditure or Consumer Price Index reports showing inflation on a year-over-year basis as mild. Yeah, it’s mild but look at the last four months. The last four months, which no one is looking at, [both have] really risen. If that trend does continue, you’re going to start to see rates have to move up in order to compensate investors for the additional inflation, which erodes the buying power of the return that they receive.”
Check out the full interview between Habib and Berman below.
Click here to check out last week's episode of the Mortgage Leadership Outlook featuring Alec Hanson. Previous guests include Robert Broeksmit, Josh Friend, Joe Dahleen, Tim Nguyen, Kristy Fercho, Tony Thompson, Mat Ishbia, David Luna, Barry Habib, Rob Chrisman and more.
See all the interviews from the Mortgage Leadership Outlook series on its YouTube channel.