The Borrow Smart Chronicles
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The Borrow Smart Chronicles - EPR and Real Estate Wealth

The Borrow Smart Chronicles - EPR and Real Estate Wealth

Episode 1

Todd Ballenger
November 10, 2023

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"The magic you are looking for is found
in the work you are avoiding"

Robert Frost

We update this quarterly, but it ultimately shows the incredible growth of Assets in the four main categories (Cash/Bond/Equities/Housing) with Housing/Equities often trading as the largest total asset class. If you are a lender, you have the opportunity to participate in the $45 Trillion in real estate wealth that needs active management to help consumers minimize their cost of ownership while maximizing their potential return.

a BORROW SMART CONCEPT
Why is EPR™ Important?

It’s all about EPR™ - Effective Percentage Rate™ Whether you are new or old to this concept, it a a critical part of liability management.

Listen in on a conversation about using EPR™ - Effective Percentage Rate™ to effectively help a consumer pick their own rate using the link below.

Follow along with our EPR discussion: LINK to EXCEL CALCULATOR

Follow along with a coaching call where we talk about the Pick Your Rate Strategy: LINK to HIVE CALL

LIABILITIES
What’s Happening.

*Over 86,000 jobs were lost during the 2007 Great Financial Crisis; expectations of 84,000 jobs will be lost during this one, and we are in much worse conditions now than we were in 2007 when rates were already coming down. While this is painful, there will be fewer people doing more business next year… if we do ugly napkin math of $1.95T done by 70,000 fewer producers that’s an 83% increase in effective business for those remaining in 2024.

other countries have started cutting rates to get ahead of the FED

expectations are for 3–4 rate cuts next year

rates trending toward 6’s and then 5’s over the next two years

these lower rates will help unlock pent-up demand

the available business per last LO standing will go up next year

Here’s a production chart of LO data I plugged into ChatGPT:

majority of loan officers doing 1.4 transactions per month right now

5.5% is where the magic happens

main liability to manage: the mortgage, Overall debt service is low, as are delinquencies

average US rate is 3.6% but that gap will close in time

old loans are being paid off, increasing average coupon rates

this old debt at low rates gets paid off through life events

how low will we go, expectations are to eventually return to 2.5%

average key durable goods costs rising for consumers

mortgage are the place to manage for wealth creation

REAL ESTATE
What’s Happening?

improvement from prior week - mainly lower rate headlines

real estate, the biggest driver of recent wealth, is moving to record highs

last 3 years saw homeowners increase their wealth by $12 Trillion

median list prices are coming down

this means a 1% drop will add back 5 Million Buyers

real wages aren’t growing fast enough to keep up with housing

back to an all-time high in house prices

the purchase trend is down for now, but like a ball being held under water

there is a big gap in cost to buy versus renting, less attractive to buy a first home

low inventory and high equity all working to keep house prices higher for longer

ASSETS
What’s Happening?

over the long run stocks go up - financial advisors focus on the long run, and lenders should too - focus on the 50+ years they’ll own a home, not the current transaction