My own parents, they bought a house in Greenwood Lake, New York, in 1983 for $62,000. Yes, their mortgage rate was something like 13 and a half percent, but only one of them needed to work at the time. My dad was an NYPD detective. My mom didn't even have to work at the. At that time. And they were able to make do without any issue whatsoever. And that house today, I looked the other day on Zillow, is valued at $650,000.

I know, it's crazy.

You know, like, that's just. That's not something that anyone under the age of 40 could even, at this rate, even envision, right? So I think you have sort of a collective malaise that this does start to affect people within, you know, the. The solution I know people don't want to hear it is you need to build more. And if that means incentivizing builders, yeah, you should do it. You should absolutely do it. And that's something that a lot of existing homeowners don't want.

Well, hello, everybody. Welcome to another episode of the Texas Real Estate and Finance Podcast. I'm your host, Mike Mills, a North Texas mortgage banker with Genuine Financial. And today, I am not going to bore you with a long intro and silly pop culture references because we're going to jump right into it because we got a ton of stuff to cover today, and I want to be respectful of my guest time. But of course, if you like what you're hearing in these conversations every week, hit that like or subscribe button. I greatly appreciate it if you did. And if you're a Realtor and you need someone to help with a difficult loan scenario, give me a shout. I'm primarily a mortgage guy that plays pretend on the Internet a couple times a week, but my guest today is the real deal. I come on here a couple times a week to give my opinions on news stories that I often read put out by this guy and his team at the nation's number one news source for all things housing and real estate. So who better to hear from about what to expect for 20, 25 than this guy right here? So please do me a favor and welcome the managing editor of Housing Wire and a dad soon to be on parental leave for the holidays, the one and only Mr. James Climate. James, how we doing, sir?

Good, man, good. Thanks for having me on. Appreciate it.

You got it. You got it. No problem. Okay, so let's. Let's kind of jump right into it a little bit because I want to talk about, you know, obviously we had a massive election that just took place and, you know, things have changed quite a bit from where they were. And everybody's, you know, whether, whatever side of the aisle you're on, you're happy, you're mad, whatever it is, but here we are. So. And what we care about is, you know, what these policies are going to do as it relates to housing. Okay. So I want to kind of start there just to get an idea of, you know, what, what you're seeing and what you're thinking is going to occur, because I do think that it is going to have some impact. So. So recently one of your reporters, Sarah Walak, she was talking about, specifically about federal land and some of the, some of the ideas being tossed out there about what to do with different types of federal land and where they're looking at it. So I want to get your thoughts on what happened with the election as far as, you know, where we think Trump's going to take housing, what, what policies he's going to put into play. Like, what are you hearing out there right now?

Yeah, I mean, I wish that we could point to the Trump campaign and say, aha, here are some big policy proposals that we can analyze and make very smart judgments on. But the reality is he said very little about housing during the campaign. Most of the comments that he made were focused on immigration and tariffs, which obviously intersect somewhat with housing, but they're not exactly the same. But that's it. I think there are a few key issues that he's going to focus on. And I just want to start with the elephant in the room, which is Fannie Mae and Freddie Mac. There's a lot of interest in Libertarian and Wall street circles to remove the GSEs from conservatorship. And even though the Republicans control the White House, they control both houses of Congress and the Supreme Court, I think it's going to be immensely challenging for them to execute on something like this. And that said, if they were to do it, I think they would have to do it under the current congressional charter, which would maintain the implicit government guarantee. And that's super important. And the reason I say this is if you try to change the charter and remove them, say you want to get rid of the public sector mission of Fannie and Freddie. I just don't think you have the votes in Congress, even though you do have Republican majorities in both the Senate and the House. And the other thing to consider here is, like, the GSEs bring in millions of, I'm sorry, billions of dollars a year to the government, they make a profit and, and you've got spend happy politicians on both sides and you have relatively low risk assets because the credit box is, I think it's fair to say, relatively narrow. And so I just don't see a whole lot of interest because politically it doesn't make a ton of sense. Nobody's going to be like, oh, thank God you got Fannied Freddie out of a conservatorship. And now housing is more expensive for me and more difficult for me to obtain. Yeah, where do we, where do we find you in the ballot box? Right. So I just, I don't see that happening in the immediate term. That said, you have a lot of shareholders from way back when. John Paulson, Bill Ackman, they could push for it, Mark Calabri and others, you know, they've always said accurately that this is not supposed to be a permanent situation, but I think it would be political unpopular. And you still need to get about $80 billion more in capitalization with Fannie and Freddie. And 2027 at the very earliest would be my prediction, if it even happens at all. So that's the first one, because you can't talk about housing without Fannie and Freddie. The second big thing out there, a little bit more for the real estate crowd, is the doj. And if you look at where Joe Biden has been with the doj, they've been focused very heavily on steering or this idea of steering, a lot of people in the real estate space would even dispute that there's any steering whatsoever. I don't agree. Personally, I think it's illogical to think that there's no steering whatsoever. But that said, if you look at the letters of interest that the DOJ has filed in a lot of these commission lawsuits.

Real quick, if you don't mind. Sorry, I don't mean to cut you off. But real fast, just for anybody that, you know, hears the word steering and doesn't fully understand what you mean by that, explain what that is. Just so anybody understands, you're essentially trying.

To push people towards certain communities, certain neighborhoods, certain homes, either because you have a financial incentive or because you have some explicit or implicit bias. So a couple years back, there was a big investigation in Long island where a bunch of nonprofits hired testers to work with real estate agents and, and often these agents would try to take them to communities where there were more black people or more people of Hispanic origin, et cetera, et cetera. In other potential cases, it could be you bring people to certain homes because Your commission would be higher if they were to buy that home. So that's the idea of steering. And DOJ has been particularly interested specifically as it relates to these commission lawsuits in that they believe that agents have in unfair incentive to bring people to homes in which they would have higher rates of compensation.

Yeah, and just so, any, just so everybody knows too, when it comes to steering specifically, I think, you know, because it's different all around the country. You know, it depends on where you live and the motivations behind it. And there are parts of the country where, you know, you're, you're pushing certain groups to certain spots. You know, I, I would say more often than not, it revolves around compensation. The second one that you mentioned, because of what you get offered, whether it be in new builds or whether it be, you know, certain neighborhoods or whatever, as, as commission based. But, but there are circumstances where that occurs. And obviously, you know, you don't want that to, to be the case. And so these are things that do need to be looked into. But, you know, if anybody's out there saying, well, I don't see that in my market, okay, well that's fair. You may not, but that doesn't mean it's not happening. It just means it's not happening where you're at.

Yeah, exactly. And I think history has shown us that the Trump administration would be willing to rip up an agreement that a Biden DOJ had struck with NAR or any other group as it relates to potential disparate impacts. And so even if the Biden administration does pursue, say. Well, let's just say that they don't believe that the settlement agreements go far enough and that they don't care if you can't have commission broken out in the MLS's. They don't want it there at all. Right. They don't want it. Any presumption that commissions have been predetermined before a buyer and a seller negotiate. Right. They could, that could get blown up, ripped up, thrown out the window on day one when Trump gets into office. So I don't expect there's going to be a lot of action regarding buyer compensation over the next couple months, maybe even a couple years, especially given that commission rates haven't really changed. Despite all of the noise, all of the hoopla around the changes to buyer agency agreements, I do think that there's going to be a big battle regarding clear cooperation. This is one of the big policies under NAR right now. There are some large brokerages and some luxury focused agents who care about or Say they care about client privacy and they think that clients should be able to market in whatever way they want to do it. And that having the stipulation that you have to list a property on the MLS within 24 hours of any kind of marketing, even if you put a pamphlet up at your local church, is something that they say is unfair and, and shouldn't be the law of the land, effectively for realtors. So I think that's going to be the next battle and that could massively shape what MLS look like. The MLS are kind of the bedrock of real estate transactions and marketing in America. They were. They were. Yeah. I mean, you could absolutely see a scenario in which certain brokerages have their own closed network, you know, kind of quasi MLs, you know, compass is one that's already trying to do something like it with Compass exclusives. And whether that's good for the customer, I think is very debatable.

But I think there is, I don't think it's debatable. I think it's bad.

Well, yeah, Robert Refkin would disagree with you. But, you know, the fact remains that if you have something, a system other than the MLS's, are you going to a model that looks a little bit more like Australia, that looks a little bit more like England? Are you looking at, you know, different structures in real estate? And that could have a lot of second order and third order effects for real estate agents if it comes to pass. So I think that's the big thing that I would be focused on if I were an agent over the next couple years.

Yeah, that, that whole piece right there, you know, has always been concerning to me. Like I, you know, we, last time you were on, we talked a lot about the NAR stuff and you know, I, I still operate from a place where, you know, I don't think those things organically show up on their own. I think that that entire thing was driven, buy some larger money interest that we're trying to maybe get into the real estate market a little bit more than they had in the past. And I think that, that, that continues. And, and you know, I don't personally think that having closed networks of, of homes for sale where only certain people have access to them is, is not good. I mean, look at, you know, look what's happened in the stock market, right, where these dark pools exist, where people trade before and after. Because if you have access to that information, you have access to that network of people because of your wealth or whatever the case may be, then you get a head start above everybody else. And that's just not fair. So, but the downside to that is that when you centralize it like they want to do with, with like a homes.com or, or whatever the case may be, when that starts to come into place and you have one entity that controls all of it, well, then you get into monopoly situations. And so I think there's, you know, there's, there's a lot of issues when it comes to that on, on where these homes are going to be listed and who has access to them. And I do think, you know, that will be a major thing that, that would be great for the Department of Justice to address. But I also think that for whatever reason, even though housing affordability seems to be a major crisis in the country right now, and I think every person out there, you know, when they, when they voted this year, had the economy on their brain as number one. I mean, there were other issues, of course, and you know, that get sensationalized. But, but ultimately I think, you know, it's the old Carville thing. Like, it's the economy, stupid. Like, that's what people are upset about. Prices are too high, rates are their, their, their pockets getting smaller every single day. And they're upset about it whether you want to blame whoever you want to blame it on. But that's, that's what they voted about.

And people always go with their wallets, right?

Yes, absolutely. So I think that's where, you know, probably a lot of the focus will be on with the administration especially. I don't, I don't know that they'll, they'll get right after housing. I wish that they would, but I don't, I don't think that they will. One of the things that's been proposed to, and like I said, Sarah Wallach wrote this article recently about building on federal land. So, you know, things like this, and I want your opinion on this. But when I see stuff like this, I'm like, is that a problem? Is that, that's not something that I feel like is going to address the issue because you're now making federal land available to private companies to build on? Well, a, Are they going to build that type of houses that we need, which is affordable homes, or are they just going to build either McMansions again or multi unit homes that are just going to be available for rent? And when you look at federal land itself, most of it is rural. There are some in metro areas, but that's, we need the housing. We don't need housing in, in Montana, you know, That's. That's not the. The issue here. We need it in, you know, in Chicago, and we need it in Atlanta. We need it in Dallas. That's where we need these homes. So, you know, is that I look at that and I go, I. I don't think that solves any problems, really. I think it's a. It sounds good. It. You know, even because both Republicans and Democrats have pushed this forward, this isn't just a Trump thing. This. The Biden administration is looking at it, too. I don't think that solves the problem. What are your thoughts on that?

No, I mean. Okay, so let's theorize here. Let's say they do it right, and they have a very clear, very coherent policy in which they can say, okay, Mr. Builder, we're going to lease you this land, this federal land, for a dollar for the next 99 years so that your cost basis on acquisition is effectively nothing. Right. Like an incredible sweetheart deal. You would still need to ensure that there is adequate infrastructure. And I don't just mean power lines and sewers and water. And you need schools, you need jobs, you need communities where people feel like they have opportunity to get ahead. You build something in the middle of nowhere in Nevada. Well, I mean, there's tons of property in America right now where you can buy a home for 75, $80,000, and nobody wants to. Right? So starting from scratch in the middle of the wilderness doesn't really strike me as solving a problem that currently exists. Now, are there ways in which you can do it? Yes, there are. There is federal land in every city in America. There is federal land in every county in America. If you were to look at Chicago, if you were to look at New York, Clark county, where Las Vegas is Louisiana, there's a lot of federal land.

And.

And if the federal government were really serious about it and said, you know what? We're looking at the housing that's even on our own federal land. Nycha in New York. There are federal areas in the other cities as well. And they said, we're gonna reimagine this and we're gonna do it way better than it's ever been done before. And we're gonna do it with actual density. You could build probably, I don't know, 50,000 units or more pretty easily on a lot of these properties. There's already infrastructure set up to handle that kind of, you know, development. But who's going to do that? Like, you can't do that now. Every neighbor around them is going to scream bloody murder. Nobody Wants, you know, more high rises with 50 even in the city. I live in New York and people complain about buildings that are too tall in New York and it's like, what are you talking about? Like, yeah, move to, yeah, I don't know, move to Mississippi if this is a problem. But anyway, my point being like NIMBYism is going to be an issue in rural areas in which there is no housing and it's going to be an issue in the big cities as well. So this isn't solving a problem. I think if they really wanted to look hard at developing land, they should look at low income housing tax credits. They should look at policies that will permit developers to build much bigger, much more dense housing, allow townhouses as, as of right. In all of America you should have relaxed zoning federally, statewide, whatever you want to do. If you want to tie it to community block grants or some other form, whatever. But you need more density in areas where people actually want to live, not people where nobody wants to live.

Yeah, well. And you have an issue right now where another article Logan Monami posted recently about how housing starts at recession levels right now because there is, there's basically no demand simply because, not because people, when people say there's no demand, I, it's very difficult to parse that out because there is demand. But there is no demand for a $450,000 house at a 7% interest rate. Right. The demand for that does not exist. The demand for $130,000 house at a reasonable, even a 6% interest rate is there, but the demand for that $400,000 house doesn't exist. And because of that, housing starts are well below, you know, where they would be. And when you look at existing homes, because so many people right now are locked into the. I got a 3% rate, I bought my house for $300,000. Now it's worth $500,000. And if I wanted to move and upgrade, I've got to go buy a $700,000 house at 7%. Well, I don't want to do that. Right.

And my wages haven't gone up that high.

Correct. My wages have not. Regardless of what. Oh, wages are increasing. Okay, well the wage gap is massive to begin with. So, you know, just a little small bump is going to help. But, but because of that, builders aren't building. Because regardless of what anybody may think, you're a builder because you're trying to make money. You're a business that's trying to earn a profit. And if you cannot turn a profit, then you are not going to build until you know that you can. And so until we, you know, and I, I, I use the word subsidies and people get, you know, upset about it. But I do believe that there has to be some level of subsidies involved with these builders if your goal is truly to build affordable housing. Because we already give subsidies to oil and gas industries, we give subsidies to farmers, we give subsidies to all kinds of industries all over the country. And the home ownership rate in America is starting to decline. And that has been the thing that has driven our economy and the United States for years and years and years because of all of the spending and economics all focused on housing, whether it be repairs and upgrades and furniture and you know, family units and all that kind of stuff, that's been the thing that's driven our economy, you know, from day one. And to see that thing start to slip away because everything has just been so incredibly expensive. I think it's the supply side. And you don't want to hear that if you own your home because you don't want your home going down in 20 or 30% of value. Like you don't want that to happen. But at the same time it's become a haves and have nots thing. And that's, that's as an industry in real estate and mortgage, that should be a concern to us because when the pool of buyers begins to shrink and becomes less and less, then our industry is also going to shrink.

I find it very shortsighted that a lot of real estate agents and loan officers are, they cheer that home prices are higher. And you know, I know that means that the deal, the individual deal that you're able to do means you have a higher commission. But if you're thinking as a savvy business entrepreneur, you should want more deals at a lower comp, that is a much health, that's one globally a better, a better outcome for the society. You shouldn't have situations where my wife and I make pretty good living and, and we thought, should we have a even one kid? You know, most of our friends don't.

Yeah.

And it's because they look around, think, wait, I'm sorry, you want me to pay a million dollars for a 1,000 square foot home? That's crazy.

Rates in the US have fallen off.

A cliff off and they have all over the place. It's not just the US And I, I don't mean to catastrophize this or you know, suggest like my own situation is representative of everyone out there. That's not Obviously the case, but when you add the fact that everything is way more expensive, and you also have the reference from your own parents. My own parents, they bought a house in Greenwood Lake, New York, in 1983 for $62,000. Yes. Their mortgage rate was something like 13 and a half percent, but only one of them needed to work at the time. My dad was an NYPD detective. My mom didn't even have to work at the. At that time. And they were able to make do without any issue whatsoever. And that house today, I looked the other day on Zillow, is valued at $650,000. I know, it's crazy. You know, like, that's just. That's not something that anyone under the age of 40 could, even, at this rate, even envision. Right. So I think you have sort of a collective malaise that this does start to affect people within. And, you know, the. The solution I know people don't want to hear it is you need to build more. And if that means incentivizing builders, yeah, you should do it. You should absolutely do it. And that's something that a lot of existing homeowners don't want.

Yeah, well, everybody's concerned about their value going down, and I understand it, like, I really do. But, you know, one thing that I hear in our industry all the time, and I hear from realtors and lenders, is, you know, interest rates were 18% in the 80s, and people still bought houses. I'm like, okay, yeah, that's right. But the average house in the 1980s was $70,000. Yeah, right. The average house today is $450,000. And when you look at the difference between the income, what they were making, and you factor in inflation, it's.

It's not like seven times. Yeah.

Yes. So it's a massive gap, and that's why less people are having kids, because everything is so expensive. Right. And now where I also get frustrated is. Is. And you guys don't do this. But when I say the media, some of the corporate media, when I look at the Wall Street Journal and the. And some of the stuff they put out, and they say things like, the next generation doesn't want to own homes. They want to be mobile, and they want to be able to live here and live there and go here and. And not be tied down to any one place. And to. To an extent, that might be true, but it's only true. And you can speak to this until you have kids. And then once you have kids and you have a family being somewhere and staying in that place becomes very important. And if you don't own your home and you don't control what you pay for it, and you, you don't manage, you know, the outflows on your monthly budget because a company, you know, that owns your property, owns your town home or your condo or your apartment or whatever it is, comes across the board and raises rent 10%, you know, and you can't do anything about it because A company like RealPage owns the software and they do it to everybody. And you, you then now have to move somewhere else. That's not, that's not what you want. You want people to have the ability to put roots down because that's what develops communities, that's what makes school systems functional. That's what, that's what our entire country's always been built on. And we seem to be pushing more and more away from that. And then we're being told, well, that's because people don't want it, so rent this apartment, you'll be happy. And it's like, I mean, sometimes, but I don't think that's the, the, the total.

Yeah, I mean, we would love to buy here in Brooklyn where we live, but we, right now we rent a, you know, a two bedroom apartment and something comparable on, on the sales market would cost about $1.1 million. And one of the major reasons, the primary reason is we just haven't built enough in the cities in which people have historically been living in for generations. We are building more in the exurbs. We're building more in Texas, we're building more in Florida. These are actually areas in which we see more inventory than we did in 2019. So there are some positives there, but I mean, there are not a lot of people that have roots in the exurbs. Right. Like, by definition, these are new suburbs, these are new areas. Now, we could be talking a totally different conversation in 30, 40, 50 years when there is a new generation, but that is going to be a smaller generation. And, and we do have to think about the consequences of not, you know, having any semblance of affordability for literally 20 years. Right. So, yeah, that's, that's going to affect other parts of the economy as well.

Yeah. Let's talk about Trump's impact on rates, because I think in the, in the grand scheme, I think there was this thought that in the beginning that, oh, he's going to make sure that rates come lower. And I think he might have even said that at some point. He did. But yeah, he literally said that. But, you know, if you live in our world and you know how this works, the President has literally no impact on interest rates. This is all determined, at least by the Fed, as far as the federal funds rate is concerned. The fed funds rate, which is, if anybody doesn't understand this, is the borrowing rate between banks and the Fed that they work off of. And that filters down to things like credit cards and auto loans, but it does not impact mortgage rates. And in fact, when Trump got elected, rates went up pretty substantially right after the fact. And I don't want to say it's directly related to him, but what it's related to is, in my opinion, at least it's related to our debt. Right now we sit at $36 trillion in federal debt, and in order to issue that debt and get that bought, we have to issue treasuries. And 10 year treasuries tie directly to mortgage rates because they're basically competing one another for investors. And because of that, when you're issuing these bonds to try to satisfy your debt or raise money, essentially in order to make it attractive to investors, you have to give a big yield. You have to show them that they can make money off of this. So even when the Fed comes out and says we're lowering rates, that's fine, and they're going to continue doing that, by the way, good or bad, I don't know yet, but they're going to continue doing this. But it's a very real scenario that you could see rates stay where they're at. I don't, I don't feel like they're going to go up. I, I really don't think that that's going to be, or at least dramatically. But I also don't think you're going to see, you know, 4% rates by the end of the, by the end of next year either. So, you know, what are your, what are your thoughts on, you know, his impact on the mortgage rates and on the bond market? Because ideally they're thinking, okay, he's going to spend more, we're going to have more tax cuts, our debt's going to go up. Maybe that's true. It's been shown in every administration for the last 15 years that this has been the case. So what are you guys seeing about that?

So, yeah, I mean, right now the bond market is responding to this idea that we're going to have the 2017 tax cuts that are going to be rude, most likely under a similar framework. So that would be inflationary, right? Tariffs, similar deal Right. If you do enact large scale tariffs in this country, you are going to be increasing costs. So that's another reason that the bond markets have responded in the way that they have. As you mentioned, Mike, you know, Trump has actually said, I have the quote somewhere, if you give me just a sec here. He actually said in September, and I believe it was a rally, he said, here we go. We will drive down the rates so you will be able to pay 2% again and we will be able to finance or refinance your homes drastically.

So they can't do that.

He has also in the past said that he wants to directly control interest rates. You know, and instead of having a Fed board and Jerome Powell or, you know, whomever the, the next Fed chair ends up being after Powell's term is up or something happens at this point, he can't do that. The only reason to consider 4% mortgage rates sometime next year would be if the economy really crashes.

Yes.

And the Fed has to respond by drastically reducing the federal funds rate and doing so very quickly. The bigger problem with mortgage is it's not even so much the rate itself, it's that the bond market doesn't respond well to major shifts very quickly. Right. So if you go from what it was 8% to 6 and a half percent over the course of six months a year, that's fine. Investors roughly know what their yield is going to be. If you go from 2% to six and a half percent or 7% in a year, it screws everything up. And so you don't want these big swings. That's a bigger problem. I think one of the concerns is that you might have these big swings. I expect rates will probably be in the sixes next year. I'd be very surprised if it got into the fives. I don't see them going much higher than where they currently are. And they're as we speak, give or take, right around 7:1 right now. Right.

So yeah, yeah, they're right around 7.

No, it's not great. But the President just doesn't control interest rates. It's just their own direct actions that could potentially change how the bond market responds.

Well, and even, even, you know, he's mentioned things about, you know, not wanting Jerome Powell as the Fed chair. And you know, I actually got into an argument. But just, you know, on Twitter, I was having some conversations about this. I'm like the, the President cannot reappoint. I mean, he can appoint once the terms up, the idea of the Fed. And by the way, I'm Not a fan of the Fed and be real clear about that. But, but the idea of the Fed is that it is not politically driven means, meaning that once that person gets appointed, regardless of who the sitting President is or what Congress or the House is held, it doesn't matter. They make independent decisions, they serve out their term and then they either get re nominated or they move on. And they're supposed to act independently on their own. So a President can certainly put pressure. They can say things in the public, they can, you know, make reporters ask questions and point out information that, that puts pressure on the Fed. But at the end of the day, they cannot tell the Fed what to do, nor can he tell Jerome Po that he's not going to be there anymore. Jerome Powell has to make the decision. If he wanted to step down, he could, but he would have to make that decision. The President, President doesn't have the power. That's the entire reason that the Fed was created. Again, not a fan of the Fed, but that's, that's why they're there.

Right? I mean, if the President could control the Fed, you think we would have 7% interest rates before an election?

Yes. No, of course. Yeah, well, and everybody forgets Jerome Powell's a Republican. Like he's been a lifelong Republican.

He's not like some guy Greenpeace, you know, who they found at like a, you know, like a Wall street protest.

Yeah, yeah. Well, and another thing that's really affecting housing too. I mean, we look at, we talk about rates and of course that's what most consumers understand and, and, and really, you know, good or bad, that's what most realtors understand. But on the mortgage side of things, you know, we look at it a little differently because the costs to do a loan have gone dramatically through the roof. When you look at what's happened with insurance premiums, which is a cause of not just inflation, but you know, greater weather events that are causing these, you know, massive destruction areas all over the country. I mean, even just a standard tornado in the Midwest used to be a couple million dollars and now that's turning into an a billion dollar event strictly because of the cost of rebuilding. Everything has gone up so much and that cost gets spread. I mean, yeah, you may not live in North Carolina, you may not live in Florida and be impacted by the hurricane, but you're paying for it one way or another because that cost is being spread out amongst everybody else. So you have that then because of where the rates are. When you were talking earlier about, you know, the, the Rates making those massive shifts from 2% to 6% in a year, basically, or less than that. Now you have additional costs. Most loans these days are coming with discount points because the bank understands, and I tell my customers all the time, the bank makes money on servicing your loan, they don't make money on doing your loan. Okay. So if you're going to refinance that loan in two years, because right now you have a 7% rate and they get to maybe five and a half by the, you know, in a year or two, then the bank is not going to make enough money to justify that loan on the interest that you pay. So they're going to charge you points up front, basically to make sure that they, that they recoup a little of their costs knowing that you're going to refinance that loan. So goes back to that stability thing you were talking about when everybody says, hey, rates are going to come down, well then, yeah, you're going to get this 7% rate today because you're going to buy. But you know, I know you're going to refinance this loan, so I'm going to charge you a little bit more up front. So you got insurance costs, you got cost to originate the loan, and then you've got things like, you know, that you guys posted recently about the, the credit reporting starting to become more expensive as well. Yes. All of this stuff is starting to add to it and you're going, wait a minute, not only are the homes expensive and the rates are expensive, but everything built into buying a house has become more and more expensive.

Yeah, I mean, that's, that's kind of the reality, like life is never cheaper. Right. But, but I do think, at least on, on the insurance point, this is the big thing that isn't talked about enough. And you know, it's funny, the worst state in America to live in in terms of insurance is actually Oklahoma.

Oh, really? I did not know that. Because of the tornadoes.

No, not even the, I mean, yes, there are tornadoes and that is a contributing factor. But effectively the insurance companies can charge whatever they want. And so they have a very laissez faire attitude, whereas in other states they have heavily regulated and you know, the insurance companies are leaving because they can only charge a certain percentage per year to incur the risk. And the risk is never proportionate with the actual, you know, potential damage there. So, you know, in Florida, like, it's so third rail. Even if you wanted to charge the Floridian public what it would actually cost to insure for Hurricanes and other weather events. I mean, it would be hundreds of billions of dollars. Yeah, and what, like, does that mean just the average cost of insurance is $40,000 a year per person in Florida? Like, no, no, that's, that's not an economical possibility. Like, there's just no way. So, yeah, I mean, insurance is going to be an issue because a lot of deals are just straight up not going to pencil out. And that's partly because in mortgage, you know, there are debt to income ratios. The GSEs will not accept a loan if it's over a certain number. Same to some degree with government loans. And if you already have a public that is close to 50% on some of these loans, and then suddenly the insurance on a property goes up from $15,000 annually to $30,000 annually. I mean, it just doesn't the math. Doesn't math, as the kids say. So you're gonna have a lot of those issues, particularly in condo markets in the Southeast. So if you're looking to get an older condo in Florida, you're already dealing with a lot of issues related to some new condo rules because of the Surfside collapse a couple years ago. And then you also have the double whammy of insurance, to say nothing of, you know, the cost of financing an asset. It's going to be a really tough market in some areas. You mentioned some of the credit reporting issues. So FICO is increasing the cost of a score about 41% from 2024. And you might look at that.

Well, it's so much more expensive to pull credit now. I mean, it just costs so much more money to do it.

I think it's partly because people don't understand how it works because it is maybe purposefully complicated. Maybe it's just a coincidence or just sort of how the sausage is made. But when FICO raises their score from 350 to 495, people look at that and say, oh, it's like a dollar fifty. Like, so what? Like, who cares? But what it really means is that every other company that is downstream stream of FICO, so all of the credit reporting bureaus, Equifax, Experian, TransUnion and then Zactus, CIC and really all of these other companies that are accruing data on your credit, right? Like whether you paid your credit card or paid your medical bill or whatever, anyone in that realm looks at that and says, okay, so fico's going to be charging X percentage more. Well, we're not going to be taking a hit because FICO decided to raise their prices. So we're going to raise our prices commensurate with that or more. And people are going to get mad at FICO for raising their prices, not us raising it, you know, an extra 40% plus, you know, 10% padding on top of that. So it's not just that one company is doing it, it's that they all do it and everybody, it's like that Spider man meme where they're all like pointing at one another, you know.

Yeah, yeah.

And at the end of the day, it's not like you just pull credit once during the mortgage process for a single borrower. You're in most cases a mortgage lender, as you all know, Mike, is going to be pulling credit for a tri merge, which means all three bureaus, you're going to do it multiple times in a transaction. So we're looking at, let's just say for numbers sake, a hundred dollars. Now you're probably looking at, I would say 50% more in 20, 25 on average. And that's going to depend on, you know, various lenders and what their setup looks like. But it's going to go up for everybody. Now some lenders are big enough where they'll absorb that cost and use it as an opportunity to get business because others will have to charge the borrower up front, you know, to take that, to take that hit on credit. We'll see, we'll see, we'll see. But you know, it does, I think it gives a big advantage to the bigger companies that have more cash. And at the end of the day, the mortgage business is a cash business.

Yeah, well, and the thing just to be clear too, when you say, you know, we pull credit multiple times through the process, that is true to a certain extent. We, we do hard pulls usually because I don't usually have to pull more than once. But there are multiple soft checks along the way to make sure that they have an open new debt and things along those natures and those all cost money as well. So if anybody's sitting there going, no, no, no, you only pull credit once, that's true. But if, if you don't know the back end on how it works with processing and underwriting, there are multiple checks along the way right before closing. You know that you go through that are like soft pulls to make sure that nothing's changed and you get charged every step of that way. They're not, nothing's happening for free on that, which drives up the cost overall. One of the listeners pointed out something about Appraisal costs as well. And you're seeing, and all of this, that all these things compound on the, on each other. And what you're starting to see too is when the market depresses like it has, I don't mean dep depression, I just mean strengths as it has, appraisers go away, title companies go away, lenders go away, Realtors go away. And then in order to meet costs, because spreads are getting so tight, consolidation occurs. So when you start to have consolidation, then you have three or four companies that are in control or, you know, maybe more of that or in control of the vast majority of what is being handled as far as like in this case, appraisals, for example. Right. The individual appraiser who's running his own business, who isn't a part of a big amc, he can't stay in business or he has to join the AMC to make sure that he can keep paying his bills because there's so few transactions. And now you have these AMCs that control everything. And once that they get you in their little bucket, then those prices start to go up as well because everybody takes advantage of, hey, things are more expensive, we got to pay more. So now an appraisal that was $550, you know, maybe in, in 2020, is now 750 to a thousand dollars.

Right? Yeah. And then you also have to wonder about the qualitative issues there too. Right. So if you have an appraiser who used to be able to be a little bit more independent and price out jobs, you know, based on geographically where they are, what else they have going on, and now suddenly they're, they're in a situation where they have to accept whatever the AMC is letting them bid on and again, like, remind you that they have to win the bid. It's all a bidding system for amcs. Then they only have, you know, X amount of hours to do that appraiser, appraisal, and maybe they don't do it as thoroughly as they used to. So I think that that is also a concern.

Yeah, yeah, it's, it's affecting things. And this is all affordability issues and, you know, stuff that, you know, when you look on the grand scape, you know, just talking about, because we started this conversation on what Trump will or won't do in his, his administration. I don't think, honestly, I don't think he's focused on any of this at all. I think whoever he appoints to HUD or whatever they're, you know, whoever that ultimately ends up being is going to be the one that, that would be addressing these issues if they care about them too. But ultimately, at the end of the day, you know, there's no real plans in place to help with affordability. Rates are probably not coming down anytime soon and, and home prices are probably not coming down as well. So we're going to be in this, in this game for a while. So if there's any lenders out there or agents out there that are just like, we, we just need rates to come down and we're going to get back to 2021. You know, you, you got to reshape your plan there, because that's not happening.

I think there's, there's often this kind of popular fiction that because Trump is a real estate guy that he's, he's like hyper focused on real estate issues. I, I don't think that's the case at all.

No, no, I don't think so either. All right, let's talk a little bit about the trigger leads. We mentioned it a little bit ago. This is another one that just really, this is one that really pisses me off because nobody, except for the people that are doing this, want trigger leads. The consumer doesn't want trigger leads. The lenders don't want trigger leads. The realtors don't want trigger leads. Because when I pull someone's credit, I mean, I lit while we were sitting here, I literally got a text message from somebody whose credit I pulled yesterday and spoke to them last night at 7:00. We were going through their loan scenario. He just texted me and sent me an image of the 20 emails and text messages and everything that he's gotten in that amount of time from all of the lenders. Yeah, I'm probably lowballing it, but I haven't got to open it up yet. But from all of the people that are reaching out to him now, I understand, you know, like, look, we're all competing in this little place or whatever, but, but nobody wants this. And yet this bill gets put up, everybody's feeling like, okay, we're gonna do something about it. And then they, they're like, oh, we'll slow down. Right. What in the hell? Like, tell what happened with that.

Yeah. So why don't we start with kind of what, what's going on with the trigger lead bill in the first place and really how it all works. So I think an important place to start is what it is. Right. So it's, essentially, it occurs when a potential borrower's credit score is pulled for a new home application. So the credit bureaus sell this data to other companies interested in reaching the customer. So, you know, in most cases that's going to be a rival mortgage lender, usually consumer direct operations. There are some broker shops out there that do it, but there are other like big data companies that want to buy that as well for other purposes. And then you also have like lendingtree and nerdwallet and stuff like that. So they're all big buyers of these. The big bureau that is doing this right now is Experian. The others are not as big as they used to be. I think they've kind of seen the writing on the wall for a while because it is not a very positive customer interaction and they have other ways of making money on you. So they've really started to move away. Experian's the only big one right now that's doing a heavy load on trigger lead sales. So let's address this bill. So trigger leads, by the way, like they're legal. They are completely legal. And this is not a new practice, but it has become a little bit more prominent because of these technological advances. So back in the 1970s, you know, a trigger lead in kind of a classic sense was like direct mail. You would receive a physical piece of mail and you looked at the knee and I don't need this shit. And then you threw it out. And today you get a barrage of phone calls, you get a million text messages. And it's unrelated. I just like, I bought a house in 2021 and I got, I counted it, it was 106, I got 106 calls and texts. When my hard, hard poll happened and it was like, it was insane, you know, even for someone who's, you know, sort of in this industry. And, and so, you know, you basically have the current model where it's considered an opt out basis. So you have to go out of your way to remove yourself. Yeah, exactly. So the new bill, it's called Senate Amendment 2358. It is tied to basically the national defense spending bill. And what that would do. We'll get into that some, some of the Washington sausage making there in just a second. But, but essentially what it would do is it would require an opt in. So you would need, you would need an explicit permission to be sending calls and texts to the customer. However, if you did service or do the initial loan, you would still be permitted to solicit the borrower, so to speak.

Yeah, well, that makes sense. I mean, because if you've done it before. Yeah, yeah.

Like, you already have the customer in your files. Like, that doesn't seem particularly egregious. What the industry wants, the credit industry, I should say wants, is. Okay, guys, look, you're right. We understand this isn't something you love, not something you enjoy, but we're cool with doing texts. We'll agree not to do phone calls. So, Mike, you're in the mortgage space. Does that sound good enough? Like, is that something that you would find? No, no. I thought the texts were more annoying because the call, I could just, in the moment, like, you know, delete or not, but the text, like, I have to manually go through my phone and remove everything. And I just found it, like, a little bit more cumbersome and invasive. And I get so many. I. Not even that I get it, like, one from each, you know, potential lender. I get some, like, really weird, aggressive messages, too. Like, yes, you know, people were desperate, I guess.

I had somebody contact one of my borrowers that said that they were with another mortgage company. I won't say the name, that they were with their employment verification department and that they needed to contact them so they could get more information on verifying their employment. And he's like, is this from you? And I'm like, no, that's not. First off, it's not my company number two. We haven't even gotten to that place yet. This is just a reason for you to pick up the phone and call and be like, what do you need to verify? And they're like, oh, by the way, blah, blah, blah, blah. I mean, that's exactly what it is. I mean, it's so many tactics. It's like just using different ways to get people to dial the phone.

And so many of them were not even unfair. Like, outright lies.

Yeah, deceptive.

Yes, like, highly deceptive. And it's surprising that this is a practice that has been able to persist for so long, essentially unchecked. So there. There is real interest, I think, you know, even if the NBA and. And some of the other mortgage groups are not able to get this tied to the Defense act, in which, you know, we would probably see a law in the next couple weeks, they do plan to continue pursuing a real change to the current trigger lead, you know, framework. So that's positive. I. I think if I were to be. If I were to place a bet on it, I'd say there is a less than 50% chance that it happens at all this year.

Yeah.

So it's. It's got a shot. But, yeah, it's been moving in, in not the best direction. And that's mostly just because, like, no particular reason. It's just, you know, there, there's a lot of changes in Washington happening right now. You have new congressional leaders, you have just a new series of people. And, you know, they're subject to different kind of lobbying. They want some things. It's not like, just to be clear, like, the people who are running the House Services Committee or Financial Services Committee don't give a shit about the trigger leaf bill. Like, it's like number like 4, 459 of their biggest priorities. It's just one of many things that was attached to the defense spending bill. And that's what they really care about. And so they're going to try to carve some things out of it. They're going to try to keep some things in. And now it just becomes a game of who can get in the ear of whomever ends up replacing some of the outcoming members.

Well, and, and I would encourage everybody. And this was something I had a Michael Williams on a couple weeks back. And he, he's a lobbyist for Washington for the Mortgage Bankers Association. And you know, I asked him, like, what's the one thing, if you could change Washington, like, what would it be? And he's like, I wouldn't change Washington. I would, I would tell people that they need to get involved because to what you, to your point just now, when you're looking at, when you're a congressman or a senator or whatever, okay, you have a million things in front of you on a regular basis that you're dealing with, you know, depending on what committee you serve on and who your constituents are and all this kind of stuff. And so where they get most of their information is from people walking into their office, a lobbyist, somebody working for an association, saying, hey, here's an issue that we want you to address, right? Well, when Equifax and Experian and TransUnion have millions of dollars built into making sure the status quo is maintained, they're going to have physical people walking to those offices on a regular basis saying, this isn't a big issue. It's not a problem. Most people don't even, oh, you saw that thing go up here. This is why it's important, blah, blah, blah. And that, that congressman of that senator who, by the way, doesn't experience trigger leads because, you know, they're, they have a whole other way that they go about living their life so they don't deal with it on a regular basis. And so it's not, it doesn't become a priority for them. However, if their assistant says, I just got 50 emails from all of these mortgage professionals and consumers coming from our, our county saying this is driving us crazy. This has to stop, whatever, then they start to pay a little bit more attention to that because that could affect him getting reelected. Because that's the way if you want to affect change. You can't just sit back and wait for the people in Washington to do it, because they're only going to change the things that are right in front of their face. And if you're not out there actively putting that in front of their face, then it is what it is. So it's kind of one of those things where if you're a, you know, a leader of a mortgage company or if you're, you know, you're a real estate broker and you're sick and tired of your clients being inundated by this stuff, you need to start getting in the habit of sending emails to those people in Washington and saying, hey, look, this has to stop, because otherwise the money interests are always going to win out because they have the resources to keep people in front of them.

It does work. I mean, even on a local level, you know, I live in Brooklyn and, and I live in an area in which my, my vote individually probably doesn't make a whole lot of difference for congressional races or center races. But, you know, on the smaller scale, my city council member, he hears from me and, and they do respond, and they have a whole staff of people who do. And, and, you know, unless you make your voice heard, they're going to, they're going to hear from fico, they're going to hear from Experian, they're going to hear from Equifax, they're going to hear from TransUnion, and, you know, money talks. But ultimately, they care about the voters.

They do not.

In like, a classic sense, they care about the voter voting for them. I should clarify, not to be too cynical, but.

Yeah, yeah, no, it's okay. That's the reality of the situation. They just, they all want to get reelected. We got just a little bit of time left. I want to dive into AI a little bit. So I, when it comes to AI, I am very much a, a dork in this. I teach AI classes to realtors about how to use it in their business and how to, you know, take advantage of it. I'm not a person that believes, well, I'll parse this out a little bit. You can tell me your thoughts. But on the real estate side, when it comes to real estate agents, I do not envision a world in which AI is going to replace them by any stretch of the imagination because real estate is such a local business. It's so, you know, what street do you live on? What neighborhood are you in? And AI isn't to a place yet. I mean, maybe you could design a GPT to get something. But ultimately people want to talk to a human and say, hey, where should I live? What kind of house should I look into? That kind of thing. There'll be a role, but for the most part I don't think that's going to affect it. Now on the mortgage side of things, okay. I think we could see some dramatic impacts on what we do because our business is very much process oriented as it is. We get an application, we push, we pull credit, we check verifications of deposit through bank accounts, we, you know, we run AUS on a loan to make sure that it fits. You know, all of these things that occur through the process. There's an underwriter that reviews it and I've been barking from the mountaintop for like the last three years that guys, you know, this stuff is already coming, whether you realize it or you don't. And, and you can dive into what Rocket's done a little bit on this too because there's been such a shift of we don't need as many underwriters, we don't need as many processors. We have these systems that are starting to be built and built in to where as long as the regulators, Fannie, Freddy Hud will accept some of this and not see it as an issue, you know, depending on what kind of regulations they want to imply there, this is going to be something that very much impacts my business. I do believe like again on the real estate side, it's better to understand it and to know it. And I've spent a lot of time learning, you know, how to communicate with these different tools, how to use them effectively and showing others how to do it as well because I do think it can make a massive difference in your business. And I do think that what I do, which is an originator, I don't think my job's going away. I think my job will be devalued. I think that what I get compensated and how I get paid will go down. But I don't believe it's going to go away because we're still the ones having to get the fish in the boat, right? And as long as you're having to get the fish in the boat, then they need you. But if once that fish is in the boat and they got to clean it, then that, that could be done by a computer, unfortunately. So I think all of that's starting to have an impact and I, I don't think I'm being, you know, outlandish about what this is going to do. I think it's already starting to occur. But I think a lot of people have their head in the sand, especially in the mortgage industry, thinking that, oh, no, it's, you know, I'm good, I'm good. And I'm like, okay, I, I mean, right now, but just hang tight.

I think if you're in the mortgage industry and you look at AI and think, I'm absolutely okay, there's no threat here, everything is absolutely fine. You're probably the dinosaur and you're looking up and going, h, what's that?

Yeah, what's that? Asteroid.

Probably nothing. It's probably.

What's that? Fire in the sky? Yeah, yeah, yeah.

You know that, that's it. I, I, I FL agree. You know, at least on the mortgage side, I think we're going to see massive changes from AI. The bigger question is going to be, you know, we talked at the beginning of the program about kind of Trump and some policy perspective. This could be the big one that we didn't address yet, which is AI. And what I mean by that is he has a lot of people in his inner circle that are very pro AI, that think that this is something that could revolutionize American business, American ingenuity. This could be the next industrial revolution.

In America, revolutionize how the federal governments run. Because that's what Elon and Vivek are trying to do. And a lot of it revolves around AI, whether you put hud, you put.

The fhfa, you put Fannie and Freddie on blockchain. Watch how quickly title goes away. Watch how quickly appraisal changes. Look about the, you know, the third, you know, the counterparties, right? I mean, that's a radically different space. If you even change some of that composition now, I mean, that's a super complicated, difficult, nuanced thing to achieve. It would take a long time to do. But it's not like the technology doesn't exist to do it. Right. Yes, it's a human problem right now. So, but, but getting back to the original point here, if, if you are in mortgage, I think you look at Rocket, they've probably spent about $500 million on AI and related technologies in the last couple years, guaranteed rate now known as rate. I, I have a habit of just saying guaranteed rate, but they now go by rate. They spent about $100 million on sort of like an AI Los CRM engine. I know UWM has spent massive amounts of money on this. If you don't think that they're doing this and looking at their bottom line and thinking we've got about X amount of people on staff and we're getting better at this every day. Do we need X amount of people on staff? We probably need Y amount of people on staff. What that number is, I don't know. You know the, the guy who runs better.com, you know, they're obviously very tech focused. They're using AI. He said he thinks 99% of tasks in the next decade in mortgage are going to be AI built and operated and the human will be doing 1% of it.

Yep, I, I, I think that's optimistic.

I think it's optimistic if only because you still have too many guardrails and mortgages, too heavily regulated industry, even with the Trump administration coming in and presumably being a lot more hands off, at least as it comes to the CFPB and all that. You have a lot of ags out there in various states who are going to be looking at disparate impact and marketing and you know, whether they're, they're using big data sets to prevent people from getting opportunities that they should have, like there's still a lot of shit you need to figure out before you can just unleash AI. But it's here, it's going to happen. And I don't think these companies are spending all this money and not considering how to reduce their workforce because the biggest cost in mortgage, it's about 75% of their cost. Humans.

Yep.

And if you only need one or two underwriters who are looking and making sure that the file looks okay or you know that the process is, is hitting whatever federal standard is in place. You don't need 15 of them. You don't need 30 of them. You don't need 50 of them. You need a couple. Right. And then you can have a sales staff. I don't think that they're going to be getting 150 bps alone in 5 years and 10 years.

I agree.

But on the real estate side, yeah, I mean that's still a very, very different paradigm. And that's because the real estate agent remains the first point of contact in most situations and is still a little bit more of the Advisor and you cannot, you can't automate that. You can't automate. Hey, should I think about, you know, doing this or what about the school district or what happens when they counter, you know, with this kind of scenario? I mean, it can help with writing contracts, it can help with comps. There are a lot of, you'll be.

Able to work more efficiently. And that's like, we spend a lot of time, you know, I help agents actually design their own GPTs so they can do social media posts and write emails and text messages that are in their voice. And you know that they, they have the ability to streamline their functions. Brokerages are going to benefit. The ones that get on board at least are going to benefit greatly from the technology because it is going to drive costs of a lot of other things down, make their ability to get in front of more people more effective. Like, it will be a great benefit for a lot of them that embrace it. But you know, I think the average age of the realtor in the country is like 50 something and the average age, same thing. It's like they're not exactly, you know, embracing it. The ones that do will have a strategic advantage in the market for several years. But you know, there, there is still a lot of, I mean it's like the Internet from the 90s. I play this every time I teach a class. I play that video. I don't know if you've ever seen it where it's like Bryant Gumbel and, and like Katie Couric and they're talking about email and what's this a. With a circle symbol and what does that mean? And you know, they're like, I don't. What's this Internet thing? You know, and this was in 1995. And so that's where we're headed with this. But I think so many people still have their head in the sand and especially in our industry because, yeah, I agree it's not going to be 99%, you know, in five years or whatever it is, but there is going to be a dramatic shift and loan officers are still going to play a role, but our role is just going to be how do I get more people to pick up the phone and call me so I can consult them on this and then dump them into the AI system and let it go.

Yeah. And look, technology is only as good as the people who use it. And so if you give like a supercomputer to my dad who's 75 years old, like, right. It's, it's, you know, it's a coaster for his coffee. Like it's not, it's not going to matter. And as you rightly point out, you know, the average real estate agents like a 50 something year old lady, you know, in the middle of, middle of America. Right. You know, and mortgage is, is a, is a guy in his 50s as well. So. And that doesn't mean that people in their 50s or 60s can't and don't use advanced technologies to get better, but I'd say the minority of them probably do. And the majority of them are just like, okay, maybe there's a tool or two that I can use. But nobody wants to go full into the pool with AI right now in that demographic or those who do, it's, I'd say pretty rare. So, you know, there are tools out there. There's like, there's Re Alpha, there's modern realty, there's homa, you know, there's a bunch of pretty interesting ones. But I think you really have to squint or imagine a future 10, 15, 20 years down the road in which being a buyer in America means a couple other major things have changed. So open banking is the standard. It's not just a theoretical. It's like I have given my permissive consumer data to a couple banks and they do the whole process. There is an lo on that one end, there's an underwriter, but it's a really slim model and the costs are cheaper and that changes the counterparties. So I get to choose who I work with basically. And then on the real estate side you have automated forms and I submit that. And so it's sort of like maybe there's an advisor on the real estate side who works at like a, I don't know, an Ari Alpha, for example. It's just one of the startups out there that are kind of trying to apply. Their, their trade is like half bot, half agent. On the buy side there's a ton of them. Right. But none of them have really made huge headway. And that's because at the end of the day it's the same reason people don't even use discount brokers. Right. When I bought a house in Pennsylvania, you know, I used an agent because I mean the thinking at the time is like, I'm not paying for it, right. You know, or I'm not paying for it out of pocket for the most.

Part, by the way, you know, not there yet.

Yeah. And then on the, on the sell side, when I did sell that house, I played with this idea that I would sell it myself and that I could use my own knowledge of the market and my own, I'm in housing.

I do, I do this every day, right?

I can totally do this. And then at the end of the day I was like, you know what? I don't want to deal with people. I don't want to deal with the whole process. I don't want to have to write a contract and also hire a lawyer and do all that. And I ended up getting the top agent in the area who charged a full 6%, you know, and like, and I'm, I'm, I feel a lot more confident in my ability to navigate the system than the average seller or the average buyer. So you think that they're going to drop just to save money, that they're going to go from full service 6%, you know, agent, even down to a Redfin agent or you know, someone at like a, like a listing order only brokerage, even further down to using a freaking chatbot. Like no way. Absolutely no way. At least not for many, many, many, many years.

No, I, I, the only thing I see that impacting is with the changes, with the clear compensation thing. I, I don't ever see sellers getting away from using agents because there's just so much involved with that. You have to have someone steering that, you know, with, with the amount of money that we're talking about these days, you don't want to leave anything on the table. But I could see a place now it won't happen until the market changes and if, if that happens, I could see a place where on the buy side of things that is a little bit, gets a little more penetration. And what I mean by that is if we get to a place where back like in 2021 where a house comes up for sale and there's 15 offers, well the seller's not going to have to pay or buyer agent, they don't have to because why would you. Right. If I've got multiple people to choose from, I'm not paying your buyer agent. You pay them. Well. If you are already paying high costs, you're already involved, then your, your desire to pay a realtor to do these other things for you to help you buy the house just goes down just yearly out of, I just don't have enough money to do it. So then the low cost options, the discount broker, the AI bot that's going to help you fill out the contract or whatever, then it could play a role on the buy side of it, which isn't good by the way, it's not a good thing. It's just I could see a world in which that could happen. Hasn't happened yet. And as it stands right now, I don't see it happen anytime soon until things just, you know, go crazy again, which is always possible. But, but that's the only place where I could see it actually playing a role on the real estate transaction side is if we get to a place where the housing market is so busy again and there's so many offers going on, too few homes, that on the buy side of things, they just need a cheaper option to be able to put an offer in on and not have to pay someone 10 grand, you know, to write up a contract so, so that I could get again. I don't think it's good. I don't, I don't want that. But that's the only place I could see that, that playing a role.

We're, we're already at like a 9010 in terms of productivity. You know, 10% of the agents are doing 90% of the business. And, and within that cohort, those who are able to also leverage technology, get more efficient, have more facetime with, you know, prospective clients, clients, you know, better lead generation, just be smarter about the business, they can scale even more. That's going to be the future and we are going to see fewer agents. We're projected to see 8% fewer next year. I think it's going to be way more than that. If we're in 7% rates and existing home sales remain as low as they have been over the last couple years, you're going to see a couple hundred thousand washout because it just doesn't make sense to pay all that money and do and fees for associations and NAR, etc. Etc. So that's going to be a much bigger factor than any kind of technology or any sort of, you know, widget that comes out of the factory.

Yeah, yeah, the, the, the AI role for, in my opinion, and this is like I'm, I'm betting on this pretty heavily myself because I'm spending a lot of time with it. But, but the AI role on the real estate agent side of things is going to help you scale, scale your business. It's going to help you reach more people, it's going to help you operate more efficiently to keep your cost down so you can continue to get more and more people through the door that you can work with. And that's where the benefit's going to come from because it's not going to come from or it's not going to have anything to do necessarily with the transaction side of things. It's going to help you become part of that 10 that handles more of the business than the other 90. So if you, in my opinion, if you want to survive in this market for the next two to three years, you have to embrace AI and be able to use it effectively and communicate with it. So that way you can get the most out of it. Because if you don't and you're still operating in the old days of sending out a mailer occasionally and you know, working your sphere is my favorite word. Whenever you're doing that, you're going to be limited compared to the agents that take full advantage of it. And it's just something, you know, I preach this every single week on my show. If you don't understand it and you don't know it, you have to get in. Because it's not that your, your business will go away because of AI, it's that the people that know how to use it will take your business. And that's why you need to take advantage of it more than any.

But in mortgage, it's gonna, people are just gonna drop out. You know, like we're already down about 50% from the height in 20, 20, 2021, where the mortgage workforce was quite big and probably over capacity. And I think we're now. So we're down about 50% from that. I think in the next year or two, we're gonna be down another 25% or more. And those people who are processors and underwriters who have the open to work, you know, label on LinkedIn, they're not going to find a job in mortgage, I think, unfortunately. And that's very sad, you know, and unless you're able to, to really adapt and change tack, these processor jobs, these underwriter jobs, with a couple exceptions, they're just never going to return.

No, no, they, the ones that went away are not coming back. And I don't care how busy you get, companies will just find better ways. Necessity breeds innovation, right? So if you, if we get to a place where transactions are flowing again, they may reach out and hire a few people in the short term. But what they're ultimately going to do is they're going to figure out more cost effective ways with technology to manage the flow that comes in and be able to handle it that way.

There's going to be one processor or handles 300 files.

Yes, exactly. All right, I won't let you go. But before we go I want you to, we're going to play a little game of put your money on because everybody cares about rates. I talk about rates at nauseam. But you know, you guys did an article recently where you were kind of predicting, you know, which I do by the way. I found it hilarious. So Jeff Andrews did, it was like housing market for 2025 and the title was Me like. And it was funny because NAR, which is the National Association Realtors said 4.9 million homes are going to be sold in 2025. And then you guys were 4.2. I'm like, okay, yeah, here's obviously the national association of Realtors has a high bar far there but and by the way for context, so Everybody knows in 2021 there were 6.9 million homes sold in the US and and the vast, vast majority of them were, were pre sold or you know, pre sale homes. Not new builds. Yeah, existing homes. And then if you want to go back to the last time we had under 4 million homes sold, it was 1991. That was the last time we had less than 4 million homes sold the U.S. so these are historical numbers that we were on the precipice of dealing with here. And a lot of this comes to rates. So Yalls housing wires, you know projection, which I love by the way Too is like 5.75 to 7.25. That's a pretty big range.

It's courageous, right? Yeah.

Yes. Yeah. Really, really getting out there. I think that was Mike Simonson's article. It's pretty funny. But, but either way, if you had to be a betting man, because when you come on next time, you know, at the end of the year I'm gonna put this up there and be like you said. No, I'm kidding But absolutely, if you had to be a betting man, like let's say we get to this the summer of 2025. Okay. And I'm put you give a specific time and let's assume that everything kind of stays status quo as far as the market's concerned. We don't have, in other words, we don't have a major crash. I think we're going to have a major recession if we haven't already been in one. I don't wouldn't call it a crash. But I definitely think, I mean targets, if anybody doesn't know, target share price dropped like 20 the other day because the retail sales were so low. But, but either way, if, let's say we stay the same, where, where do you see rates landing? You know, as we get to the summer next year, I think we'll be.

In about the 64 range.

Okay, that's fair.

Yeah, I think pretty, pretty moderate. I still think home sales are going to be relatively low and that's because people haven't adequately factored in some of these an ancillary costs like insurance and.

You know, property values go up, property taxes go up. That's how it works.

And then you look at what is for sale and where and predominantly it's in Florida, it's in Texas. Are they going to retain the number of jobs? Are those trends that we saw in which people are leaving kind of the coastal areas of California and, and New York and D.C. and Chicago, are they going to continue to go to those areas? You know, I think that's still very much an open question. So I would say I think we're probably going to be around 4 million home sales next year as well.

Yeah.

Now of course Trump could crash the economy with tariffs, with, you know, all sorts of policies. But assuming that that doesn't really happen or if it does, it's on a relatively limited basis and it was mostly campaign rhetoric, I'd say it's pretty much going to be status quo next year. And I'd say yeah, 6, 5 is rates, 4 million home sales and everything a little bit more expensive.

Yes, well, and that's, that's pretty much been the trend. The only thing I would add to that is the reason I get my, my, my brain in the place of I don't think things are as good as maybe sometimes, you know, the, the corporate media would lead you to believe is, you know, personal consumption debt, when you look at credit card debt is at all time highs for us or for Americans. The delinquency on that debt is rising at a dramatic rate. The national debt is massive and all of these things in my opinion are not sustainable. The reason that you're seeing the Fed cut rates is not necessarily because the economy is bad. It's because the US Government can't afford to continue to pay the interest on the debt. That's when they own, you know, something like I think they owned $17 trillion of U. S debt is held in the federal bank or in the Fed. So those type of things, if you are watching the markets and you're concerned, I mean right now, as we speak, right now bitcoin is about to hit a hundred thousand dollars for the first time in the history of ever.

I should have bought bitcoin back in the day. I thought it was some stupid fad and I have a single Bitcoin, which is actually great, actually. I suppose.

There you go. Yes, yes.

Well, just to that last point, Mike, real quick, I think that means we're gonna have a lot more promise in home equity products and the closed end seconds. I think this is going to be a Freddy pilot. They've already been doing it with some of the big banks and a couple of the larger IMBs. I think they're going to expand the program and do so a lot more quickly because it's going to allow people, nobody wants to see, you know, a ton of people outwardly struggling and not paying their credit cards and, and all that.

So, yeah, credit Card rates are 29%, so, yeah, 8%. He locked in. Too bad.

Yeah, I mean that, that might be one of the few consensus parts of legislation which the Republicans and Democrats might do. I don't think it's a good idea. But they might try to cap credit card debt at. I think it was 10 is the number.

10 is what they say. Yeah, yeah, yeah. So we'll see. I mean, look, I, I, I see that stuff put out there and I never really buy into it. I'm like, okay, let me, let me see it when it happens. Because the amount of money that's involved in that and the amount of, of, you know, dollars behind making sure that that kind of stuff doesn't happen, I think it's just talking political talking points that never really get to fruition.

But I sometimes think I'm a simple DID for not using credit cards at all. Like, I have zero credit card debt, like nothing whatsoever because I just like it. That scares me.

Yeah, well, it should, it's terrible.

I mean, I don't have any, but you know, there are people who are like, oh, you know, I took this great vacation with Aruba. All I did was use points and cool, good on you, man. But I, I don't have, okay, as much confidence that I can manage it without, you know, falling out of the boat.

Yeah, gotta have a little responsibility with them, that's for sure. But I mean, if, if used wisely, you can get some advantages of them, but most people don't, most people think they're going to and they just end up $30,000 in debt and they're paying, you know, a thousand bucks a month in, in interest on that and don't know what to do, so. Well, James, man, I really appreciate you coming on. We're a little longer. I apologize. Like I said, I wanted to be respectful of your time, so, so thank you so much, I'll have you back again here sometime in the near future again. We'll, we'll dive into more things. We'll see what actually happens when, when Trump gets into office and some of these things start occurring if, if they are actually what. What he said they would do or, you know, how it's all going to shake out. I don't know if you also saw already his, his, uh, nominee for, uh, the Department of Justice, Matt Gaetz, officially, uh, removed himself from the running today. So he is, uh, not going to be that person. So we'll see how all this.

You know, I think it means it's still very, very likely that Godzilla is named the next HUD secretary. So I got 50 bucks on that. So let's go. Let's go, big green.

You got Godzilla in the office pool?

Yeah, that's right.

Yeah. Well, thanks for everybody that stuck around. Appreciate it. I'll have a market update back out on Monday. We'll talk more about rates, get into some of these policies again, and James will join us again in a couple months, and we'll rehash this stuff again after he gets a little time spent with the family. So, James, enjoy the holidays with the family and everybody else, have a great weekend and have a great Thanksgiving, and we'll see you next week.