Shant Banosian is not only the top mortgage banker at Guaranteed Rate, but the top mortgage banker in the country, 4 years in a row, with 4,140 closed units and $2.2 billion in funded loans in 2021 alone! On this episode, Shant and I discuss lessons he's learned as his business has grown, as well as the current mortgage market, where Shant thinks rates might be heading and how we can discuss these rate changes with clients.
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“Rates have gone up from the low 3’s at the beginning of the year into the 6’s and even 7’a at some points. Your average mortgage payment across the country has increased about 50% from the beginning of the year alone. You've got about $200,000 on average of lost buying power just in the last six months. So it's definitely impacted things. I think home purchase activity, mortgage activity has been greatly impacted by rates. To put it in perspective, when I first got into the business in 2007, this is exactly where rates were when I first got going. And we're right back to it. I think the reason it's so shocking is how fast it's happened and how used to it we are.
We almost took for granted the rates in the 2’s and 3’s, and even 4’s for that matter. But it's important to realize that rates in 2020 and 2021 that hit all-time lows only happened because of an intentional play by the government, the Fed, to drastically reduce rates, drastically reduce buying power, in order to make sure that a health crisis, an unknown health crisis didn't impact our economy. And I think that it's clear that certainly we didn't go into a recession in 2020 or 2021. Everybody bought everything they could get their hands on. Money was free, almost. And so now, because there was so much pent-up demand, because money was so cheap, and the supply chain issues that were caused both by a global pandemic and also the terrible situation in Ukraine. It slows the world economy. You got inflation, and so rates have spiked up a lot.
Mortgage rates track inflation. So the government is aggressively trying to slow things down. And how they do that is increased borrowing costs. Right? So 80% of our spending, or 70% of our spending in our country is done utilizing debt. You buy a house, you get a mortgage, go to school, get student loan debt, get a credit card, go to the store, use it on a credit card, or car loan, right? So when you increase everybody's borrowing costs, it's going to impact their budgets, and it will eventually slow rates down. The government's done this before. They've dealt with inflation before. They've shown that if they handle aggressively, it will slow things down quickly, which is what they want to do. Inflation is at 8 to 9%. They want to be down on the 2’s. That's why rates are going up so fast.
What I'm blown away by is how active the housing market still is, even in spite of how fast rates have gone up. So we're still seeing people buy every single day. I think a couple of things have happened. First, our clients went through the shock of like, wow, this happened really fast. When are they going to go back down? And then I think there's a part now where people didn't know what to do, and they kind of just took themselves out of the market. Now you're starting to see your traditional buyer remain in the market. My belief is that housing is foundationally important to most people. You see people kind of go through walks of life, graduate from school, start making money, get married, have kids, all those things. The step, right? The average age of a home buyer in the country is 33 years old, I believe. So if you need to buy a house, you're going to buy a house still obviously within your budget. It definitely impacts your budget. What's also happened is rents have gone up almost as aggressively as rates and home prices. So when you compare housing to renting, it still seems like a pretty good deal, even though with rates in the 6’s and 7’s.”