Navigating Homeownership with a Curveball
by SGL Financial
Our 2 Cents – Episode #177
Navigating Homeownership with a Curveball
Welcome back to Our 2 Cents with Steve and Gabriel Lewit! The hosts begin the show with their spin on some of Yogi Berra’s famous quotes, then they discuss the possible revival of a tool that had a major impact on the 2008 Housing Crisis. Listen in now using a link below!
- Yogi-isms and 2024 Baseball Stats:
- Discover legendary baseball player, Yogi Berra’s “wise” words turned into financial advice including, “A nickel ain’t worth a dime anymore.” and “It ain’t over ’til it’s over.”
- Plus, a quick check-in on how well (or not well) the White Sox, Cubs, and Yankees are performing this baseball season.
- Housing-Bubble Era Comeback:
- June is National Homeownership Month, so let’s take a look at a headline that immediately caught our attention.
- History is repeating itself, as zero-down mortgages return, offering hope as well as risks.
- Understand the implications of a no-down-payment home loan and how to determine if it is a good choice for you.
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Podcast Transcript
Announcer: You’re listening to Our 2 Cents with the team from SGL Financial, building wealth for life. Steve Lewit is the President of SGL Financial and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.
Gabriel Lewit: Welcome back to Our 2 Cents today. You’ve got Gabriel here and Steve on a bright and sunny day, and we are wishing you all a warm hello.
Steve Lewit: Hello, warmly. A warm hello.
Gabriel Lewit: You know what I’ve noticed? I think you just repeat my intro.
Steve Lewit: Well, I kind of get caught. I’m not sure what I should say or should interrupt, because you always say hello and it’s so welcoming.
Gabriel Lewit: Well, you could say things like, “Hey, everybody.” So if I say hello, you say hello. If I say, “How you doing?” You say, “How you doing?” I just happen to notice this.
Steve Lewit: You’re my leader.
Gabriel Lewit: All right. There you go.
Steve Lewit: Well, welcome everybody. It’s good to talk to you again. How did I do?
Gabriel Lewit: There you go.
Steve Lewit: There you go. Okay. I’ll work on that.
Gabriel Lewit: Well, how about for our listeners, Mr. Lewit, how are you doing today?
Steve Lewit: I’m doing great. It’s a beautiful day. The sun peeked out a little bit. I like that. Enjoying the warm weather, and happy I’m here and breathing and vertical and life is good. How about you?
Gabriel Lewit: I’ve noticed something interesting. This is just you. I feel like when you ask people how they’re doing, they always say, “The weather’s nice today.”
Steve Lewit: Well, that’s a tough question to answer. How am I doing real person? Well, I’m going to tell you how I’m really doing.
Gabriel Lewit: All right, we’ll do the surface level, “How you doing?”
Steve Lewit: We’ll stay on the surface.
Gabriel Lewit: All right, excellent. Well, I think we’ve got a good show…
Steve Lewit: I hope everybody else is doing well.
Gabriel Lewit: Yes, we do as well. Of course, hope you’re doing great. We’ve got a good show lined up for you today. We’re going to start off with some baseball analogies. Baseball season is in full swing. I’ve got some stats here for you. Now, I apologize in advance if you’re a White Sox fan.
Steve Lewit: Yankee fan.
Gabriel Lewit: I am a White Sox fan. The first game I ever went to see was a White Sox game.
Steve Lewit: I have a lot of sympathy.
Gabriel Lewit: And their record this year is-
Steve Lewit: It’s not a record, it’s a disaster.
Gabriel Lewit: … 15 wins, and 46 losses.
Steve Lewit: Yeah, how do you do that?
Gabriel Lewit: Not even close. And interestingly enough, if you look at their run scored versus run allowed differential, it is absolutely horrendous.
Steve Lewit: It’s crazy. Yeah.
Gabriel Lewit: Yeah. So very sad there. The Cubs are a much better 30-31. And you are a Yankees fan, and they are 40 and 19.
Steve Lewit: They are great this year so far.
Gabriel Lewit: They’re always good. The Yankees are always good. They’re always good.
Steve Lewit: No. No. They were horrible last year.
Gabriel Lewit: Didn’t your guy Judge just pass some record?
Steve Lewit: I don’t know.
Gabriel Lewit: Producer Gabby, can you Google Aaron Judge record? It was something big I think. Hold on a second. Let’s see what it says. Hold on. We got to get to the news, not the batting averages here. Okay, keep going.
Steve Lewit: I think she just passed it.
Gabriel Lewit: Record… Let’s see.
Steve Lewit: Go up a little. It says, “Well, who has the…” Oh no, that’s not it.
Gabriel Lewit: Can you scroll down just a little?
Steve Lewit: I didn’t hear that.
Gabriel Lewit: Well, that’s just going to be a stats page. Anyways, if we find it, we’ll come back to you on that.
Steve Lewit: I’m sure you’re all interested in-
Gabriel Lewit: Speaking of the Yankees…
Steve Lewit: Aaron Judges’ record.
Gabriel Lewit: Well, I thought it was interesting by the way. But speaking of the Yankees, so there was a guy that once played for them named Yogi Berra.
Steve Lewit: Well, this is a guy that I watched play. I would go to Yankee Stadium and I’d see Yogi Berra and Mickey Mantle and Skowron, and I saw them all. And these were the great Yankee teams. Phil Rizzuto.
Gabriel Lewit: Don’t know him.
Steve Lewit: Yeah. Well, you don’t even know what a typewriter is.
Gabriel Lewit: I do know. I used to use a typewriter.
Steve Lewit: You do not know what a typewriter is.
Gabriel Lewit: No, I definitely know what a typewriter is. And so, well, Yogi Berra was also a famous for Yogi-isms, which were phrases mentioned by Yogi Berra that were sometimes wild, little crazy little off the wall. Some don’t make any sense.
Steve Lewit: And yet they do.
Gabriel Lewit: And maybe they do, and we’re going to…
Steve Lewit: A lot of those came out when he was a manager.
Gabriel Lewit: Yeah, so in light of it being a summer baseball season, we thought we’d share some Yogi-isms with you-
Steve Lewit: Financial Yogi-isms.
Gabriel Lewit: … And talk about how they might pertain to your finances.
Steve Lewit: Love it.
Gabriel Lewit: Okay?
Steve Lewit: Love it.
Gabriel Lewit: All right. So he had a lot of quotes to choose from.
Steve Lewit: Oh my gosh.
Gabriel Lewit: So, let’s pick… The one that jumped out first and foremost to me says, and this, well, he says this, not me. “I never said most of the things I said.”
Steve Lewit: Yes. You should have been a politician.
Gabriel Lewit: Right? No. “I never said most of the things I said.” Okay. Well, yeah, I’m not sure how that would apply to your financial…
Steve Lewit: Yeah, I was just going to ask you. I’m not making the connection there.
Gabriel Lewit: So, we might just move past that one, but I still thought it was a fun quote. Okay. How about this one?
Steve Lewit: Well, that would be if you’re talking to an advisor and the advisor says, “Well, I never said I said this.” Maybe it fits in that context.
Gabriel Lewit: Or maybe a client says, “I never said I needed…” I don’t know. I’m not sure.
Steve Lewit: Yeah.
Gabriel Lewit: Yeah, I don’t see a lot of applicable analogies on that one.
Steve Lewit: I wonder why you picked that one.
Gabriel Lewit: No, it just was one that I thought was funny, just the quote.
Steve Lewit: Yes.
Gabriel Lewit: Okay?
Steve Lewit: Yes.
Gabriel Lewit: Because he did in fact say all these things.
Steve Lewit: Yes. Yes, he did.
Gabriel Lewit: Number two is, “A nickel ain’t worth a dime anymore.”
Steve Lewit: Yes.
Gabriel Lewit: Well, I think if you were talking… It sounds on the surface like inflation, but then you’d say, “A dime ain’t worth a nickel anymore,” right?
Steve Lewit: No.
Gabriel Lewit: I think if you were talking inflation.
Steve Lewit: A nickel is not worth a dime. No, it would be a dime. Now you got me confused.
Gabriel Lewit: You see what I’m saying? His quote is, “A nickel ain’t worth a dime anymore.”
Steve Lewit: Right. But it’s really a dime. What is it?
Gabriel Lewit: I think the point is he…
Steve Lewit: But here’s the thing. It makes sense. Everybody knows what he’s talking about, because it’s a thing about inflation.
Gabriel Lewit: Well, he wasn’t talking about inflation, I don’t believe. I’m just saying we’re saying we could use this to talk about inflation.
Steve Lewit: I bet he was. He’s probably saying, “A nickel’s not worth a dime anymore.”
Gabriel Lewit: So now you’re trying to interpret what he actually meant by that?
Steve Lewit: No, Yogi-isms are impossible to interpret.
Gabriel Lewit: Well, yes, I would apply that to inflation where 10 cents doesn’t go as far as it used to. 5 cents would always be less than 10 cents, so I think the dime ain’t worth the nickel anymore would be the… If we’re actually using it.
Steve Lewit: 10 cents is less than 5 cents.
Gabriel Lewit: Feels like it’s worth less than 5 cents, right?
Steve Lewit: Well, I’m trying to make sense out of this.
Gabriel Lewit: We’re not supposed to make sense of the quotes, we’re just supposed to talk about what it references in financial planning, –
Steve Lewit: Okay.
Gabriel Lewit: … Which would be inflation, right? So obviously we’ve talked about that, that’s one of our themes for the year.
Steve Lewit: That was a pun. That was a pun, you missed the pun.
Gabriel Lewit: I don’t know what the pun was.
Steve Lewit: I’m trying to make sense out of this. There was a pun.
Gabriel Lewit: There you go. There you go. See, we inadvertently stumbled across something minorly humorous. Well, yes, inflation should be something you factor in. Okay.
Steve Lewit: Yep.
Gabriel Lewit: Number three. I do think there’s a lot of application for this one, so I’m going to build this one up a little bit here. “If you don’t know where you’re going, you might wind up someplace else.”
Steve Lewit: Gosh, that’s great. I forgot that one.
Gabriel Lewit: But if you don’t know where you’re going…
Steve Lewit: You will wind up someplace else.
Gabriel Lewit: But where would else be compared to? Because you don’t have a…
Steve Lewit: So you always wind up someplace.
Gabriel Lewit: You would always, yes. Not might, I think you would always wind up someplace else.
Steve Lewit: Apply that to your money.
Gabriel Lewit: Well, we talk about this a lot. People are on what we dub it autopilot mode with their finances and their planning, meaning you just do stuff, you don’t really put a lot of extra thought into it. For example, “Oh, I’m going to contribute this year to the Roth, next year to the IRA. This year, I’m going to switch this around. Maybe I’ll save some cash. Maybe I won’t say some cash. You just kind of just do stuff, and you don’t really think too hard or too long about it, which would be the equivalent to our Yogi-ism of, “If you don’t know where you’re going.” So what just making decisions on autopilot does is you’re not really headed towards a specific end destination with specific decisions made in mind.
Steve Lewit: Or a specific goal. So for example, you put your money in the stock market, but you don’t have a goal. So how do you know if you’re doing well or not? You’re always winding up someplace else because you don’t have a goal.
Gabriel Lewit: Yeah. Yeah. So that’s helpful. You can start to establish benchmarks. You can start to establish goals. You can start to outline what you’re happy with, what you’re not happy with. All these things will start to help give you a plan of where you’re headed.
Steve Lewit: Yogi was a genius.
Gabriel Lewit: Super genius.
Steve Lewit: Super.
Gabriel Lewit: We should do Yodaisms for a future show.
Steve Lewit: That would be fun.
Gabriel Lewit: I was thinking Yogi and I’ll say Yoda.
Steve Lewit: Yeah, that would be a lot of fun actually.
Gabriel Lewit: For the Star Wars buffs-
Steve Lewit: Love it.
Gabriel Lewit: … Out there.
Steve Lewit: Yep.
Gabriel Lewit: Well, yeah, let’s not forget that Producer Gabby. Let’s write that down just in case. Okay. She’s giving me the thumbs up folks. All right. Now, related to Yogi-ism number three. “When you come to a fork in the road, take it.”
Steve Lewit: Yes. I didn’t know he said… I’ve heard that before, I didn’t know it was a Yogi-ism.
Gabriel Lewit: Well, the question is where do you go? Where’s the fork headed?
Steve Lewit: Yeah, just take one.
Gabriel Lewit: Just take a fork.
Steve Lewit: Take the fork.
Gabriel Lewit: Okay. Well sometimes, I would say sometimes life forces you to take forks in the road, and the question is then reassessing where is that fork taking you? Maybe that’s the analogy that we could make here from that.
Steve Lewit: I can’t figure out any reasonable analogy on that. It’s like I have a choice to buy a house, my second home, or not buy my second home and met a fork in the road.
Gabriel Lewit: Well, technically, if it’s a yes, no, either buy, don’t buy, you’d always have to take one of those forks.
Steve Lewit: Right.
Gabriel Lewit: You’re either going to do or not do.
Steve Lewit: But that’s taking the fork.
Gabriel Lewit: But which fork?
Steve Lewit: Which fork?
Gabriel Lewit: Yes. This was also, you know what this reminds me of? What was it? The Who’s on First?
Steve Lewit: Yeah. The Keystone Cops. No, that wasn’t the Keystone Cops, that was Abbott and Costello.
Gabriel Lewit: I think that was Abbott… Yeah, there’s Abbott and Costello, Who’s on First… All right. But yes, many forks in the road. Should you take Social Security? Should you not? Should you retire now? Should you retire later? All of these forks need assessing in your plan. Should I sell when the market’s down? Should I not sell when the market’s down?
Steve Lewit: So that’s like a client coming in and saying that, exactly that Gabriel. “Should I sell if the market’s down or shouldn’t I sell?” And your answer is yes.
Gabriel Lewit: Yes or no. One of the two.
Steve Lewit: One or the other.
Gabriel Lewit: All right. Okay. This is a good one. I’ve heard this one before. I like this one. “Mr. Lewit, the future ain’t what it used to be.”
Steve Lewit: What did he say? What was that?
Gabriel Lewit: The future ain’t what it used to be.
Steve Lewit: It ain’t what it used to be.
Gabriel Lewit: Well, trying to interpret that-
Steve Lewit: The stock market ain’t…
Gabriel Lewit: … I guess I’d say the past ain’t what it used to be, right?
Steve Lewit: The future ain’t what it used to be when it was the past. So put that in terms of the stock market. This is the first thing that came to mind for me.
Gabriel Lewit: Well, the first thing that came to mind to me is thinking about how the past isn’t what it used to be, which of course there is old school ways of planning income in the past.
Steve Lewit: Oh, good. I like that.
Gabriel Lewit: For example, 4% withdrawal rules were the norm. People had pensions in the past. Now people have to essentially build or create their own pension.
Steve Lewit: Yes.
Gabriel Lewit: The tax situations in the past are very different than they are now today. And you’ve got uncertainties about social security, which wasn’t necessarily a concern 10, 15 years ago.
Steve Lewit: Well, do you know why?
Gabriel Lewit: Yes, I do.
Steve Lewit: You do?
Gabriel Lewit: Why what?
Steve Lewit: We have all of these concerns. Because the future ain’t what it used to be.
Gabriel Lewit: Exactly.
Steve Lewit: Yes.
Gabriel Lewit: Yeah. So that’s where I think having a plan to address these things really helps. So especially if the future turns out to be different than what the future was otherwise going to be.
Steve Lewit: Yes. Yes.
Gabriel Lewit: Okay. All right.
Steve Lewit: What it was meant to be.
Gabriel Lewit: This might seem like his next quote, which is, “It’s like déjà vu all over again.”
Steve Lewit: Was that him?
Gabriel Lewit: Yes. “It’s like déjà vu all over again.”
Steve Lewit: Déjà vu. That’s like the one on ice cream that he did. What was the one… He did something. Oh, “I’ll have pie à la mode with ice cream.
Gabriel Lewit: Well, that’s like going to the ATM machine to get out some money. The automatic teller machine machine.
Steve Lewit: Right.
Gabriel Lewit: The ATM machine.
Steve Lewit: The ATM machine.
Gabriel Lewit: Yes. That’s where I’m headed.
Steve Lewit: Yeah. Got it.
Gabriel Lewit: Okay.
Steve Lewit: Got it.
Gabriel Lewit: So yeah, déjà vu all over again. Well, look, markets are cyclical. They probably have been since the times of Yogi Berra.
Steve Lewit: Well, history repeats itself.
Gabriel Lewit: History repeats itself. Maybe not a third or fourth or fifth or sixth or seventh time,-
Steve Lewit: And it’s not always-
Gabriel Lewit: … Maybe as many times.
Steve Lewit: … Exactly the same, but it’s very simple. Yeah, the market goes up and goes down. So when the market goes down, it’s déjà vu all over again. I’m too aggressive in my portfolio.
Gabriel Lewit: And we know anytime this happens, somebody is going to ask the question, when the market’s down, “Should I sell?” Or they’re always going to ask, déjà vu all over again would be, “Well, what’s the top stock pick this year?” Right? Everybody always likes to ask that question as if we’ve got that crystal ball. But the point I think is we can learn from all these things that happened in the past, such as trying to pick winning stocks is very difficult, if not impossible. Selling when the market’s low is generally a very bad idea.
Steve Lewit: Well, you can…
Gabriel Lewit: Markets will recover when they’re down because this has happened many times prior in the past.
Steve Lewit: Yeah, it’s easy to get out. You just don’t know when to get back in.
Gabriel Lewit: And folks, don’t be surprised when the market does go down, because remember, it goes both up and down as it has for nearly a hundred plus years.
Steve Lewit: Yeah, so when you have a fork in the road, take it.
Gabriel Lewit: You do, you take the fork.
Steve Lewit: Yes.
Gabriel Lewit: Okay. Now this one here, I got some thoughts on this one. Now he says, “You can observe…” Observe, can’t talk. “Observe a lot by watching.”
Steve Lewit: That’s, you can see a lot by seeing.
Gabriel Lewit: By looking.
Steve Lewit: By looking.
Gabriel Lewit: Yes. You can observe a lot by watching.
Steve Lewit: But there’s so much wisdom in that because when you watch, you can observe. These are so great because they make sense, but they don’t make sense.
Gabriel Lewit: That’s why they’re fun.
Steve Lewit: They’re fantastic.
Gabriel Lewit: Okay, but here’s my take on this. Well actually, let me hear your take first.
Steve Lewit: Well, my first take is if you watch how you behave financially in different situations, the way you react, the fear you have, the false hopes, the disappointments, the good days, the bad days, if you watch that, you can really observe about something about why you do that.
Gabriel Lewit: There you go. Well, okay.
Steve Lewit: I don’t know where to go after that.
Gabriel Lewit: Mine’s a little different. So mine was, my thought is, us as advisors…
Steve Lewit: We.
Gabriel Lewit: We as advisors.
Steve Lewit: Yeah, it’s not us.
Gabriel Lewit: It’s been like 30 years since I’ve taken an English class. I think it just-
Steve Lewit: It’s just we.
Gabriel Lewit: … Deteriorates over time. Yogi’s saying words like “ain’t”. Okay, well, what it used to be.
Steve Lewit: Well, it’s Yogi Berra, we’re sophisticated financial advisors.
Gabriel Lewit: So, we, we as advisors, we have the luxury or the benefit of sitting down and vicariously watching or observing and learning if you will, from hundreds of other clients that we’ve talked with before we’ve talked with you. And so it’s interesting. I have people, clients that come to me. This just happened recently. A fellow I was talking to said, “All I want to do is pick the winning stocks.” I’m quoting this word verbatim. And I said, “Well, of course. Right. Of course.”
Steve Lewit: I’d like to do that too. Who wouldn’t?
Gabriel Lewit: What’s interesting from this is he says, “Well, I’ve picked a lot of winners in the past, and I think I can continue to do that.” And he’d been on a very lucky streak lately. His money had tripled in the last year. Tripled. And I asked, “Are you going to de-risk any of that?” “I think I can continue this streak.” And here’s what I mean by this. For every one of those that I talk with clients that think they can do this successfully long term, I have talked with and observed dozens that have had the opposite result where they’ve learned that that’s not possible because they made mistakes and they lost lots of money. And there’s wisdom to learn from that, and I try to share that wisdom. The question is, not everybody is always open to receive that. Some people need to learn by unfortunately going through the negative experience themselves.
Steve Lewit: Well, some people want to coach and some people say, “I don’t want to coach. I’ll just figure it out on my own.” But if you weren’t watching, you couldn’t observe.
Gabriel Lewit: Well, and I’m trying to talk practical instead of just the silly phrases.
Steve Lewit: Oh, you’re getting serious on me.
Gabriel Lewit: But when you’re doing your own retirement, you haven’t necessarily had a lot of opportunities to observe or watch other people financially plan their own retirement the way a really good financial advisor or expert might have. So you can’t learn quite as much there unless you’re learning vicariously through others that have gone before you.
Steve Lewit: Well, there’s another threat when you do that is I was reading, I was listening to a webinar from Wade Pfau from Retirement Researcher. Wade Pfau folks is one of the most brilliant researchers in retirement, retirement income portfolio design. And if you can read anything that he writes, you should read it. It’s P-F-A-U. And he said, and I’ve said this often, and you have too Gabriel. He said, “You know folks, the thing about retirement is you got one time to get it right. If you don’t get it right, you can’t fix it 15 years later.”
Gabriel Lewit: You can’t rewind time.
Steve Lewit: You can’t rewind it. It’s not like you’re 30 years old and you got 40 years in front of you. And he said, “That’s the biggest mistake people make, is they do it themselves without a history, without observing other people and really being watchful. And then they get it wrong, and that’s it.”
Gabriel Lewit: That was the shot.
Steve Lewit: That was their shot in the dark.
Gabriel Lewit: Well, to use a baseball analogy, that was the swing at the fence.
Steve Lewit: Right. Right.
Gabriel Lewit: And as Yogi would say, it ain’t over until it’s over.
Steve Lewit: Right.
Gabriel Lewit: That is the final phrase we have.
Steve Lewit: It ain’t over until you’re over, but if your 10 runs down with two out in the ninth, it’s pretty over.
Gabriel Lewit: So, I think the goal for that last one is making a plan. In other words, choosing a fork in the road to take that will result in you not having to say the phrase, “It ain’t over till it’s over”, which is usually used in dire situations.
Steve Lewit: Exactly. Like you’re down 12 runs and you’re in the dugout.
Gabriel Lewit: And you don’t want to be in the position where you’re saying, “It ain’t over until it’s over.”
Steve Lewit: Guys, it ain’t over yet.
Gabriel Lewit: Let me triple down on my risky investments to see if I can build it back.
Steve Lewit: We still got a shot. Yeah.
Gabriel Lewit: Yeah. So those are our Yogi-isms for you here today. And do we still have them up there on the screen? I was going to mention a few others just for fun. If we turned them down… Okay. Hold on. Hold on. Okay. These have nothing to do with finance. I just wanted to mention them. This one, he says, “Why buy good luggage? You only use it when you travel.”
Steve Lewit: He might of been… Oh, you know what he said also? “The lines are so long at that restaurant, nobody goes there anymore.”
Gabriel Lewit: I like that one. Also said, “It’s spring break, they paired up in threes.”
Steve Lewit: Yeah, right. Pair up in threes.
Gabriel Lewit: Hold on, hold on. There’s a few more. Hold on. Let’s see. “On his hitting approach, I can’t think and hit at the same time.”
Steve Lewit: I don’t mind that. That’s pretty…
Gabriel Lewit: Let’s see here. “I’m not going to buy my kids an encyclopedia. Let them walk to school like I did.”
Steve Lewit: What? Do you know what he did?
Gabriel Lewit: Oh, he hits from both sides of the plate. He’s amphibious.
Steve Lewit: Amphibious. Yeah. Yogi was amazing. He became a real entrepreneur. At that time, bowling was the number one sport, and he opened these whole thing on bowling [inaudible 00:21:30].
Gabriel Lewit: Yeah. Now this one’s a little morbid, but, “Always go to other people’s funerals, otherwise they won’t come to yours.” Oh gosh.
Steve Lewit: That’s terrible.
Gabriel Lewit: That’s terrible. All right. Let’s scroll back over. One last one, then we’ll move gears here. Okay. Yeah. You had the pie à la mode with ice cream. And never answer an anonymous letter. Touché. We’ll end with that.
Steve Lewit: Love it. Yeah.
Gabriel Lewit: All right. Well, if you have any questions about what we were talking about here, planning coming to a forks in the road, maybe you’re at a key decision. Should I retire? Should I not retire? Who do I help? Do I do this on my own? These are some key forks in the road, and we’re here to take all the wisdom that we’ve observed ourselves, as well as all these wisdom analogies we’ve gleaned from Yogi to help you with your retirement plan.
Steve Lewit: And some of them have a real application.
Gabriel Lewit: They do. They do. All right. Give us a call anytime, 847-499-3330, or go to sglfinancial.com. Now, for the last part of our show here, we’re going to talk about a shady financial vehicle or tool that is making a comeback, which is not necessarily a good thing in the housing market.
Steve Lewit: Yeah, I’m so glad you brought this up. I wasn’t aware of this.
Gabriel Lewit: No. Yeah. And this is in celebration of two things. Number one, June 2nd is National Home Ownership Day, which we just passed. But more importantly, the Biden Administration this year, 2024, has proclaimed that June is now National Home Ownership Appreciation Month.
Steve Lewit: Oh.
Gabriel Lewit: National Homeownership Month.
Steve Lewit: A proclamation from the boss.
Gabriel Lewit: From the White House.
Steve Lewit: From the White House.
Gabriel Lewit: Okay. So now you know. And what does that mean? It doesn’t mean anything other than it’s been proclaimed. And it gives me something to talk about here on the show together with you.
Steve Lewit: On the podcast, right. Thank you for a topic.
Gabriel Lewit: Yes. Yes. So yeah, so what’s the shady financial tool that’s making a comeback? Well, the comeback is from its widespread use during the housing bubble of 2008. Now, Mr. Lewit, do you want to give a quick synopsis on what happened in the housing bubble and subsequent market crash of 2008?
Steve Lewit: Well, essentially, they were giving away mortgages to anybody that could sign their name.
Gabriel Lewit: Yes. Can I add one part to that?
Steve Lewit: Sure.
Gabriel Lewit: It was called, and it’s in this article here, which I had forgotten about, and then it reminded me, it was called Ninja Loans. No income, no job, or assets. They were literally giving out ninja loans.
Steve Lewit: They were giving out homes. They were giving money away.
Gabriel Lewit: You want a home? You get a home. You want a home? You get a home.
Steve Lewit: Actually, they were giving debt away, and eventually that caught up to them with these mortgage-backed securities that were all fake, or not all fake, but were misrepresented. And the whole financial underpinning went down.
Gabriel Lewit: Yeah, so all these people sold or bought mortgages they couldn’t afford. Those all got rebundled into CMOs, collateralized mortgage obligations, debt instruments that get traded by big banks. They were all trading them, not realizing that a lot of the people inside of the owners of these homes were defaulting, not paying. So a lot of these assets were…
Steve Lewit: Well, when they bundle these as mortgages, they sound safe. And the rating companies rated them safe. And people weren’t paying the mortgages.
Gabriel Lewit: That’s the problem.
Steve Lewit: So they weren’t that safe.
Gabriel Lewit: So, everyone was defaulting. And then when this all got realized and assessed, all of a sudden all of these things were worth far less than they were purported to be worth, or almost worthless in some cases. And that was the precipitating cause of the market to crash in 2008.
Steve Lewit: Well said.
Gabriel Lewit: So, with that in mind, as one says, déjà vu-
Steve Lewit: All over again.
Gabriel Lewit: … All over again,-
Steve Lewit: All over again.
Gabriel Lewit: … History tends to repeat. So there is of course challenges right now where affordability is a concern because of high prices of real estate.
Steve Lewit: And high interest rates.
Gabriel Lewit: And high interest rates.
Steve Lewit: Sure.
Gabriel Lewit: So, there is a company here that is proposing a zero… Let me know if you’ve heard this before. A zero down mortgage, so that homes could become more affordable.
Steve Lewit: Right. So you don’t have to put any money down to buy the home.
Gabriel Lewit: Well, now, this particular deal-
Steve Lewit: Which sounds great.
Gabriel Lewit: … Says that they will give you a $15,000-
Steve Lewit: Loan.
Gabriel Lewit: … Zero interest loan, first and foremost, to serve as your “down payment”. But that would be the only down payment you’d have to make. Other than that, you’d have to pay all your normal home mortgage payments.
Steve Lewit: Right.
Gabriel Lewit: But what’s the problem with this?
Steve Lewit: Well, where should I start? Well, there are a few problems. It depends on, okay, I have no money. I have no savings. Or maybe I have savings, but I can buy this house with no money down. And when that happens, people get over their heads. Everything is fine until it’s not fine. And the problem is there’s no equity if the housing market goes down. If you want to take a home equity loan, there’s no to maneuver. So you’re either in the real estate or you’re forfeiting the real estate. It’s almost black and white.
Gabriel Lewit: Well, and let’s say you’ve got kids or grandkids that are out there looking to buy a home. This is I think, a very concerning thing to keep our eye on, even if you don’t have kids or grandkids buying homes, just because this could be a precursor to more issues in the market down the road. So I do think this is a concerning issue. But also think about this. It sounds good, right? On the surface, maybe you even have money for a 20% down payment. But then along comes this option where you can put zero down. So what do you do? You say, “Well, I’d like my $50,000. So you put zero down. And all of a sudden, you realize you have $50,000 extra flush in your pocket.
Steve Lewit: And what am I going to do with that?
Gabriel Lewit: Maybe you go on a vacation, maybe you buy a car with it. Maybe you aren’t the fiscally smart person we all would want you to be and you do other stuff with that money. And then the market housing market turns.
Steve Lewit: Or the economy turns.
Gabriel Lewit: Or the economy turns.
Steve Lewit: And you lose your job.
Gabriel Lewit: You lose your job. The market’s gone down for home prices, you try to sell your house, and boom, you’re underwater.
Steve Lewit: Can’t sell it. And that $15,000 has to come back.
Gabriel Lewit: And in this particular program, you’d have to also pay back that $15,000 if you move.
Steve Lewit: If you move, yep.
Gabriel Lewit: So, there’s a lot of red flags here. This could be part of a bigger conversation, which is, how do you pay for a home. If you have the option to do a zero down, should you even do it? I would argue you shouldn’t, even if you had the option. Fundamentally, if you even have the money saved, I still wouldn’t do it. And if you don’t have the money saved, I know it sounds very promising and a great way to get into a home.
Steve Lewit: Well, people say to themselves, “Oh, I’ll be fine. I can handle it. I know all the problems. I’ll take care of it. It’s going to be great.” And how many times have you heard that before? How many people have told us, “Gabriel, yeah, I’m going to be fine in retirement. I can manage my own money. I’m pretty savvy. It’ll be great.” And then it’s not.
Gabriel Lewit: Yeah. Well, the other thing too is as anybody generally who’s owned a home knows, things… Was that Murphy’s Law?
Steve Lewit: Yeah.
Gabriel Lewit: Things that can go wrong will go wrong.
Steve Lewit: Yes.
Gabriel Lewit: I believe.
Steve Lewit: Yes, it is.
Gabriel Lewit: So, that’s generally what happens.
Steve Lewit: I don’t know who Murphy is… Was he a baseball player?
Gabriel Lewit: Murphy is Murphy. Yeah. So it’s just his law. Okay. Yes. Anything that can go wrong will go wrong. And the point is, you got to plan for these. It’s also applicable I guess, to retirement planning, but it’s important to assume that if you buy a house with zero down, that because you don’t have the money, that something’s going to happen in that home, the roof’s going to go, I’ve had my sewer line collapse, it was $10,000, the furnace goes out, all these things could happen. And if you don’t have proper savings, you’re not going to be able to afford it. And then if you try to sell your house while the market’s down and you have no equity, you’re underwater. This is what was all at the root cause of the prior 2008 global crisis.
Steve Lewit: Yeah, but here’s the problem. So, if you’re a young person and you’re invulnerable and you’re like Superman, and I’m not going to have any of these problems, because you’re young and you’re happy, and the world is great and you’re going to be great, it’s easy to buy a home like that, and then something goes wrong. And mommy and daddy won’t bail you out.
Gabriel Lewit: Yeah. I mean, so it’s hard.
Steve Lewit: I’m not bailing you out in your sewer, I’m just not going to do it.
Gabriel Lewit: Good news is I’m not underwater on my home.
Steve Lewit: No, you’re not. You actually made a great pie.
Gabriel Lewit: I’ve got good equity in there, yes. So I don’t know. Many of you may not be in this boat, but you might have, again, kids or grandkids in this boat, and it’s just something to keep an eye on. And I thought it was interesting, and it tied into our Homeownership Month here of June. Now, if you are looking for a home and you’re wondering how to afford this, does it make sense to buy in a high mortgage rate environment still? Or maybe you can wait one year, two years to see if those rates come down.
Steve Lewit: Or maybe you can assume somebody else’s mortgage.
Gabriel Lewit: There are things called assumable mortgages-
Steve Lewit: Assumable mortgages, true.
Gabriel Lewit: … Where let’s say somebody that’s living at a house has a two and a quarter mortgage. You can essentially buy them out of that house and assume that mortgage. The scope of how to do, that’s a little beyond our time allotment today. But these are the types of questions that we’re here to help you with, amongst any and all other questions that you might have. And so again, if we can help you in any way, shape, or form here, give us a call, 847-499-3330. Go to sglfinancial.com and click contact us.
Steve Lewit: And folks, we’re all wishing you a future that is better than it used to be.
Gabriel Lewit: Exactly. Yes.
Steve Lewit: Yes.
Gabriel Lewit: A future that is much better than it used to be.
Steve Lewit: Then it used to be. Yes.
Gabriel Lewit: And if you have a favorite Yogi Berra-ism
Steve Lewit: I’d love to hear it.
Gabriel Lewit: Yogi-ism, send us an email info@sglfinancial.com. We’d love to hear what your favorites were. Maybe we’ll collect any responses we get our way and share that with the group next.
Steve Lewit: That would be a lot of fun.
Gabriel Lewit: Well, we hope you have a wonderful, wonderful week, and a weekend whenever you’re listening to this, and we will talk to you on the next show.
Steve Lewit: Stay well everybody.
Gabriel Lewit: See ya.
Announcer: Thanks for listening to Our 2 Cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at 847-499-3330. Or visit us on the web at sglfinancianal.com. And be sure to subscribe to join us on next week’s episode.
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