Women's Money Wisdom

Episode 268: Mortgage Rates, Market Myths & Smart Home Buying with Erica Powers

• Melissa Joy, CFP® • Season 4 • Episode 268

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Is now a smart time to buy a home—or just a risky financial move?

On this episode of Women's Money Wisdom, host Melissa Joy, CFP® sits down with returning guest and mortgage specialist Erica Powers CMPS®, CDLP®, NMLS#739673. First Merchants Bank is an Equal Housing Lender and a Member FDIC. She unpacks the ever-changing housing market and what it means for your money moves.

With over 20 years of experience and certifications in divorce lending and mortgage planning, Erica helps us cut through the confusion about mortgage rates, affordability, and refinancing strategies. 

Together, Melissa and Erica explore:

🏡 The real reasons mortgage rates rise and fall—spoiler: it's not just the Fed
📍 Regional housing market trends across the U.S.—from inventory shortages to insurance issues
💡 How to evaluate if refinancing makes sense (and how to find your break-even point)
⏳ Advice for buyers on when to act and why trying to time the market is a myth
📈 What adjustable-rate mortgage holders need to know before their reset

Whether you’re a first-time buyer, thinking of refinancing, or just trying to understand how rates work, this episode will leave you feeling more informed and financially empowered.

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...

Melissa Joy:

Welcome to the Women's Money Wisdom Podcast.

Melissa Joy:

I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money and I'm here to help you make the most of it. Now let's get into the show. Just a quick note before we dive in. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. So be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are my own and those of my guests, and they don't necessarily represent those of any organizations that I'm affiliated with. For more important disclosures, please go to our webpage at pearlplancom. Now let's get started.

Melissa Joy:

Welcome back to the Women's Money Wisdom Podcast. Today, we are going to be talking all about mortgages, and I know that's a topic that affects many of you. Whether you have a house, today you are looking to protect your low interest rate or reset your high interest rate or you're looking to buy in the future. This is going to have a wealth of information for you and your friends. And back on the podcast is friend of the pod, erica Powers. Erica is a mortgage professional and she has been assisting clients across the country with their mortgage needs for over 20 years. She is a certified divorce lending professional, so she has expertise for people going through a divorce that may need a new loan, and she's also a certified mortgage planning specialist and she has been a wealth of wisdom over the years. Welcome back to the podcast, erica.

Erica Powers :

Thanks for having me, Melissa. I'm excited to be back.

Melissa Joy:

Well, it's always great to chat with you.

Melissa Joy:

We talk all the time because you're kind of my go-to person when I need information about mortgages both the how-tos, the what's possible, but also what's advisable, because those can be two different things.

Melissa Joy:

We're recording this on April 8th and the episode's coming out in a couple weeks and, because we're in pretty volatile times, we could have a lot of changes in the next two weeks. So I just want to give you like a little line in the sand about when we're recording this conversation and none of the things that we'll talk about are, like you know, quotes, for example, or anything like that. But we're going to give you a lay of the land, something we've been planning on even before the turbulence in the market in the last few weeks, even before the turbulence in the market in the last few weeks. But I think it's the perfect time, as things are changing significantly, to talk all about mortgages, how to borrow, when to refinance, all that good stuff. So what are you seeing today, erica? Give me a lay of the land of, you know kind of the real estate market, mortgages, what you're doing, what you're not doing, like, give me some bullet points about what's going on today.

Erica Powers :

Sure, so I can help clients all over the country, but I do mostly assist clients in Washtenaw County and the surrounding areas of Southeast Michigan. So saying that, because we are still in our area seeing a shortage of inventory right, so people are competing for most of the houses that go on the market. So we're seeing a lot of that competition and we're still seeing rates that are maybe higher than people got used to a few years ago, and so there are a lot of people I think that maybe had been previously sitting on the sidelines hoping that we'd see rates come down, but I do think that we've seen a lot of people decide that that may not be what's going to happen, and so if they're interested in buying or getting into the market and looking for a house, yeah, I work with people all over the country, so about half of my clients are here in Michigan, half my clients are all over and it's definitely a time period where everybody's real estate market is not the same.

Melissa Joy:

I recently read that the housing market in the Midwest and the Northeast is quite tight. There's not a lot of inventory, you know, there really wasn't like kind of an overbuild, oversell. It just is an area that hasn't been as intensively focused on growth. But then in certain parts of the South and Southeast and maybe a portion of the West Coast there's a little bit for a variety of reasons, including, you know, natural disasters. Unfortunately has soured people on Florida. It's much more difficult to insure a house in Florida or California and then some parts of the country just had like kind of parabolic, like just through the roof prices and they're coming down to earth and so that's changing the economics. So it depends on where you're listening as to what market you're in. Yeah, 100%. So then you said interest rates remain relatively high. We had this very, very low interest rate situation after years of relatively low rates, lower than they are today, right, so when COVID hit, you know certain people can brag about a 2%, 2.5% mortgage and nowadays we're talking in the sixes and sevens right.

Erica Powers :

That is correct. Last week we saw a little bit of a correction for about a day, correction for about a day, for a moment in time, for a moment in time and um, now this week um rates have gone back up again. Um, so now historically they're still lower than they've been in the past. So I don't want people to think that, you know, if you look at a historical graph we're still kind of in the average or a little bit low average over time, but it's still higher than people got used to.

Melissa Joy:

Yeah, that is. You know that's a big, huge portion of your mortgage payment when interest rates are where they are today. And then we also at the same time have dynamics where property values are going up, property taxes are going along with them, and then homeowners insurance for better or worse, like you want that insurance and it's just getting more expensive because I mean the equation of the property values plus losses that insurance companies are taking on, storms and maybe a little bit of piling on or, you know, kind of sneaking in your rates along with it. Like these are all very real parts of the equation for affordability of housing.

Erica Powers :

Yes, I do find too. A lot of times people will be looking on, you know, any of the websites, the little relittercom, whatever it may be, and some of the amounts that they're listing as what they think the homeowner's insurance will be monthly is not even close to where it will end up once that client gets a quote. So it's important to kind of build a padding into that number because that will be a part of your monthly payment.

Melissa Joy:

That's right. And also if the person whose house you're buying has owned that house for a long, long time, they may have a low and unsustainable property tax. That is going to be reset when you purchase, so you can't count on you know somebody that owned a house 20 years getting the same range for the property taxes. It's going to be higher. You need to look at comparing the person across the street that sold their house last year and not necessarily that owner.

Erica Powers :

Yes, you definitely need to take into account that those taxes are going to go up and make sure that when they do go up, that that's still going to fit your budget.

Melissa Joy:

I also think, another important consideration. I know some people just walk in the door and they're like, well, here's all the things I'm going to change in this house, because you know it is my dream house. But also my dream house has this color walls and this type of flooring and the kitchen needs to be redone, et cetera. And, gosh, I wish I lived in that family, because my husband's like no changes in the first five years, kind of. But you know, you really need to think about that equation too, because lending is the same when it comes. If you needed to do a home equity line or,000, let's say, a powder room for $25,000 a year ago, it might be $40,000 or $50,000 for the same project because of the cost of materials that are not all made onshore here in the US, and so there's a lot of factors that you can plan for going in as you're selecting your house, and if you're going to have a home improvement project, you really need to budget that in right up front.

Erica Powers :

Yes, and to realize that you may be being very unrealistic about the cost. So it's a good idea to do a little bit of research about what the cost actually will be and then also to factor in a little bit of a buffer for things that might break in the house. So for a lot of people that they're buying their first house, they don't realize that, as a homeowner, if it breaks, it's on you to fix it. So you need to have a little bit of a cushion there to be able to make up for any of those costs that might unexpectedly come up.

Melissa Joy:

Yeah, I'll tell you. In my financial planning software there's a space for maintenance, and you could also include, if you bought a condo, the homeowners association costs, which can be quite high. But they cover a lot of things that you may otherwise really be paying for, like landscaping, any exterior improvements, a host of services. But I often start with a baseline of 1% of the value of the home. So if you bought a $750,000 house, I would say at least annually, you would expect to do maintenance of at least $7,500, if not more, and so that would be a conversation point. But it's not like when you rent and you can just call the landlord to fix things. You got it, that's on you, and there are certain things you need to replace and change over time.

Erica Powers :

Yeah, 100%. So it's good to have that cushion so that when those things come up you're really not caught off guard.

Melissa Joy:

One of the reasons that I wanted to record this episode is that we had a mutual client who had asked like why aren't interest? I know the Federal Reserve lowered interest rates. Why aren't mortgage rates lower? And there are so many factors that go into mortgage interest rates that they're not just saying, hey, is the Federal Reserve going to lower by a quarter percent or a half percent and thus that's what rates are going to be. How frequently do rates change? Rates?

Erica Powers :

change, honestly, every day and sometimes throughout the day. So you know, you could talk to me in the morning and the rate might be one thing at that point in time and then you make a decision in the afternoon the rate could be different. Oftentimes we do see our rate sheet stay the same throughout the day, but it's never a guarantee and our rates don't change just based on the Fed rate. So that's kind of a misnomer. Oftentimes people will call us and say well, the Fed lowered the rate yesterday, so the rates are lower today, but our mortgage rates probably had priced in that change by the Fed much earlier, before the Fed actually even changed the rates Weeks in advance.

Erica Powers :

Yes, yes, yes. And sometimes on the reverse, if we think that they're going to change the rate, or we think they're going to change the rate by more and they don't, then that can actually harm our rate, even if they still lower their rate. But our rates factor in many different things. So it takes into account inflation, it takes into account the 10-year treasury, it takes into account other things that might be happening either politically within the United States or outside of the country, right, so the threat of war or instability, those types of things are going to impact mortgage rates, so it's not just one thing that impacts them.

Melissa Joy:

That's so interesting. I often ask you how rates have changed. When I see the bond market as measured by, often, the 10-year treasury, when I see that going up or down, then usually there's often a pattern or a rhyme, because bond markets are listening to the same thing we have. Just so we mentioned, we're recording right after the first week of April. The first week of April we had historically significant down days. The stock markets were down 10% and for the first two days bonds like really were acting like the seesaw that we described, where stocks were going down and bonds, their prices were going up, which meant their rates were going down. But then we had the third day of you know kind of instability where things weren't as bad but they were still negative and on that day interest rates actually went up and the price of bonds went down.

Melissa Joy:

And there is speculation. Why is this happening? And some hypotheses are maybe China's selling some of their bond reserves that are in US treasuries. Certainly, if we have tariffs that are not going to go away, that's inflationary in terms of the prices and what the Federal Reserve does to fight that is make interest rates higher. Or you know, just simply things might go back to normal, which would be kind of put us back to where interest rates had been before. All of these are possible and all of these are being factored in to a bond market that has a variable and changing price and is not predictable, even though people try to predict what's gonna happen next all the time.

Erica Powers :

So how do you see it predict? Oh, it's going to happen.

Melissa Joy:

Right, it really would make everything easier, and that is such a stressor and adder to. You know, people aren't most people don't professionally buy and sell houses all the time. It's a transaction that typically happens two, three, four times in your life, and so adding the stress and anxiety of a variable interest rate and types of loans and things like that to your considerations when you're purchasing a house can really make you feel a little bit more uncertain and have, you know, just more variables you're not experienced with.

Erica Powers :

Yes, I think that all of the different variables when you're buying a house adds to that stress. And I do think for my clients that are right now trying to figure out do I buy a house, do I wait, what do I do? It's really to look back and figure out where their budget lies. If they're buying a house today, are they going to be able to afford the house based on today's rate and will that fit their budget? If that's going to fit their budget, especially in the area where we're at, where house prices continue to increase and are forecasted to continue increasing, then you buy the house when you find the house that fits your budget and the rates are where the rates are at, and then later on in the future, if rates come down, that's when we have the opportunity to look at refinancing. But at least you're not paying more for the house because you waited till rates came down and maybe you get a better interest rate but your house is a lot more expensive at that point.

Melissa Joy:

Yeah, that's true, there's so many just variables, and what we always do, if people can afford it, is encourage them. If they feel ready and it's the right time to, yes, do it. But then also have the right game plan in place to evaluate. And so that game plan would include I know that for you any loans that you've done in the last few years for clients who have the potential to refinance. You've got your list, you know what their interest rates are, so you can kind of calculate hey, these 20 clients need a phone call when interest rates go lower.

Erica Powers :

Yeah, and that it's going to make sense, right? So if you're going to refinance, you want to make sure that the rate's going to be low enough to recoup any costs and that it's going to make sense over the long term, right?

Melissa Joy:

So when you say low enough to recoup any costs, you're saying like if a rate were an eighth of a point lower. So if you went from six and a half to six and a quarter, let's say so 0.25 lower. That might not be enough to make up the cost because you also have closing costs and you're resetting If you did a 30 year to a 30 year you have a whole new 30 years to pay it off.

Melissa Joy:

Yeah, most likely that small of a decrease is not going to make a benefit. What's a typical range where people might want to reach out?

Erica Powers :

Like how much lower. I mean a lot of people will use like a 1% gauge, but you do have to keep in kind of take into account loan size. So for some people that have a larger loan, it might not take a full percent before it's going to be a benefit to them. So you know, I think it's a case by case basis and that's why it's a good idea to have the discussion with your loan officer, make sure that they're paying attention and watching for you, and have the discussion of what's going to make sense. So when they call you and say today might be the day and it only might be today that's the day you're ready for it and what would the cost be in a refinance?

Melissa Joy:

And also, I know sometimes people say, oh, this is no cost, but the cost might be buried in the interest rate.

Erica Powers :

In that case yeah, if you're hearing that it's a no-cost refinance, usually that means that the rate that you're choosing has some type of a credit built in that's covering the cost, because the costs to refinance are including whatever the lender may charge you. So whatever their fee is typically to cover things like underwriting or cross-exempt fees. But then there are also fees. If you need an appraisal, you're going to need to pay the appraiser. You're always going to have title work that needs to be done and there are fees that the title company is going to charge to prepare the documents, for the time that the notary is sitting with you signing the document. Depending on the state you're in, sometimes there's taxes and things on a refinance where you're going to need to pay that locality a certain amount of taxes. You need to factor those in. So there are a range of fees that need to be calculated in depending on where you're located at.

Melissa Joy:

And is that something that, when you're talking to somebody about refinancing, you can tell them hey, here's an estimate of what the cost might be and here's your new payment schedule.

Erica Powers :

Yes, yes, we would discuss in detail what the cost would look like for their specific situation. Would look like for their specific situation and then based on the new payment, you know how long does it take to break even on those costs?

Melissa Joy:

to see its evenings Perfect? And if you need to be on one of those lists, call the person who did your mortgage. Or if you don't have a person, erica I'm sure would be happy to be watching for the refinance moment.

Erica Powers :

Yes, I'm always happy to help anybody out.

Melissa Joy:

So just kind of bringing, I want to switch the subject ever so slightly and think ahead. I hope that current environment, kind of the tariff trap, doesn't create a US recession. I don't think that that's like 100% probability, but when we have our next recessionary environment, which you know, at some point there will be a recession. The question is when? What changes when it comes to mortgages and mortgage environment and what would people need to be kind of knowledgeable about?

Erica Powers :

Well, it depends on. Obviously there's all sorts of things that happen, but typically in the previous recessions that we've seen, it has improved interest rates. So if that were to happen again and that we saw an improvement in rates, then there might be some opportunity to take advantage of refinancing. This is likely going to be for the people who have purchased a home in just the last few years, your people that are still in the twos and threes of the old days. They may never refinance.

Melissa Joy:

Um, I kind of hope we never get to that point because it was created out of a moment of extreme economic stress with covid. So yeah, my big inside if we don't go back there.

Erica Powers :

I kind of don't think that I will see that in my future again, um, but I I do think that for people they're likely not going to be raised financing, unless maybe they're looking to do something with equity in their house, and there could be reasons why that would make sense for some people. But for the majority of people the ones that have purchased in the last few years if rates start to come down in the future, then there is a good likelihood of that happening in a recession, and then they would have an opportunity to take advantage of that. So I think it's something to be kind of keeping an eye on and be aware of that. That would be a benefit.

Erica Powers :

No-transcript. Keep in mind is it's not just one factor that's driving the interest rates right, it's all these different factors. So just because we're in a recession doesn't mean that rates are going to improve if inflation is really high. Inflation really affects interest rates probably more than some of the other factors. So you can't necessarily count on that, and that is why I think it's important for people not to try to time the market, because you may not be able to time the market.

Melissa Joy:

And so you probably won't be able to.

Erica Powers :

Yeah, yeah. So you might be sitting around waiting and thinking that you're going to get to this point where rates are going to be low and house prices are going to drop dramatically, and that's very unlikely to happen. We don't really see that. Even if we do go into a recession, it would not likely be like what we saw in 2008, where home prices came down.

Melissa Joy:

We don't expect that in 08, where home prices came down. We don't expect that. Yeah, never say never. And certainly there are so many different factors. There's also, you know, factors when it comes to lending standards. So sometimes banks can either be forced due to regulation or because of their own focus on their ballot sheet, may choose to be pickier about who they lend money to, and that certainly can impact the mortgage possibilities for you as well.

Erica Powers :

Yeah, there's all sorts of things that are going to impact where rates are at, so it's not, it's never just one thing.

Melissa Joy:

Well, I think we might have made things less clear and not more clear, but that's really the nature of the world of mortgage is. It's constantly changing. There are also different types of buying programs and if you could just briefly like, let's somebody say somebody has an adjustable rate mortgage, which is also called an arm, and they may be coming closer to a reset, Although I think some of those people probably have a few more years based on when interest rates went up, unless they did a very, very short arm, like a three-year arm. But what should those people be looking for?

Erica Powers :

through your arm. But what should those people be looking for? I think it's the same thing, right? You're going to take a look at where your payment is now, where you think that it might address to. You know, when you did your mortgage, there were terms of how much the rate could adjust either upwards or downwards each year, and so I think it's important to call your loan officer and have that discussion of where are you at, what are the possibilities, and then at what point does it make sense for you to maybe lock into a fixed rate mortgage. So you know, maybe it doesn't make sense right away, maybe you're hanging on to the arm for a little bit, depending on what's happening in the market, but in other situations it could make sense, even right now, to take advantage and to lock it in. But that's where you have to have the discussion, because everyone's situation is going to be different, right, and everybody's goals are different and their financial plans are different.

Melissa Joy:

That's absolutely true and that's why you know hopefully in this conversation you're hearing a financial planner, a really knowledgeable real estate professional and a mortgage person together can really combine, for you know, the ideas and concepts that can be really informative for you in making the most informed decision when it comes to real estate and mortgages. Is there anything you would leave people with in terms of things that you're seeing that are different or questions they should ask in today's environment about either refinancing or new purchase mortgages?

Erica Powers :

I mean, I think the biggest thing is to have a good plan when you're searching for a house. So if you're a purchaser and you're searching for a house, have a really good plan and be knowledgeable about depending on where rates are at or where they might move as you're putting in offers, will you still be within your budget? So if you're able to do some of that research and have those discussions ahead of time, then when you're putting in an offer you're going to be more confident, regardless of where the rates are at. So I think that that's number one is to just have a good loan officer that's working up those numbers for you and so that you're going into your offer with confidence. And then I think for refinancing it's kind of the same thing, right? Are you having that discussion with where it's going to make sense for you knowing how long you're going to live in the home and you know what your goals are is going to drive your decisions so that when you do see a rate change that you're able to take advantage?

Melissa Joy:

I love that. I think that you know you can really do a lot of pre-planning to be prepared. And you know you can really do a lot of pre-planning to be prepared, especially, you know, with resources like Erica or using financial planning software to put in hey, this is what we would buy something for. Here's the interest rate, so you can foresee how that will impact everything and also your budget and how much money you need to set aside for the house, including property taxes and insurance and maintenance costs. So do keep your eyes wide open, do be informed. If you're not sure where to start, calling somebody like Erica, if you're going to be a first-time homebuyer and saying, here's the lay of the land of our finances, can you tell me what we can afford Can be really beneficial for you for being prepared. And that doesn't need to be a call the week you're going to be under contract. It can be a call six months or 12 months out.

Erica Powers :

Yeah, I think if you know you're going to plan on purchasing, it's always a good time to have the conversation earlier rather than later.

Melissa Joy:

Well, Erica, where can people find you if they're interested in learning more?

Erica Powers :

Sure, they can find me. Well, I can give you my website and you can put that in the show notes, and they can also find me on Instagram at local mortgage banker and send me a message. I'm happy to help anybody that's interested in purchasing or refinancing.

Melissa Joy:

Well, thanks for bringing some mortgage wisdom to the podcast, erica. We appreciate you, as always, yeah.

Erica Powers :

Thank you for having me on.

Melissa Joy:

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way you can support the podcast is to forward an episode to a friend or leave a review. Go to pearlplancom and the podcast link to get all the resources and links mentioned.

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