Podcast Episode - Suze School: Market Madness

Estate Planning, Money Management, Money Market, Saving Money, Stock Market

May 03, 2020

Listen to Podcast Episode:

In this podcast, Suze explains what is happening with the three markets that affect our lives the most: the real estate market (including interest rates), the stock market, and the job market.

Podcast Transcript:

May 3, 2020. First of all, welcome all of you who are brand new to the Women and Money podcast, and the men smart enough to listen. Thousands and thousands and thousands of you are joining us for the very first time. I can't wait until I say hundreds of thousands of you, but I don't think that will be that much longer, and I just love that. So welcome, welcome, welcome. Also, welcome all of you and I'm glad you're all loving the Women and Money app that you can all download for free by going to Apple Apps, as well as Google Play, and search for Suze Orman. You'll love that app because I love that app. And I don't love many things when it comes to apps, but that again is just beside the point. But many of you are telling me that you really love it. And it's there that if you want to ask a question, you can submit your question and if chosen, I will answer it on the podcast. I usually do that on the Thursday podcasts that drop on Thursday. And the good thing is, you can also search all of the podcasts that I've previously done, as well as the answers that I've personally done myself to many of the questions that you've written in. And you can probably find the answer to the question that you are looking for. So you don't have to see is Suze going to answer it on the podcast or is she not? Also, we live stream there. We do many things there, so can you just go there and check it out? And also, for those of you who are waiting to hear what is this affiliate deal that Suze is going to be offering, I will be announcing it either on this coming Thursday's podcast or a week from today. I just want to make sure that everything is in order because I know once I announce it, your little side hustle here for you to make some more money, you know, and help yourselves here, as well as you're helping others, you're going to want to do it. And I just want to make sure that everything is legally set up because we're dealing with money here and sending out money to you and all these things. And it's not going to cost you a penny to participate. It's not a multi-level marketing deal, it's not where you have to buy something for others and have inventory. You just have to want to help yourself and you just have to want to help others. It's just that simple.So today on the podcast, I really want to talk to you, and maybe we should go to Suze School here. I want to talk to you about the three markets that absolutely affect your financial life more than anything else. And they are the job market, they are the real estate market, and they are the stock market. So let's first start with the real estate market if that's OK with you, and it's got to be OK with you because that's what I've just decided to do! I don't know why I decided to start with that one, but I could think just because I wanted to write. All right, that's beside the point, again. All right, listen to me, here as I'm recording this, do you know that a 30-year fixed-rate mortgage is at 3.23%? Which is the lowest level since 1971? A little bit ago, it was at 3.25%, but as of a day or so ago, it was at 3.23%. OK, a 15-year fixed-rate mortgage is at 2.77%. Now, those are seriously low interest rates when it comes to a real estate mortgage. First of all, let me just be clear here. What I'm talking about now is for conforming mortgages, not jumbo mortgages, not FHA mortgages, but for conforming regular mortgages. And for those of you who don't know, a conforming mortgage for the year 2020 are mortgages that are for $510,400 or less. But if you happen to live in a high-cost area, they're for mortgages that are for $765k, approximately or less. I guess it's exactly $765,600 or less. So just know that anything above those amounts if you are applying for a mortgage that is above the amounts that I just said, that is considered a jumbo mortgage and your interest rates are a whole lot higher for jumbo mortgages than they are for conforming mortgages.Now, the first question that has to be asked and answered is who gets that mortgage? Who can get that interest rate? The lenders have gotten very, very strict. I'm just telling you that right now, and they've gotten strict because they're really afraid that many of you that are going to be taking out mortgages, that you may be defaulting on them because of what's coming in the future. Or, will you have your job, will you not have a job? What's going to happen? They are scared, so they have tightened they're lending practices big time, and they expect you to have really excellent credit to get these rates on loans that you may be applying for. They are truthfully looking for a FICO score of 760 or above. And I just want to talk about FICO scores for a second as well as the scores that you get on Credit Karma and all of those scores that are free. Please know that still to this day, 80% of all the lenders out there only use a FICO score. So, if you go to I guess it's FICO.com, I don't even know where you get them anymore, because you can get them for free on your Discover card. Many of your credit cards give you your FICO score for free. So just be careful that you want to know if you're going to be applying for a loan, you want to know what your FICO score is, not just your free credit score that comes from a company by the name of Credit Karma because it's a different scoring technique. So, they want you to have a FICO score of about 760 or above. They're probably not even, you know, going to look at you or consider you if you have anything really below 650, maybe they will, but you know, 740, 760 right in there, it will give you a good rate, just something for you to think about. Now, here's what's really important. I know many of you are enticed by these low interest rates and you are really thinking I'm going to go in the market and I am going to buy now because now is a great time. Look at these interest rates. Please listen to me. The interest rate market, that's another market we can talk about, but the interest rate market is not going anywhere soon. Interest rates are not going up. Interest rates are going to stay low, low, low exactly like they are right now. Do you know that half of all renters say that they lost their job? Do you know that? So what do you think that means? That means housing is hurting. It means that landlords who own real estate might not be able to keep their real estate because they don't have anybody who can rent from them. It may mean that they have to take lower rents. If you're taking a lower rent for a property that you already own, it is very probable that the price of that property also then isn't worth as much. So I'm just asking you right now that if you're in the market to buy a piece of real estate, and you're doing so because you are afraid that the interest rate market is going to go up, I am asking you not to buy real estate right now. I'm so sorry for those of you who are selling right now, and you really need to sell. And you're saying Suze, please don't tell people that, I need to sell my property. And I know, I know you do. But the truth is, I don't know what to say to you. Maybe you're going to have to lower your prices, I don't know, but, you know and I know that it's a very difficult market for you to sell right now. But you have a home, and so you don't have a choice, you have to just wait to see what's going to happen here. Those of you who are buying a home, you have a choice, should you be buying or should you not? So, my advice to you if you want to follow it, is if you're in the market to buy a home and you're buying that home right now, simply because you are afraid that interest rates are going to go up. I'm asking you do not buy the home right now because I think that this is very possible what I'm about to say could happen. If many, many homes start to come on the market because jobs and income and things like that didn't come back, or people got really far behind on their mortgage payments and they cannot catch up so now they're going to go into foreclosure if things go on much longer. Then, you will see a tremendous amount of homes come on the market. When a lot of homes come on the market, it then becomes a buyer's market and you have your choice of many, many homes. And it is very probable if the government wants to stimulate those homes to be purchased because home buying is a big part of our economy, you never know the deals that they might make. Interest rates could even possibly go even lower, believe it or not, to hopefully really entice you then to buy a home. So just stay put, that is my advice for you. So there may be some of you out there because there's always exceptions to my rules here and what I'm asking you to do. That you come across somebody who is so desperate for money that they will sell you their home at any amount that you want to pay. If that's the case and there's a house selling for $300k and they're willing to sell it to you for $200k or whatever, it may be, OK, buy it. Buy it because now you got a deal of a lifetime and you're at a low interest rate environment, no matter what. So either you strike the deal and get the price of the home down to a serious deal, like an unbelievable deal that you can't even believe they said yes to, or just wait. That is my advice for you there. Now, let's talk about the stock market. The stock market is going to get interesting. I told you this month, did I not, that, I think I said it on Thursday, that I really thought this was the month, not long from now, that the market is not going to be, in my opinion, very happy at all. And it is very possible, I don't know if it's going to or not, it could decline dramatically again. So this is not the time right here for you to be putting money in large sums into the stock market. I just got an email from somebody, it's actually a friend of my niece, Lauren, and she said, Suze, can you help my friend? And they were saying how her friend's parents just sold a piece of property and they have $1m and what should they do with it? Now, I am very aware that if they went to a financial advisor that it is probable the financial advisor would say, wow, $1m. Let's do XYZ with it because remember, most financial advisors still work on commission. And very possibly, or again, probably they need money as well. Did they buy a house that was too big? Did they just get a new car? What are their bills? Because, you know, the more money you make, the more money you spend, the more you want everybody else to see that you're just so rich by the assets that you have. So your financial advisor very well could be in financial trouble themselves, so they need to do things to generate as much income for them as they possibly can. So it is very likely that if they went to a financial advisor and that was the situation of the financial advisor, the financial advisor would be saying, let's do this, let's do that, let's do whatever. I am saying to you right now, if you have a lump sum of money, just sit on it for a little bit here, don't put it into real estate unless you get a really great deal. And this is not the time to be putting large sums of money into the stock market. If you want to go into the market after this month in a dollar-cost averaging fashion where you're putting money in every single month, I don't have a problem with that. But I do not, especially this month, want you to go in with large sums of money, OK? Again, I don't have a problem if you are dollar-cost averaging, you can continue to do so. And if you don't know what dollar-cost averaging is, go to my Women and Money app. Search for dollar-cost averaging, and it will come up in either the questions that I have answered for you or in the podcast, and you'll be able to either read the transcript on it or listen to that podcast. It's really such a cool app, I can't even believe that Sarah built it. I love that woman, Sarah. Remember Sarah from the very first podcast we ever did? She has done an incredible job. But back to the point here is that right now, the real estate market and the stock market, I just want you to be careful with. Again, my instructions have always been, if you are invested in good quality investments and you have three, five, 10 years or longer until you need this money, just stay put. Eventually, you'll be OK. But again, if you needed this money within a year, you needed it to pay for your kid's college education, whatever. I asked you last Thursday, which was, you know, pretty at the top here before we went down. We'll see what happens now. I asked you to take it out of the stock market, so I'm not changing that opinion. But, that's what I want to talk to you about, those two markets. All right, so now let's talk about the job market. And I think I saved this one for last because this one, I have to tell you, seriously depresses me. So let's just go back to history for a little bit here. In 1920, do you know that 26% of the economy was made up of the service sector, but 74% was made up of manufacturing? That is no longer true today. Almost 80% today of the economy is made up of the service sector. Which is why we really kind of have about 30 million jobs right now that have been lost. And it's not going to stay at 30 million, it's going to be 30, 35 million, possibly 40 or even 50 million. It could continue to go up there. As I told you before, it is totally probable that we could see an unemployment rate equal to, if not more, than the Depression. But manufacturing is very different than service. It's very different. Why? Because way back when we were a manufacturing economy, and if something like this happened and there was all of this stuff that had been made, really, they would just store all those goods in inventory. And eventually, they would be able to sell them as things cleared up and make all that money back. A service industry, a service business, they cannot hold inventory so they can't close for weeks on end and make up for that lost time. They can't sell that hotel room that never got filled. They can't sell that Uber ride that was never taken or the haircuts that you never were able to give. So that money, when you're in the service industry, is gone forever. But the sad part is that the expenses, to just even hold that empty business, is fixed. So a lot of you that have hair salons you're still having to pay for everything, even though you have no income coming in. And there will never be a way for you to make up for that income. Am I making sense? And this isn't just on the individual level, it's on the corporate level as well that offers services. So, why does that depress me? It depresses me because even if you get your job back, even if the job market starts to improve sooner than later, which it will, I have this gut feeling that what will also happen is that everybody's going to have to take a pay cut.It may be, you know, to even get people to come into your stores. Or, let's say you have a hair salon. You may have to offer it for less money, a haircut, to entice people to come in. Maybe landlords are going to have to make deals for commercial people where they charge them less so they just don't close up. But the point that I'm trying to make here, really everybody, is do not be surprised if even when you go back to work that there's an announcement made that says, all right, we need to take pay cuts. Think about the hospitals and many of the hospitals that aren't servicing the Coronavirus people, and there are hospitals that aren't, but the hospitals are empty because they were prepared to take everybody and then nobody showed up in some areas. And now, even those hospitals don't have any revenue, because why? Because elective surgeries were postponed, everybody was afraid to go into the hospital, and so even hospitals, some of them are going to have to take pay cuts because they didn't have the revenue coming in at this time. But they still have the same fixed expenses. So why am I giving you this joyous news? Because once again, between the real estate market, the stock market, the interest rate market, and the job market, it is going to be your goal, honest to God, to save as much money as you can possibly save to take this time and really look at your expenses. And what expenses can you absolutely cut back? And this advice is for everybody. Everybody right now should really be valuing every single penny. It's funny because, as I just said that, it reminds me of my Billy and Penny book, which teaches the value of money to kids. And for those of you who are home right now, you might want to go seriously to www.SuzeOrman.com/BillyandPenny, and you can download that book for free, and it could go right to your I-book reader or your Kindle or a PDF, and you could be doing this with your kids and teaching them the value of money. If you want to see me reading that book, you can find me reading that book to the kids on the app, the Women and Money community app, again, which is free. So it's in the new event section there, so you can have me read that book to your kids after you've downloaded it so they can go through it with me. So I know I just got sidetracked. I know, I know I do that often, but the point of this is, we really need to learn how to make every penny count and count every penny at this point in time, which by the way, is the theme of the Billy and Penny book. So these are the things that I want you to know, and I want you to take into consideration because I don't think as I said to you last week, I don't think we're going back to normal. There will be a new normal. There's going to be a new economy. There's going to be for a long time. And even though I've said to you by September, you're going to feel better, which you will. And by February, absolutely things should probably seem what is normal or what we're accepting as normal. I'm still afraid that the hit that you personally took during these months is going to hurt and therefore the only way to make it not hurt is for you to make up money by saving money and not spending money like you used to spend it before this happened. So these are just things that I really, really just want you to think about. So I realized this wasn't the most uplifting of podcasts, but it sure was the most realistic. And if I can just give you my reality or my perceptions of things to keep you safe, to keep you sound, to keep you secure, to make sure that you're smart with the moves that you make. Then, in the long run, everything will be OK. We need to keep the long view here. What are the moves we make today to make sure that our tomorrows are what we want them to be? And I know so many of you say, Suze, this is absolutely impossible, I'm never going to change, it's not going to work, I might as well give up. And I know how depressed so many of you are. But I just want to leave you with this thought and this quote. And this is a quote that I heard from somebody years ago, and I'm so sorry to say I don't remember who I heard it from. But at times when I know that you are doubting that anything is going to be OK because you think absolutely, this is just an impossible situation that you're in. I just want you to remember this quote, and it goes something like this. You know, in life when you want something to happen, you really think nah, no, what I want is absolutely impossible. It will never, ever happen. And then time goes on and you start to think, well, I still think it's highly improbable that this is ever going to happen. But in the end, in the end, you realize that it was inevitable after all. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information.

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