On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about new home sales and how recent remarks from Treasury Secretary Bessent could help the bond market and mortgage rates.
Related to this episode:
Why did we just see the highest new home sales print in years? HousingWire
https://www.housingwire.com/articles/why-did-we-just-see-the-highest-new-home-sales-print-in-years/
Enjoy the episode!
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Content Studio.
Related to this episode:
Why did we just see the highest new home sales print in years? HousingWire
https://www.housingwire.com/articles/why-did-we-just-see-the-highest-new-home-sales-print-in-years/
Enjoy the episode!
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Content Studio.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about new home sales and
00:12also how recent remarks from the treasury secretary could help the bond market and
00:17mortgage rates. Before we dive in, I want to thank our sponsor, Rocket Close, for making
00:21this episode possible. Logan, welcome back to the podcast on this special Memorial Day episode.
00:28Yes, we made it through Memorial Day in 2025.
00:34That's saying a lot this year. We have so much to talk about. Let's start with...
00:43By the way, you got a lot of love for singing Eat It in the last podcast.
00:50Yes. Thank you for everyone who is very nice to me about that. I actually do think I know
00:55so many lyrics from Weird Al songs, but that took me back. So, you know, appreciate everybody with
01:02their support. That is hilarious. See, you got Weird Al, I got Shy, you know. We got our own
01:09little culture vibes here. You are definitely way better at that. Oh, my gosh. So, we are
01:17recording this on Friday morning, and lots of things happen Friday morning and Thursday night. So,
01:23first thing, let's talk about that existing home sales report.
01:27Well, actually, it's the new home sales report. Oh, yeah, you're right.
01:31And the headline, it's actually very true. New home sales report beat estimates, and it's at the
01:39highest print in years. Wow.
01:42So, of course, everyone's like, what? Wait a second. The builder's confidence is not that far
01:49from COVID, and the new home sales just, you know, the last time it was this high was actually in 2022
01:55when sales were falling. So, of course, we got to try to explain everything. It's a very complicated
02:04story. But if you actually look at new home sales, you brought in and out to 2022, it just basically ebbs
02:11and flows back and forth. It's in a very small range. And one thing I've come accustomed to
02:17realize is that not a lot of people know that the new home sales market has its own purchase
02:21application data. And that purchase application data has been showing positive year over year and
02:28month to month growth. Nothing spectacular or anything like that. But still, if you took what
02:33the Mortgage Banking Association did with their purchase application data, they were looking for
02:38724,000. So, everyone has different estimates out there. The last three months have been revised lower,
02:46which is really showing the trend is actually not as strong as the headline. And this number will probably
02:52be revised lower. And it's just basically kind of the same story. And we always have to remember that the
02:58builders confidence index is tied to more smaller builders, not the big publicly traded builders. So
03:04the big publicly traded builders balance sheets look a lot better, their corporate profits are a little
03:08bit better. So they have levers to pull. And it's not like new home sales is working from 1 million,
03:15which was the peak during COVID or 1.4 million, like we saw at the peak of 2005. They're just basically
03:22managing we have sales going back and forth. Now, if new home sales broke above 800,000, and it was
03:27growing, that's a legit breakout in sales. But here, it just looks like to me the same story.
03:33When rates go lower, they could sell a little bit more homes. And then when rates go up, really,
03:39the builders new home sales data really gets hit when rates get seven and a quarter and above. But
03:44we're just hovering. And because they live in a sub 6% mortgage market world, at least the big publicly
03:53traded, they can still move a lot of product when needed. But we made that case that single family
04:01permits have probably peaked for the decade unless rates fall. So it's a complicated headline. I know
04:08a lot of people are confused. My Wall Street friends are like, what's going on? And the surveys
04:13were all really bad. But just look at it in the context of the last few years. And always remember,
04:19if you look at rates, when they get above seven and a quarter is really when the builders sales
04:23data starts to fall. And then when it comes out a little bit, picks up and really just we don't go
04:27anywhere. Kind of like the existing home sales market, we have when rates fall, demand picks up,
04:32when rates go up, demand fades. Here, it's working from a higher level, 2019 levels. If the existing
04:39home sales market had a comparable level, you're at 5 million existing home sales easily.
04:45So that's why the builders are just up there. They're a smaller marketplace. We're talking 743,000
04:53homes versus 4 million in the existing home sales market. But advantage, disadvantage to a degree
04:59still, if they could still offer sub 6% mortgage rates, millions of people buy homes every day. So
05:07it's a supply and margin issue to some extent that now as inventory grows, if they have to start cutting
05:15more prices and rates, the profit margins go down. This is why you don't see building permits,
05:22single family permits grow anymore. We're starting to complete the old units and we're kind of stuck.
05:28So I know the headline could be confusing, but when we wrote that article, we tried to explain it.
05:34So I want to dig in a little bit on, so you just mentioned it and you just mentioned it
05:38on our last podcast too, where you're like, we've seen the peak for home building for a decade. And
05:45I'd like, let's dig into that a little bit because that doesn't seem like good news.
05:50No, I mean, unlike the last decade, the last decade was like working from the lowest levels ever. And it
05:56was the weakest new home sales. So for those that followed my work in the last decade, I was like,
06:00we are never going to get to 1.5 million housing starts until years 2020 to 2024, because new home
06:06sales weren't warranted. You need, oddly enough, my God, now that I think about this, I was always
06:12saying you need new home sales to get above 743,000 to get 1.5 million starts. And back then that looked
06:20like very attainable, but I said, no, that's going to be a year's 2020 to 2024 story. So we're here again
06:26at this level. Um, the builders completed units of sale. That's their main thing. Uh, it's around
06:35120,000. That's like the normal level of the peak of many, many cycles in the past. So, uh, smaller
06:45builders, disadvantaged, big publicly traded builders have a little bit better backdrop, but in this
06:52environment, unless you're growing sales, unless rates are lower, this is the reason why I sing like
06:57permits, just permits in general are at recession level still. And it's been here for years. So it's
07:03odd, right? You always account to an economic expansion in America as permits rising. That's
07:10always a leading indicator. And yet we've had the economy expand with permits basically at early
07:16COVID-19 recession level. So unless rates fall, there's no motivation or financial motive for them
07:24to start, you know, piling in on, uh, uh, permits, why they still had the backlog. And I think that's
07:30the thing is that they still have, uh, uh, basically near all time high backlog of orders of homes that
07:37haven't even started yet. So they're just managing, right? They're efficient sellers, as I call them,
07:41they're just managing and make sure they could get it, you know, by the time the home is built and ready
07:46to go, they could sell it. And this way you avoid, you know, uh, or you don't deal with huge cancellation
07:51rates or anything like that, that will hurt your margins even more. Okay. But why is then this,
07:59the peak for the whole next decade? If, I mean, you're, I mean, it's 2020, it's 2025. You only got
08:06five years left and single family permits were already at an elevated level post COVID. So unless
08:11rates fall, there's no reason for permits to really grow. So that's the reason now if mortgage
08:17rates fell and were lower for longer and demand picked up, yeah, you can get permits growing again.
08:24We've seen that happen before, but for now, uh, there's just too much completed units of sale and
08:29margin pressure for them to like, yeah, let's go for it. Okay. So that that's clarifying. So the rest of
08:36this decade, not for the next 10 years, but like for the next 10 years, just the rest of this decade.
08:40Okay. Okay. And you see that, like, even if, even if, um, mortgage rates fall, if they have a
08:46backlog, then, you know, we're just, well, if, if mortgage rates fall and builders confidence picks
08:51up and they start to grow new home sales, Sarah, shockingly enough, they build homes,
08:59even with labor constraints and all these other things, they somehow build home.
09:05That's why I was confused for you to say like, well, this is the peak. I'm like, well, I mean,
09:09don't we expect mortgage rates to fall sometime in the next five years?
09:12Well, I, I, I know, but it's been, it's been a few years now that permits aren't growing and it's,
09:17it's, it's, it's one of the more confusing economic expansion data lines that we have,
09:22because we're, we're always trained to think permits are a leading indicator of an expanding
09:27economy. This is an expansion that has happened now while housing existing home sales have been in a
09:33recession since June 16th, 2022, 531 PM. We remember that call. Uh, the new home sales market
09:41isn't necessarily growing with permits or anything like that, but, uh, it's very, it's a very unique
09:48cycle. It's, it's confused so many people, but if you want to realize why residential construction
09:53workers haven't fallen, it's really because of this. Uh, and also it's, um, uh, that sector is very
10:00tied to the remodeling business around the world or around the country. Okay. So then, uh, other news
10:07on Friday morning, we had secretary, uh, Besant talk about some changing, some rules that relate
10:12to bonds. This is a little bit out of my league. Let me ask you to explain exactly what happened
10:16there. Okay. For first, uh, outside of weird out, what other 80 songs can you, uh, uh, sing or know
10:23the words to, I know the words to every journey song guaranteed journey song. Journey is just
10:29legendary, right? You too. Absolutely. Even the B sides, I could do all those Bruce Springsteen,
10:35most of them, you know, just the classics. That's what I'd say. Weird Al. Yeah. We're weird. Weird Al
10:41Bruce Springsteen, the classics. There you go. Wait, who was the, who was the comedian that smashed
10:49watermelons? That was, um, oh my gosh. Gallagher. That was Gallagher. Is Gallagher still alive?
10:57I have no idea. People who are like, you know, so our producer Alyssa listening to this is like,
11:03I know she has no idea who Gallagher is. That's, that is old school for real.
11:08Who, uh, when I think of the eighties, I still think of, come on, come on, come on, come on,
11:12come on, come a chameleon. You come and go, you come and go. Culture club right up there. Absolutely.
11:20Absolutely. Duran Duran, you know, MTV videos, you know, over the days. Um, so one of the things that
11:29I thought Bessent should have done or the white house should have done is that they should have
11:36change this uh slr rules early on if they were so adamant about the 10-year yield going lower
11:43you want to give yourself the best backdrop possible now i don't know logistically or legally
11:48they could have got it done faster but what this basically is is they're going to allow
11:54um financial institution banks you know firms to hold more treasuries and they believe that can
12:03you know create more liquidity in the market and you could get uh uh more buyers in because right
12:10now technically you're limited uh so uh friday morning uh a lot of action on friday morning
12:18from the from the white house but uh he talked about summer so in the summer is going to be the
12:25time frame where the slr and for everyone in the mortgage industry real estate uh this is kind of
12:31a big deal because they're they're really counting on this to create a little bit more uh calmness in
12:36the bond market but it'll be summer when the rules change so okay so summer is officially now right
12:42i mean like so so so pretty soon i i didn't see an exact date that that's like an important story i
12:47thought they should have done this early but maybe legally they couldn't have got it done but uh that
12:53i'll uh create more buyers or more holders of the 10-year yield and and of course it's friday morning
13:02uh i i woke up to president trump uh putting tariffs on apple and uh uh i can't build uh iphones
13:12in uh india but you got to bring into indiana by the way we are going to indiana again that is going to be great
13:20we had a lot of fun in indiana last time yes we did absolutely okay so it wasn't just it wasn't
13:27just apple it was 50 tariffs on eu correct on the eu yeah trump just doesn't like europe
13:33just doesn't like you know it's europe you you think about europe and you know the vat tax and
13:41everything and and what they what they do over there but here is this revolutionary ai that you know
13:47here in america we're pushing and then everywhere else but then europe is like i was i think do they
13:52still have nokia there right you know i mean i'm sure they do does europe create anything that's like
13:59you know energetic or passionate or anything like great food great visiting but when you think of
14:07europe just think so in any case trumpy got mad again it's probably bored it's right before the
14:15right before the holiday weekend and the stock market is up so he's thinking okay let's go for
14:20it you know so which probably means that the uh conversation with uh europe the uh the trade deal
14:28with europe isn't going as well as he so again you should kind of show your hand when you do this
14:32uh um so we haven't had deals with japan yet we haven't had uh other deals but he's put a
14:39in nine days we're going to get a 50 tariff on on europe so what happened is the 10-year yield fell
14:46in the morning so all of a sudden the bond market which was petrified because of the budget you know
14:53the vigilantes are here now the 10-year yield is down was down like at one point 20 basis points from
14:59the recent high uh and again if the labor market is still firm and holding up 4.35 to 470 is acceptable
15:09uh area right um so bond yields fell mortgage pricing fell on friday off of it but uh again
15:17yeah so some interesting uh fireworks before the holiday uh and uh looks like trump's going to get
15:24that tax bill signed and you know just wanted to uh through throw a few firebombs out there before
15:31the weekend absolutely and we expect more to come or you know as a newsroom we're always looking
15:36throughout a holiday weekend that doesn't mean anything to the white house they might it might
15:40be saturday night it might be sunday morning you never know so uh we're always watching so if you're
15:45out there you're you're in real estate or mortgage you've got these competing things you're like okay
15:50we're going to allow more people um invest in the bond market so that might drive things down a few
15:55points you have continuing trade war uh craziness uh going on that might drive it up like what what should
16:02people expect well let's look at what happened this year the the 10-year yield got to a level that i
16:09did not think it should have got to um but the trade war the markets believed the trade war was
16:16recessionary so it drove bond yields lower and then it was you know a face ripping reversal
16:25so that was chaos if you take the chaos out of the equation right the 10-year yield let's look at it
16:32the last few years looks pretty normal just in a channel that's why we do channel forecasting uh every
16:38single year because things go in ranges we don't do let's talk about a mortgage rate once every four
16:45months and then that's it no we want to we want to teach people that the economic that the whole slow
16:50dance was designed to you know teach people that you're okay it's really fed policy and what drives
16:56the 10-year yield economic uh you know expectations of economic growth uh inflation expectations and
17:03fed policy so we're just hovering back and forth and take the drum out but you could clearly see if
17:08the market really thought recession was coming they still have the ability to send bond yields lower
17:13and we all know debt's coming and there's no difference out there so hopefully this week
17:19brought some common sense into that because uh uh yeah we we had some really and i know and i know
17:25there's people want to highlight stuff and and get people to click but but our debt to gdp has been
17:32rising for so many years and our debt has been rising our deficits you know so and rates were so much
17:39higher before when it wasn't so uh a little bit more perspective and i think that that this was a good
17:45week in that sense to bring some reality back into the conversation when's the next jobs friday so
17:51that uh if we're looking for the labor data to maybe tell us something uh you know the jobs week
17:58isn't next week uh or the bls jobs friday uh it's the following week because i think may 30th is on
18:05friday so june 6th is is uh uh the labor week and of course um labor over inflation we jobless claims
18:15still the fastest data line to give us a head stop and for for those that uh one of the things i do now
18:21on social media is i show the uh jobless claims for federal workers and that's been falling down you
18:26know after this big spike that data line is moving lower it's nowhere back to where it used to be but
18:31there's a clear uh the firing of federal workers have stopped uh and if they found jobs or not
18:39you know there's there's ways to track that continuing claims but uh yeah so we're gonna
18:44whatever jobs week happens it's very critical but again we always have a labor report every week
18:50every thursday with the jobless claims data well i was thinking by by uh june 6th you know maybe some
18:56of that data that we're looking for as far as you know layoffs and and you know other other impacts
19:02might be showing up there on the other hand i don't know you know here's here's here's the
19:07interesting thing uh in 2024 the labor data was noticeably slowing down but for me it just got to
19:16my forecast so i always have a different take than everybody i was like okay i was i was the guy that
19:22was wrong for all this long but i said okay maybe i could get my revisions and then we could get back
19:26down so the labor data so far looks perfectly normal to me it really depends on what people
19:33perceive the job market is and for so far this year the monthly creation numbers were between 133
19:40and 151 000 that's what i was looking for we're at 147 000 per month so the labor market i just naturally
19:46see the progression of jobs data getting lower as population growth slows and the expansion is longer
19:51it's really hard to get big job prints anymore uh in this case the labor data stabilized right it went
19:59from it's soft it's a softer labor market by a lot of fronts but it also stabilized so if jobs data if
20:06we start trending below 133 000 per month then yeah you got you got something especially if it goes sub
20:13100 000 but for now it's stable for now the jobless claims data is is not at recent lows but not
20:21breaking out either and again everyone's kind of said uh um you know what what can make the fed move
20:32it's the labor market now of course we had the ruling that uh uh the supreme court you know trump has
20:40authority over firing a lot of individuals but the federal reserve or the fed or at least powell is
20:47protected because it's a quasi first or second american bank which drove everyone nuts uh on x everybody
20:56had to give their take on it but uh we went with the approach of uh if he's not happy you can't probably
21:04fire him but he could do a shadow bank or shadow fed president and whoever x is for him that person to
21:11come on and say don't worry when i'm there we're going to cut rates whatever it is that the whole shadow
21:17bank that beset talked about before trump won this would be the backdrop for it now that the supreme
21:24court said no mas you can't you can't touch powell right uh so this would you know this is something
21:30to think about going out in the future if things don't go the white house's way do they bring out
21:37the shadow fed president the shadow was a movie in the 80s or no 90s i think that's actually i think
21:44that's older so this no no the shadow yeah the shadow's an old comic but there was a movie i think
21:49one of the baldwins actually did it that would that would make sense so this this supreme court ruling
21:57was really interesting because they did say that president trump can fire the heads of independent
22:01agencies and then they did a carve out for the federal reserve so they were very specifically like
22:06don't touch jerome powell right because i i think most people feel like they don't want to crash the
22:12market they don't want that to happen and there's more at stake with federal reserve you know that's
22:17what turkey does turkey like every time every time they raise rates there they they like you know it's
22:23not like you know like russia throws its people outside of windows you know turkey just like fires
22:29them like comes and squirts them out you know so i think there was always this rule that you you can't
22:36you know the sitting fed shares is off limits just for that because you know uh a politician might
22:44want rates to go lower than it should be just to help the economy it whatever you agree or disagree
22:49that's the supreme court just kind of wanted to have kind of a buffer there which you know maybe
22:57five ten years a lot i still think they left a little wiggle room that maybe they can but
23:03in any case for now uh the shadow fed president is still in play uh more than trump firing uh powell
23:11now and you know trump said it himself i think you know he was advised that hey you're not going to
23:16be able to fire powell but he said why do i want to fire him i'm going to replace him soon
23:21so uh 2026 powell's gone he's probably like thank you get me out of here and uh um and then who
23:29if he does do the shadow fed president if that does occur it's just a theory if it doesn't we
23:34won't talk about it but then we can go into the dynamics of what a shadow fed president uh can do
23:39i think bessen talked about this in october of 2024 it'll be really interesting to see i know we're
23:46going to keep a close eye on that okay anything else it was such a crazy uh friday anything else you
23:51want to talk about i know it's you know it's holiday weekend and uh uh usually the tracker
23:57gets impacted uh the the following week uh because people you know want to go on vacation and do stuff
24:03that everyone's on board on uh buying and selling so it could distort the weekly uh uh data as much
24:10but but hopefully the tracker does kind of the same same story as we see uh it it'll be interesting
24:17because our monthly pending sales is finally showing positive growth and like we like i've
24:24talked about before uh june to october june and october existing home sales were all under four
24:32million last year and then rates fell and then sales picked up uh a little bit uh toward the end of
24:39the year and total existing home sales finished above four million so we're going to have some again
24:44real easy comps from june so we have one more existing home sales report that will have a
24:51above four million uh comp to work with from 2024 but after that oh it's it's the mother of low bars
24:58man it is just really rare from 1996 to now to have any monthly existing home sales period under four
25:05million but we're gonna have a few months just a tad under four million uh and if sales trends just stay
25:10the same you're gonna have like like five months of year-over-year growth but just put it in
25:14context uh and we'll we'll see how the uh tracker sales data looks like this week amazing well logan i
25:22hope you have fun on this uh memorial day weekend you know listening to your 90s uh throwback songs
25:28or whatever it is that you do let's see looking at charts uh barbecuing look at charts getting ready
25:37for football season um you know you know what's you know what's interesting about uh data which which
25:44we love we are getting so many good questions on instagram stories uh uh so the before i leave every
25:50friday on instagram you go to the story section ask me anything okay uh and just remember the hair
25:59questions that's fine but this is genetics more than anything else uh but also you know the questions
26:06have been getting better and better and more and more and more people are learning that's the this
26:10this is why i do it because if i'm doing my job right this is the old coach of me people start to
26:16learn and then they could talk about the bond market and they could talk about economics and then there's
26:20this is like the most beautiful thing like to see what the questions were when they first started to
26:24what they are now come to friday ask me anything i'll give a video response uh and it's it's gone
26:32very well especially uh this year where you know uh we were averaging like over a million people coming
26:37to the instagram account a month yeah it's crazy um those are great questions you're very they're
26:43very popular i i shudder to think some of the questions you get that you don't put on there
26:48but the the ones interesting you know very entertaining
26:53logan thank you so much and we will talk to you again soon