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On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about FHFA Director Bill Pulte calling for Fed Chair Jerome Powell to be investigated, mortgage rates and the ADP jobs report.
Related to this episode:
Bill Pulte calls on Congress to investigate Fed Chair Powell
https://www.housingwire.com/articles/fhfas-bill-pulte-calls-on-congress-to-investigate-fed-chair-powell/
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HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
Related to this episode:
Bill Pulte calls on Congress to investigate Fed Chair Powell
https://www.housingwire.com/articles/fhfas-bill-pulte-calls-on-congress-to-investigate-fed-chair-powell/
More info about HousingWire
https://lnk.bio/housingwire
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Modashami to talk about FHFA
00:11Director Bill Pulte calling for Fed Chair Jerome Powell to be investigated, as well
00:16as mortgage rates and the ADP jobs report. Logan, welcome back to the podcast.
00:23It is jobs Thursday morning. By the time this comes out, you know, the jobless claims data
00:29the BLS jobs report, the things that really matter for this week. But when what a week,
00:37you know, get the popcorn out, get the Pepsi drink out, put the legs up on the movie theater and sit
00:44down and watch this crazy second half of 2025. Okay, so we are recording this on Wednesday,
00:51about noon, and we broke the story this morning. You actually helped break this story.
00:58The fact that the FHFA Director, the Fannie Mae Chairman, they are the same person,
01:04Bill Pulte is calling on Congress to investigate Jerome Powell, based on what he thinks what he
01:10said was congressional testimony that he said was not true. Some other things. So that's a very
01:18interesting story. So their full court press on Powell continues.
01:23Not shocking. This is what we kind of expected, you know, a full court press. You know, to me,
01:31this is the more interesting aspect on this is, let's just do a hypothetical. Let's just say
01:37the next few months, the labor data starts to underperform. And because we're not at neutral
01:45policy yet, because the Federal Reserve, what they tell you, because what I think and what everyone
01:50else thinks is irrelevant, they will tell you they are still modestly restricted. It puts the onus
01:57on them that they can't have the labor market starting to break, because they're the ones that
02:02raise the inflation expectations for 2025. They're the ones that are saying, well, it hasn't happened
02:09yet. Well, it'll happen in the second half. So the onus is on them, because a lot of people are still
02:17forecasting that the growth rate of inflation, because it's come down so much, has the capacity
02:22to go up. But then if you're doing a push or pull, you know, if the labor data starts to get weaker,
02:29then, you know, the ball is on their court on that side. And this is the predicament they put
02:36themselves in by not getting to neutral policy. If they're a neutral policy, then they're going to
02:41say, well, we're not that far from getting to an accommodative policy. We could get there very
02:45quickly. So then it just becomes a very interesting second half. Because to me, you know, the ADP report
02:53came out negative 33,000. The ADP report and BLS are having a gap in about two of the job sectors in
03:00America, healthcare services. And what's happening is that the BLS report is noticeably higher than
03:09that. The bond market doesn't, or nor should it really care that much, because the job openings
03:14data came in fine. So whatever it is this morning, we'll keep an eye on how the bond market reacts to
03:21it. There's also some stuff that is going on with the UK with their budget and how their bond yields have
03:26reacted. So I don't want to bore people too much with that. But yeah, a lot, lots happened. We still
03:31have one more day left before July the 4th. So my question is, does that ADP data give you any insight
03:38into what you think we're going to see on the jobs, on jobs Friday slash Thursday? You know, there have
03:45been times where the ADP report is much stronger than the BLS. There's times where they're much softer. I would
03:52tell you this, the job openings data, even though it's lagging, the market puts more weight on that
04:00because they know the Federal Reserve puts more weight on that. The ADP report is the least
04:05important data line. So they typically do trend together over time. If you look at it on a longer
04:16timeframe, if ADP gets weaker, headline jobs gets weaker. But for ourselves, you know, because the
04:22labor force growth is not picking up, we're going to have less people looking for work. And this is
04:27what we talked about before the year started and early in the year that we have to keep an eye on
04:33the labor force growth because if there's less people looking for work, it's a little bit harder
04:37for the unemployment rate to go up higher. So you can have like six straight months of like 80 to
04:4490,000 jobs being created and not have the unemployment rate move too much. So everyone's
04:50keeping an eye on what we call technically the break evens, but that's why I talked about it so
04:53much early on. So we'll see how the report is, but the job openings data was fine. The jobless claims
04:59data, the continuing claims is starting to pick up a little bit more in the last few weeks. Of course,
05:05small business gets impacted a little bit more with trade war tap dance. Not sure, you know,
05:10where everything's going. So we'll see. But it didn't shock me right away when the 10-year yield
05:17didn't react much to the job openings. I was going on X and saying, yawn, yawn, really, this is not,
05:25if the job openings data was really bad and then the ADP got it, then you got something. But I think
05:31that's how I try to explain what happened Wednesday morning.
05:35You know, it's interesting to me that Bill Pulte picked today to be like, you know,
05:42Congress should investigate Powell because it feels like this week we could get lower rates just because
05:47of what the data says. We don't know that for sure, but it feels like an interesting thing. Like,
05:52wouldn't you just wait to see what the jobs report says? Because you might get lower rates
05:56just doing that because that's really their goal.
05:58So what the president wants is like recessionary Fed funds rates. He wants an accommodative policy.
06:08That is so different from what I'm talking about because to warrant those kind of rates very fast,
06:16a lot of this is because of the budget. It's problematic right now. You see what's happening
06:22with a tax bill. They've got to do some accounting stuff to make the numbers work. But as a Fed
06:28funds rate was much lower, the interest payment is much lower, right? So they have more wiggle
06:33room. We talked about this late last year that, you know, don't be shocked if something happens in
06:392025, you know, to try to make the budget work because the interest payments, this is what's
06:44occurring right now. So normally you would say, why does Trump want that many rate cuts? Is the
06:50economy going to recession? A lot of this is budget related. For me, it's always about getting to
06:57neutral because the Fed is always going to be behind the curve. But the 10-year yield had fallen
07:02a lot recently. And, you know, when we're down here, the market is already getting that next rate
07:09cut in. It looks about right, right? The 10-year yield doesn't look that odd to me when you think
07:17about Fed policy where it is. But if the report this morning on Friday or Thursday comes out weaker,
07:24we'll see how the bond market reacts to it. Or if it's just an average report, you know,
07:29you might not get too much move. But we've already had a noticeable move lower. The dollar is already
07:35noticeably lower out there. Energy prices are lower this year than, or oil prices are lower this year
07:42than they have been in recent years. So we've always said that the trifecta, the Trinity, Trump needs
07:48about the 10-year yield just to get a little bit lower. If he just got 380 to 4%, they'd be perfectly
07:53happy. But what he wants is to make that budget work for that deficit and the tax bill. And we'll,
08:01I mean, it looks like they'll still get something done with the tax bill. But see, it's just much
08:07more difficult. The numbers get harder, right? Every decade we go out, the mandatory payout gets
08:12bigger and bigger just because we have a growing population out there. Okay. So I mean, the aging
08:18population, excuse me. Either one. So we are getting towards the lows of the year in mortgage
08:26rates. But your forecast is 575 to 7.25, right? Like your mortgage rate forecast for 2025 is that. So
08:34you're just hoping to get down towards 6%. You really don't see something that could move it
08:40down into the fives unless we see a real recession, right? So again, we always like to target the 10-year
08:47yield first rather than mortgage rates. So the 10-year yield range is 470 on the top end, 380,
08:54right? The whole door line at 380. If the labor data starts to get weaker, right? The 10-year yield
09:00will go there without any rate cuts, right? So last year, what happened, it was the market really
09:07was anticipating so much weakness in the labor market that they took the 10-year yield and broke
09:12it through the hoarder line. And it's like, it's not really breaking yet, you know? So it just shot
09:18right back up. Now it's getting different. We're starting, we were going to get two rate cuts regardless
09:23of tariffs anyway. But if you get two rate cuts in, getting down just toward four and a quarter and
09:304% becomes much easier, right? Getting higher becomes a much more harder task. You're really
09:37going to need economic growth, the labor market to be good, and inflation to pick up to warrant
09:42higher yields above 470 or even in that range. So the 10-year yield looks right. The spreads are
09:49getting better, especially on the days where yields go up. So we're close to the year-to-date lows,
09:55but we're about halfway in to the forecast. That second wave down lower needs weaker economic
10:04data where Fed policy is. Last year, we saw that the market over, you know, play their hands with
10:10the 10-year yield. 2023, the Gandalf line, you shall not pass. I was like, if we break below 3.37,
10:17we're going to recession. I don't think, I don't see that in the data yet. Eight different times that
10:22sucker was being tested, reversed every single time. So here, again, breaking, if the labor market
10:30is breaking, you got lower rates for longer. End of story, right? The whole dynamic changes. We're
10:35quite not there. That's why we have to focus on jobless claims at this point, residential construction
10:40workers out there. So it really becomes a unique challenge. I wonder if the Federal Reserve
10:48probably is thinking to themselves, maybe they should not have raised the inflation expectations
10:52as high as they wanted. Because I think just personally, I think they thought the inflation
10:59data would be hotter by now. So we're going to have this jobs report, we're going to have another
11:03CPI report, PCE report, you know, all before kind of, we'll have another CPI and jobs report before
11:11the Fed meets. So that July meeting becomes very contained, like, there's going to be a lot of
11:17different takes on it. But for me personally, how they have reacted, they don't cut in July unless
11:23jobless claims are breaking. So I'm kind of telling everybody, even if we get a weak report, this is not
11:28the Federal Reserve that gets ahead of the curve. This is the Federal Reserve that tells you what they
11:32told the New York Times, we wait, we play catch up. Last year, we waited too long to cut rates. So we
11:40had to play catch up. So the only two times they're talking about cuts is catch up mode, behind the
11:46curve, old and slow. That's how they operate. They're not ahead of this in this regards. And
11:53Powell admitted it, the Cleveland Fed president admitted it. So I'm going to take them to their word
11:58until they prove me wrong with their actions. But their actions always tell me behind, slow, on purpose.
12:07So we've had, we've had Powell talk about a July rate cut. We've talked, Bowman's talked about a July
12:15rate cut. But from your perspective, that's less important than what the labor market does.
12:21I still think that they need to see more labor weakness. The job openings data is very key to them.
12:29That report did not have breaking in it. So the jobless claims data is always the key. That's the
12:35fastest data line for deterioration of the labor market. We're going to get that Thursday morning.
12:41But again, Powell kind of said, hey, rates are a little bit lower. We saw that purchase application
12:46data came out today. And again, people are just like head scratching. 22 weeks straight of year
12:53over year growth, nine straight weeks of double digit year over year growth. This week, one thing I always
12:59tell people, we never used a week to week unadjusted numbers because that showed 10% week to week growth.
13:04It was like 0.1%. You use adjusted numbers. But again, 16% year over year growth. That's nine
13:10straight weeks of double digit year over year growth. So the bar is low, new listings data is up
13:16and everything. But it's still to me, people are starting to have to talk about it now because
13:21it's gone. But I still see the takes not quite up to par yet. And to be fair, a lot of these people
13:28aren't housing analysts or have tracked this data line to know the percentages and what's going on in
13:332025. It's so interesting. You've talked to several media outlets who seemingly were very surprised at
13:40the positive take you have on housing. You're not saying, wow, things are going gangbusters. But you're
13:46like, you do have to look at the purchase application data and say, we're seeing this demand even with rates
13:52as high. I think the misconception is, you know, pricing is cooling down. That's a function of
14:00supply growing, not because home sales are crashing. Just, you know, home sales had the fastest crash
14:07in 2022. Price growth cooled down. 2023, home sales didn't really go anywhere. But pricing was a little
14:16bit firmer. That's a function of supply, right? Supply was much lower in 2023. This is why the
14:22whole team hire rates because it's not a functioning marketplace. So I think there's just a lot of
14:26confusion. And I see that, that people are like looking at the purchase apps are what's going on
14:32here. Inventory historically still low. But when you have a so much price inflation in such a short
14:38amount of time, when inventory grows, the supply gets bigger, there's more choices. But that
14:43affordability ban hits the buyers in the pool. So naturally prices got to cool down. That's the
14:49whole wish. That's the whole chef kiss. That's why I love 2025. But I think a lot of people just
14:55like doom porn. So it is interesting because when people visually see the charts, we show them and
15:01they're like, what? And then of course, if you have the tracker data, if you read the weekend tracker,
15:06you think about you're so much ahead of 99.999% of the people in the world, because they're like still
15:12looking at stale data. So the next two weeks, of course, the tracker is going to get hit by the
15:19July the 4th holiday weekend. But after that, we'll take it from there. We'll see what happens
15:23with the rates. But it gets a little bit more interesting for me because I've only seen the
15:26data like noticeably get better when rates go from 6.64 to 6. And we just saw a little bit of
15:32stabilization in the data and it's clear to us. But again, if you wait three months, you'll see it in
15:39the existing home sales report. We don't want to be like the Fed. We're not old and slow here.
15:43We are current and forward. And that's how we've operated since the Peloponnesian War, Sarah.
15:50Is it though? Is it?
15:51It is. It is. I've been on this planet for a very, very long time.
15:56Oh my gosh. So funny. Okay. Let's talk a little bit about that demand because
16:02when you say like, okay, we've had all these 22 weeks of positive purchase application data. No,
16:09not huge, but more. What does that end up volume-wise by the end of the year? Like what
16:14do you expect home sales to be? To me, because again, one of the things we've always tried to
16:21stress with purchase apps, it can take 30 to 90 days before it hits the sales data. Okay. So
16:27the last two years, purchase apps were growing eight weeks, 12 weeks, back-to-back years. And
16:34then it stopped because rates went up higher. And I would always go, that's it. That's the peak of
16:38sales, the monthly sales. Here, that isn't the case, but you might get some of this demand in
16:44the next report, or you get maybe more of it in two months. Our weekly pending sales data
16:52and our total pending are kind of positive year over year. So we're seeing it. It just takes a little
16:56bit of time to get into the existing. And it's not, it's not much. I mean, I think the existing
17:00home sales forecast, which I would agree with is like 4.2 million. It's not like a thrusting demand
17:08out there, but when you have new listings data grow on a year over year basis, those sellers are
17:15buyers. So it boosts up the purchase application data. That's what's happening this year. So if we
17:21start to see noticeable demand, our, our weeklies and pending sales will have a lot of, uh, a lot
17:27more growth year over year, but also if the demand was even better, the weekly purchase application
17:33data would even improve better. Like last year, we saw that when we saw no, no year over year growth
17:38of purchase apps, but the weeklies were noticeably better. It gave us a couple hundred thousand home
17:42sales from like the three, like, you know, uh, from, from the low, uh, three, uh, 3 million, 800,000
17:50up to like four, 4.2 million stuff like that, that it's a material change with the year, but in grand
17:57schemes, not much happened yesterday, last year with, uh, existing home sales. So it is going to be very
18:03interesting to me to see if we make that next move, lowered rates, how does the demand look now? It should
18:10perform better on the week to week data because the year over year growth is, has been at double
18:14digits for nine weeks now. So we have that positive purchase application data, but that's just
18:20application. How many of those applications fall out? Like what is the majority of them are in a lot
18:27of people make a big deal about red fins, like most cancellation. I encourage everyone go, go look at
18:32that chart, go look at that chart for the last like seven years. To me, uh, red fins cancellation rates,
18:37a material change would be probably in the twenties, uh, uh, 23 to 27%. Uh, it's like 0.6% higher than
18:46last year. Majority of apps do go through. This is why our pending sales are up, uh, out there. So
18:53it does fall through. I would say cash buyers as a percentage of sales are down. Uh, uh, but in terms
19:00of most people that fill out an application, majority of them get through, but red fins data is a little
19:06bit higher on a year over year basis. And, uh, a lot of, uh, a lot of people are talking about,
19:12well, there's, there's like the highest rejection on mortgage applications. Logan, you're not reading
19:17it. I said, homie, go read the sentence. It says refinance, not purchases. And there are 42% of
19:24purchases aren't being declined. You know what? If men just start to read, like read a couple of
19:32sentences, so much of the clarity would be there, but they just look at a head headline and go,
19:38oh, and then they go, I said, did you read the article? They go, no. Oh my God. You're one of
19:42them. You are one of them. One of them that I've been battling for 14 years. And why do we say
19:49the history of human civilization? Those that read have a benefit over those who don't read and burning
19:54books are a bad thing. You should read them. And listen, I mean, we write headlines. It's hard to fit
20:01stuff in a headline, right? To, to get it, to be the right size. You're like, oh, it's digital. Okay.
20:06But the search engines wanted to, you know, you have to optimize for that. So I'm just telling you,
20:10if you only read headlines, you are getting such a small percentage of what's actually going on.
20:15That's just what's the running joke I've had Sarah is that I, I, on April fools, I do a doomsday
20:20article. I did a doomsday article on April 1st, 2017, every April fools. I, I do the same article.
20:27I just replayed it. And because the article has the U S is going into recession. It's the most
20:32popular thing I've ever written because men are just like, hello dogs. I go, oh my God,
20:37doom porn, doom porn, my miserable life. I have to go read it. And they read it in the bottom. I said,
20:42if you're the person that shared this article before you read it, you're the jackass I'm talking
20:48about. And still to this day, some of the same guys still fall for it. It's like seven years.
20:54Even they go, Logan got me again. You know, reading is a good thing. Looking at charts is
21:00a good thing. That's why we do crayon economics. We just draw those black lines to make it seem,
21:05okay, this was happening here. It is not, not happening here. So it's the world we live in.
21:11What did I say? Pilgrim in an unholy land, but some of us have to do this job.
21:16Well, Logan, thank you so much for being on. Of course, we'll talk tomorrow too,
21:19after that jobs report comes out. Thanks for being on this week. Ended up being because we
21:24had so much news, economic news. You've been, you're, you're going to be on four times this week.
21:29Yes. And remember, chart daddy, get in shape, six minutes, start doing your jumpy jacks,
21:34start doing your pushups, you know, start doing your stretches.
21:38I reject that whole notion. All right. We'll talk to you soon. Thanks.
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