Logan Mohtashami on mortgage rates under trade war deadlines

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the new trade deadlines and how mortgage rates are affected by tariffs.   Related to this episode:   What's Fed Chair Jerome Powell's next move on rate cuts?  https://www.housingwire.com/articles/whats-fed-chair-jerome-powells-next-move-on-rate-cuts/   HousingWire | YouTube  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q   More info about HousingWire⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://lnk.bio/housingwire   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.

Transcript

00:00Welcome, everyone. My guest today is lead analyst Logan Bodoshami to talk about the

00:10new trade deadlines and how mortgage rates are affected by tariffs. Logan, welcome back to the

00:16podcast. It's so much nicer being on four times a week, isn't it? I don't know. I guess we did it

00:25last week. I guess we did it last week, actually. But by the way, before we go talking, I just want

00:30to say my condolences to the ladies out there, because if you're looking for a six-foot-five

00:36man in finance with blue eyes, if they're telling you that people should dump their homes because the

00:42Japanese debt is out of control and wages are spiraling out of control and that's going to

00:48push yields up here longer and ladies, just toss them. If men start talking about that, he's no

00:55good. Is this some thread that's going on? Like what? That seems so random. What do we say about

01:01men on X or middle-aged men podcast stock traders? Stock traders do not understand that people live

01:10in their house, they have sex, they have children, they go to work. It's what they do. It's a lifestyle

01:16choice of how they live their lives. They're not on margin 24-7 running around. And the new listings

01:24data was a perfect example why middle-aged men podcast stock traders should not be listened to

01:28rushing to sell out because, you know, no, it's just, it's 2025. And we had another, just a stupid

01:35question on X. And I was just like, homie, your wife's going to leave you, your girlfriend's going

01:39to leave you, you're going to be homeless. That's what's going to happen. Okay. So ladies, if they're

01:44talking about that stuff, just toss them. You don't, it's not good material. I like it. You're

01:48going for the different angle. You're not talking to the stock traders. You're like, no, let me just

01:52talk to the women and say, don't put up with this nonsense. Don't put up with this nonsense, man.

01:58Okay. Well, let's, speaking of nonsense, let's talk about mortgage rates and where we are and what

02:04you think is going to happen next. So we wrote an article yesterday when this comes out, it'll be

02:10Wednesday morning, but you know, kind of like what the Fed is really thinking about. Cause a very

02:15interesting happen, a very interesting data line came out on Tuesday. The Fed's inflation expectation

02:22data tanked, right? They're looking out, you know, one year, three years, five years, it's starting to

02:30go lower on the consumer side as well. So obviously the trade war headlines pushed people to think that

02:36inflation was taking off. Now, my argument is that the Fed doesn't care about this because they have

02:41their own agenda really with, you know, with the growth rate of inflation in the second half.

02:45But in theory, that would be a very good piece of news. But, you know, since jobs week, when the

02:5210 year yield got to 421 and mortgage rates were down there, you know, I didn't think we warranted to

02:59be there unless the economic data was getting weaker, primarily the labor and the labor data.

03:03Everyone could question that jobs report, but bond traders just took it and say,

03:07the labor market is a breaking Fed isn't going to, it gave Powell covered to not cut rates.

03:13But now with the trade war, we got to make deals. We sent letters out. I don't know if we heard back

03:21from the penguins yet on what they can buy, but in any case, the bond market does not act well

03:29with the trade war. And a really good example is early on when the 10 year yield got to 4%

03:35in Godzilla tariffs. I mean, I was literally saying, hey, listen, we don't belong down here

03:40where Fed policy is at. So we had a really sharp reversal in yields. But the bond yields, when it

03:45gets, when there's less clarity on the trade war, yields tick up a little bit. Now, the difference now

03:51than earlier in the year is the spreads are acting better. The market is generally more calm.

03:57But we have a deadline now, August 1st. And the bully ball tactic has not provided or has not,

04:08we haven't got 90 deals in 90 days or anything like this. So one thing to think about going out

04:13for the rest of this month is how does the 10 year yield and mortgage spreads act if we get closer to

04:19August 1st and there's no deals done or very limited progress? That'll be the interesting aspect for

04:26the next few weeks. Because President Trump said this is a firm, there's going to be no extension

04:33from August 1st. But to me right now, it's still acting much better than what it did earlier in the

04:41year. Earlier in the year, Godzilla tariffs just threw everyone into a hurricane, right? Stocks were

04:47down over 20%. Bond yields shot down lower, made a huge reversal. The market was disoriented. Now,

04:54the market's a little bit more calm. And we'll see. Because to me, progress being made on trade deals,

05:01right? If we put a lot of time and energy into that rather than investigations, then the Federal

05:08Reserve can maybe say, OK, we could get a little bit more dovish. So I don't believe we're going to get

05:14a rate cut, even if the jobs data was bad. That's just not the MO of this Fed. But we should kind of

05:20look out and see, should deals be done before August 1st, especially before the Fed meeting? Will

05:26Powell and the crew start thinking a little bit more dovishly or have a more dovish tone going out

05:33in the future? Or, you know, we get inflation report next week, inflation picks up a little bit

05:38hotter, trade deals get worse, you know, stuff like that. That would be a negative. And that was the point

05:42of the article we wrote yesterday to kind of say, OK, we got these things to keep an eye on. And we

05:47have a deadline in August. And the Fed meets before that deadline. Most likely you're not going to get

05:52a cut. But you can get a victory in terms of maybe a little bit more dovish stance.

05:57OK, so maybe make it more clear, like you said, the bond market doesn't like the trade deal when

06:04they're not done, when it's in this sort of like, we don't know.

06:08Less clarity bond yields have been able to tick up. And also there's a global bond yield factor

06:14into this. I won't bore people too much with that. But bond traders know that Fed wants to see deals

06:20done. Right. So we've had a big move in the 10 year yield from 421 to 443. We're, you know,

06:27nothing too dramatic where Fed policy is. But this is a really good test case now that we went through

06:34Godzilla tariffs and Bissette had to sneak into the White House and get Trump to tweet and put a delay

06:39in there, you know, when Navarro was gone. Now, you know, is this going to be a much more calmer

06:45marketplace? And this is a perfect three week period to test case this, to see what comes out

06:50of the negotiations, what what deals are made, what deals aren't made. How does the bond market react

06:57to inflation data? What about the jobless claims data? It's a good short term period to think about

07:03mortgage rates going out for the rest of this month. Well, that's what I was going to ask you,

07:07like, tell me what that means for mortgage rates. You said bond, you talked about the bond market.

07:12I'm out here and I'm like, what does that mean for mortgage rates? Just be mortgage rates should be

07:17hovering around this level. Because we've already had a move higher until the economic data starts to

07:27get weaker. And that's why I didn't think that we should attend when the 10 year olds at 421 and

07:33mortgage rates got to a recent low. I said, OK, we're really pushing it now because unless the labor

07:38data is really bad, we should reverse. We did reverse. So going out, we need to be mindful of

07:44every single day something new can happen and could change your business. That's why we have

07:50Logan Motoshami on Instagram stories 24 seven all the time to take a look to see how the bond market

07:56reacts to this. So and we enjoy the Instagram family a lot. But going out, there's not a lot

08:05of labor data except for jobless claims. And then going out, we do have to see how does the bond

08:10market react? I mean, let's just assume, let's say somehow we get nine trade deals within like two

08:17days and the 10 year yield acts lower. That's a positive in the future because the Fed has told

08:23you we would like to cut if we get some deals or get some clarity. So I think this is a good test

08:30case because what happened earlier in the year was it was chaos and you can't operate in chaotic

08:35rates move way too fast and the spreads got really worse. The spreads got it. We lost about 25 basis

08:41points on mortgage rates. So we should be hovering around here until we get either deals or the

08:46reports come out either positive or negative for that. This is why we track stuff daily to see how

08:52the market reacts. And a positive thing is that the spreads have gotten better. So there's limited

08:57damage to the upside now when the 10 year yield goes up. But mortgage rates pricing do rise. They

09:02rise up slowly, but they don't rise up as much as they did early on in the year. This is why I always

09:08this is why the seven and a quarter was my peak forecast for this year, assuming the spreads get better.

09:13We got close to seven and a quarter the second time around when the spreads got worse. But unless

09:19the spreads get bad, we should not be at those levels again this year.

09:25Is there a trade deal that you think could move the needle more than others? Like

09:28if this comes in, that's really going to make it a big deal?

09:32Japan and India.

09:33Okay.

09:34Japan and India. The rest are, I mean, some of these countries are so poor that you're not going

09:39to get the trade deficit any better. They don't have, they don't have a lot of money in these,

09:43you know, they're, they're very poor countries compared to the U S but Japan and India would be

09:50big headlines. Those are, you know, when we think about big economies around the world,

09:55Japan and India are, are, are, are the two outside of the U S and China, of course,

10:01and the UK. But outside of that, these smaller deals, maybe not so much, but I think,

10:06I think right now the bellwether is Japan and India in terms of getting something done.

10:12Of course, you know, Trump has gone out there and said, you know, we're going to put an extra

10:1610% tariff on anybody who is, uh, who dealing with the bricks because they're anti-American,

10:22which is funny because the anti-Central Bank people are almost pro bricks people because they say,

10:27you know, the dollar's going to collapse and, you know, the bricks are going to take over,

10:31which is hilarious to me, by the way, in any case, uh, be careful of crazy headlines.

10:36Too in the next few weeks. But I think Japan and India would be, would be key.

10:41You know, what's great, Logan, is that you keep up with all of that. So the rest of us don't have

10:46to like, what does this faction think? What does that faction think? What does it mean? And you know,

10:51I, I'm glad that I go down a lot of rabbit holes. I'm glad I don't have to go down those. I,

10:55you can just summarize for us what's happening.

10:59I'm an agent of chaos. I love being down in the devil's pit fighting everyone. It's a lot of fun for me,

11:04but yeah, this is, this is, this is a really good month to test case everything because we extended

11:10the deadlines and the, the president is known to just come out with some random stuff and we'll,

11:16we'll, we'll see how it works. But obviously the, the bully ball tactic didn't work as fast.

11:22And they asked Peter Navarro, Hey Pete, what happened to your 90 deals in 90 days? And he's

11:27like, well, these countries, they had it too good. They didn't want to deal. So we'll see, but,

11:33and we'll see if the deadline gets passed or extended on August 1st. But I think this is a

11:39really good test case. Like so far to me, the bond market and mortgage market are performing a lot

11:44better now than they did after Godzilla tariffs. So, uh, an inflation expectation is falling for

11:51the fed and the consumer. That's a positive. I don't think that moves the needle too much with

11:56the fed, but generally people see the, the, the, the, the country likes it when there's less trade

12:01war, crazy headlines, that is all positive for mortgage rates down the line. We get deals,

12:06we move on with this stuff and, and take the next leg, uh, uh, forward. But, uh, it's,

12:12we, we, we got, we got a few weeks to test this out. All right. So we've talked about a lot of

12:16things. Let's talk about purchase apps, which will be out by the time that this comes out.

12:20Although we haven't seen a lot. Yes. And a gentleman asked a very good question. Um,

12:27because it's because people started reading and they, they, they see 22 weeks of year of year growth

12:32and they go, what, what is this? Nobody's going to talk about this. And it's funny. Cause, uh, um,

12:37I, I talked to CBS national news recently and I showed them the data and they're going to come

12:43out with a piece, uh, uh, about our work on this. And they were so surprised that they're like,

12:49what is this? And we had our pending sales. Let me tell you this. It's so much fun for me to like

12:54show people that never seen our tracker data, like all this stuff. And then like, for, I think people

12:59are so visual that you can say something, but if you show it in a chart, that's why the chart daddy was

13:05created. This is my job 24 seven. And we showed this stuff. They're like, wow, that's amazing.

13:11But the gentleman asked about what happened last year. Was there any year over year growth? This

13:15is a, this is very interesting. Last year, the purchase application data at the start of the

13:20year was extremely negative. Uh, we had 14 negative prints, two flat prints, two positive prints,

13:26no year over year growth. The volumes weren't crashing anything big, but there was nothing going on.

13:32And then I think, I believe April 30th was the peak of mortgage rates around seven and a half

13:36percent. And then mortgage rates started to go lower. What happened then is that we didn't have

13:41any year over year growth in purchase apps last year until the end of September. Uh, and then all of,

13:47uh, October and mortgage rates didn't get below 6.64 until early part of August. But what occurred last

13:55year is that the year over year data was negative for many months. Rates went lower and everybody said,

14:01Oh my God, housing demand is still falling except the weekly datas were getting positive. This is why

14:08we have the tracker. And we said, no, no, no, you got to track the weeklies here. And we just had,

14:13you know, uh, uh, 18 weeks of positive data more on the week to week side. So what occurred is

14:18ebbs and flows, right? We talk about waves in economics. And when you're working from a lower band

14:24of sales, that weekly data getting, uh, better, really improved, uh, the sales data sales data

14:30was very negative, uh, uh, uh, from June to October. And then it increased the home sales data

14:36a couple hundred thousand without any negative, like we had negative year over year data on purchase

14:41apps, but the data got better. So it was until, um, uh, end of September and October, and then November

14:48and December for purchase apps after COVID tends to be the early seasonal kick in demand. So we didn't

14:56have any positive year over year prints until that period of time, but purchase apps look out 30 to

15:0290 days. Everybody saw the negative year over year data. They didn't care about the purchase apps.

15:07They said home sales are falling and then it had a couple hundred thousand increase. And that's why we

15:14created the tracker because our pending home sales actually verified it. And in fact, that was the

15:18in September and October, I said, darn, I'm going to lose my price forecast, right? I'm going to lose

15:23my price forecast because our forward looking data is getting better. And this is how you track housing

15:28economics with models, not with a terrible YouTube page or just a horrific, uh, Instagram. I got

15:34Instagram has some really bad people too. Lord have mercy. Um, but in any case, there's how you got

15:41growth in sales and we ended up just a little bit above 4 million. Uh, so it'll be interesting to

15:45see how the second half of 2022 goes, especially if, if, if mortgage rates could get below 6.64,

15:53that's when the data has gotten traditionally much better. We're seeing this year over year growth

15:58because we have extremely low comps and we have more new listings, but, uh, uh, it will become more

16:03exciting and interesting if rates could just get down. And I would tell you this, uh, uh, one of the,

16:08the shadow fed president, uh, Kevin Warsh that Trump, you know, parades around at, at events

16:13and Trump came out this morning. It was like too late. It's like too tall Jones. Homie brought

16:18out too tall Jones for football fans. You know, that he's like, I was laughing. Um, Kevin Warsh,

16:25who is generally known as a hawk that a lot of wall street people don't want him to be fed chair.

16:30He even said, Oh yeah, we could cut rates a lot. You know, we have to, you know, bring down the

16:34feds balance sheets, but housing is in a recession. So there is the shadow fed president basically

16:41trying to make a case for lower rates because housing is in a recession. And remember on the

16:46economic side, it's the residential construction workers and residential investment that matters

16:50more to the economic cycle. Uh, and for him to say that, you know, it just makes the whole shadow

16:56fed president interesting in the second half of 2025. Uh, uh, we're team Waller here. It's not team

17:03Kevin Warsh, but, uh, it is, if they start talking about housing being a negative for investment

17:10and jobs, that'll be something bullish going out because they've never cared about the housing market

17:15for years. I mean, there's nothing going on. All we did is have a Neil Kashkari have a panic attack

17:21when mortgage rates got down to 6% and we got a little bit of growth of demand. He's like, Oh my

17:25God, no, no, no, no, no. How are we supposed to balance an economy if people are having sex and

17:29buying homes? If they leave that mindset away and go into, well, housing is in a recession and we

17:35know how economic cycles work. And Logan keeps on showing that chart all the time. And he's right

17:39about that. Then it starts to get a little bit more, a little bit more teeth into the policy talk

17:45out there. So very exciting month of July going up to the deadline in August and a very exciting

17:52for the second half of 2025. And we're here for it 24, seven, four times a week, award-winning

17:58podcast, Sarah Wheeler and Logan Moshami together, the dynamic duo or the wonder twins unite.

18:04There we go. Yes, absolutely. Uh, I wish that you would say something like, um, yeah, we're going to

18:11see, uh, rates down towards 6% by X date, but I know you won't do that because you don't, you don't

18:17predict things like that. You give us channels. Sarah, we create models for that. We don't,

18:24and models say that the only two times that mortgage rates got down towards 6% was that

18:30the bond market anticipated major weakness in the labor data or the economic data. And it drove the

18:3610 year yield down to two key levels. Again, offline, you shall not pass. And the horn or line,

18:41hold the door, right? And both times they were rejected. So if we get more rate cuts in the

18:47system, getting that bandwidth or that bar lower, it makes it easier, right? If the fed funds rate

18:53was at three and a half percent, it's easier to get to 6%. Spreads could even get better in that

18:58environment. We're just not quite there. We don't want to tell people like, remember all those people

19:03that thought mortgage rates are going to get under 6% because the growth rate of inflation is going to

19:07fall in that. No, that didn't work because fed policy is up here. If you want that, you got to get

19:12fed policy lower that all kind of works together, but there are other variables in play. So no,

19:17you're not getting a simple answer. You should know better because every time you've asked me

19:21this for the last few years, I don't give you the simple answer.

19:24I just said, I wish I could. I didn't say I was going to, because I know you won't, but

19:27it is good news at least that, that the federal government is like, you know,

19:32housing's not doing so well there. You know, we should pay attention to that. We should do

19:36something there. We'll see what, what pans out there. Logan, thanks for being on again.

19:40Another time this week. Always appreciate it. And we'll see you again soon.

19:44Pleasure.

Category

Transcript

Be the first to comment

Recommended