- 5 months ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about inventory, mortgage spreads, a possible cut of the capital gains tax and Jerome Powell.
Related to this episode:
Housing inventory actually fell last week. What is going on?
https://www.housingwire.com/articles/housing-inventory-actually-fell-last-week-what-is-going-on/
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Related to this episode:
Housing inventory actually fell last week. What is going on?
https://www.housingwire.com/articles/housing-inventory-actually-fell-last-week-what-is-going-on/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about inventory,
00:12mortgage spreads, a possible cut of the capital gains tax, and Jerome Powell. Logan, welcome
00:17back to the podcast, or maybe you should say welcome back to me since I was the one who
00:21was on.
00:21Welcome back to you. How is the UK?
00:24It is amazing. It's very hot right now, but I like hot, and also it doesn't seem
00:29that hot to me. So it's good. It's great.
00:33By the way, whenever I say we have such a unique and lovely housing ecosystem here, the UK doesn't
00:42really have a 30-year fixed product either in scale like we do. So the UK, Canada, and
00:49a bunch of other countries, another reason they hate us so much is because we have fixed
00:54long-term debt costs and wages rise. And that's one of the reasons why the insulation of the
01:01housing market is unique here.
01:04We're so lucky. We're so lucky. Okay. Let's get into the tracker because we had some really
01:09interesting data lines this week. Do you want to start off with new listings?
01:12Yeah. So let's talk about the last two weeks. So before the July 4th weekend, the tracker data was
01:20showing some stabilization. Then July 4th weekend came, and July 4th weekend is on a Friday. So that
01:27basically means two weeks of data is going to be nullified to a degree. But now that all of you
01:33that read the tracker, you guys can now visually see what holiday weekends, especially if it's on a
01:40Friday where Thursday's off, we're not working with a full deck. So what occurred, so a good example
01:47is two weeks ago, active inventory grew higher than what we were normally seeing the few weeks
01:55before that. What does that mean? Not a lot of people, not a full deck of buyers into the systems
02:00inventory can grow. Then this last week, inventory declined, noticeably too, right? So we wrote the
02:08tracker saying inventory decline, what's up? This is just a function of the July the 4th weekend.
02:14You got the few days that are off the grid because people are coming in. Then you have
02:20the weekend where people are on vacation. So that looks perfectly normal to me. The new listings data,
02:28two weeks decline, happens all the time during this period as well. So that's not shocking. The weekly
02:34pending sales that we have, that's a little bit different than our total pending sales,
02:38two weeks decline out there. And now we can go back to normal. But I wanted to highlight this so
02:45everyone could understand that holiday weeks or weekends can cause chaos into weekly data.
02:52Just like the last few weeks of the year where people go, Oh my God, nobody's filling out purchase
02:57applications. It's because it's Christmas and people are getting ready for the new years and
03:01they're on vacation. So it's going to happen again this year. That happens every year where
03:05people just go, Oh my God, housing's collapsing. It's like really so late.
03:09You know, sometimes you can, you can tell that people are just reading the headlines.
03:13So when they saw that your thing listings are already falling or whatever, what's going on
03:18in the housing market, what you say is exactly what you just said. You give the reasonable explanation
03:23for what's going on, what, what they should expect next. And then you had people take that headline
03:26and be like, Oh, the sky's falling. It's like, literally, if you read even two paragraphs,
03:31you know that that's not true. Yeah. And, and one of the things this year is prepping everyone
03:36up for this week for the holiday weekend, because the two weeks before July the 4th were stabilizing.
03:43So it was one of those unique backdrops where it could really take the data, but we're going to
03:47be back to normal going out here. So we'll see if we keep back to the stabilization in the data,
03:55mortgage rates are up a little bit from the side, but another wonderful thing that we highlight in
04:00the tracker, mortgage spreads are 54 basis points away from normal. So is that good or bad?
04:09With mortgage-backed securities being sold off by the federal reserve, right? With, you know,
04:16the balance sheet reduction. And, you know, a lot of people said, you can never see the
04:22mortgage-backed security. You want to see rookie ball people. If you really, really wanted to see
04:26rookie ball people were the people that said mortgage-backed, the, the MBS market is toast.
04:31And the, you know, the spreads are going to get, you know, really bad, you know, in 2024, which
04:37it goes against what has happened for many, many decades, because you have a bunch of people who
04:42have, I've always said this, we actually wrote an article. The biggest rookie housing people are the
04:46ones that said mortgage-backed securities, MBS, MBS, the whole housing market is based on MBS. They don't
04:51actually show the 1970s, 80s or anything like that. The federal reserve wasn't in the market. So
04:57naturally the spreads are getting better. It is a huge story this year because, you know,
05:02a good example, Friday, the 10 year yield up seven, eight basis points, hardly had any damage to rates
05:08because the spreads are getting better as rates go up. This is a really important thing because I think
05:12one of the, one of the wrong narratives was that the spreads get worse. Like from 2023,
05:18you know, that's not the worst part. It can get a lot worse, five, six basis points,
05:23like what we saw in the eighties, not the case. And we're not that far off from normal spreads,
05:30which means if you have a 435 10 year yield and the spreads get back to normal, just you can get
05:366% mortgage rates without the 10 year yield really going much lower. So that's a healthy thing,
05:41something to think about going out in the future. So I think we've debunked this one
05:45now that we're in 2025, that the spreads getting worse, even with Godzilla tariffs,
05:51the spreads only got bad 20 to 25 basis points. We didn't get anywhere close to the 2023 level.
05:58So we had a market drama, world global market drama, and the spreads even acted somewhat better
06:04in that environment. So that's something really positive to go down the line
06:08out here because this, with the balance sheet reduction of the Fed and MBS, you know,
06:14these things were supposed to make the spreads worse, not better. It's gotten better. It's 2025,
06:19it's July, it's summer. Did not happen, people. Why? Rookie ball. Rookie ball. By the way,
06:26we took out one of the ringleaders of the anti-Central Bank movement. Vlad, if you're seeing this,
06:29God bless your souls, but you just never learned to shut up too much. All right.
06:33Okay. Well, I have something to say about spreads, but on that topic, I mean, it's pretty funny. You
06:38asked Grok to, I guess Grok did a roast of you and it was hilarious. And one of the things that said
06:44was like, yeah, you challenge people to debates, but you're just going to show up with boring
06:48information and you're not really going to do it. I'm going to show up with spreadsheets
06:52and a PowerPoint, you know, bore people to death or something. I mean, that's one of our things,
06:58you know, uh, give great data to your clients, but bore your family to tears. Right. So, uh,
07:04yeah, that's what I mean, remember what, what, what is one of the same economics done right
07:10should be terrible, boring. It's not designed to be this hot, fun, sexy thing, but you can make
07:17it somewhat entertaining. That's what I try to do. But if you really do it the correct way,
07:22you don't doom porn 24 seven. Right. And like we've always said, there's only one group of
07:28American citizens that do this data. And it's just since birth, they are just doomed for life.
07:35Okay. Well, back to spreads. I think the spreads at this point have just been, I mean,
07:39the bond market is sort of desensitized in a way that would have been hard to imagine, say a year,
07:45a year ago, because like in the past when we had like war news or we had, you know,
07:50the Silicon banking crisis, you had this really, you know, that you have these variables that would
07:54affect it. And now it feels like they kind of just struck. It's boring, Sarah, the mortgage
07:58rate pricing last few weeks, uh, have been very boring. That's a good thing. Right. Calm is a good
08:04thing, right? Chaos can cause, you know, disruptions in the normal flows of business. But, uh, it is
08:12beautiful to watch that the spreads got better in 2025. And, uh, in this regard, um, how I look at
08:20it is it looks normal. If you look out the history of mortgage spreads and not overweight everything
08:28on the federal reserve that you can reduce the balance sheet and still have spreads get better
08:33as volatility compresses, the fed starts cutting rates. And again, 54 basis points away from normal
08:41we're not that far off. And if that next level happens, I think when you get more
08:45fed rate cuts, a little bit more assurance of what's going on, then, you know, you could get
08:50that last level and then it makes so much easier getting towards 6%. And why do we say that is that
08:54the housing data gets noticeably better for the existing home sales market for the builders
09:00when mortgage rates get towards 6%. So, uh, that's why we use that target because we have data to verify
09:06it. Uh, uh, and the spreads getting there is, is such a good thing. And we, every weekend with
09:11the tracker, we highlight what the, what mortgage rates would look like if the spreads were as bad
09:16in 2023. In some cases we'd be near 8% this year, uh, which would, we're, we're not getting 23 straight
09:23weeks of purchase application data growth year over year. Uh, if mortgage rates are near, uh, 8%. So
09:28positive, right? Positive, positive, positive story in that, in that light.
09:33Another thing I wanted to ask you about the tracker, it's something that when I'm editing it,
09:37I often ask you like, Hey, should we be worried about this? Or what does this mean? And that is
09:41the price cut percentage. So it's the number of homes that had to take a price cut before they sold.
09:47And now we're over 40%. So walk us through why that's not a big deal.
09:51Well, I'm biased here. I want a more buyer's market. So the whole concept of team higher rates
09:58was to get the price cut percentage to increase. And that's what we saw in 2022. But rumor
10:03for those that read the tracker, we call it slope of the curve economics, right? The slope of the
10:10price cut percentage curve in 2022 was very aggressive because we went from a 3% mortgage
10:15rate to a 7% mortgage rates. I don't care. I'm smiling. I love the fact that this thing's at
10:2140% because every year that goes by and price growth cools down, it makes housing a little
10:27bit more affordable down the line, which creates future sales where the savagely unhealthy housing
10:32market was the price cut percentages being as low it was, was a detriment up here. Good to go down
10:39here. Terrible kills future demand. It's the third calendar year of the lowest home sales ever because
10:44prices escalate out of control, right? But every year that goes by affordability gets better in the
10:50sense that price growth cools down, wages are up. Wages are outstripping home price growth this
10:56year so far. That's a positive. So in this context, I think it's, it's, it's not a detriment. It's a
11:02positive, but that's just me. That's how I've looked at it. Mark Zandy, a really good example. Mark
11:07Zandy did a whole thread. He's a, he's economist for Moody's. He's like, oh God, we have yellow flags,
11:12red flags, housing market is everything. I was like, homie, we're 25% year over year growth with
11:18purchase apps. Home sales aren't crashing anymore. Inventory is growing back. You either have to be
11:23a pro supply person and be happy with this or you're a faker. And a lot of people are fakers
11:28about inventory. They say, oh, we want more inventory. Here it is. Oh my God. Inventory is so low. No,
11:33it's higher. We need lower rates. No, this is what we all wanted unless you were faking about it. And
11:40that's what I think we have a lot of fakers out there because you should be slapping and happy and
11:46everything that inventory is up. We're just talking about the bottom levels of 2019.
11:51And people are like, oh my God, oh my God, home prices might fall 0.8% for the year.
11:57Who cares? Positive. It creates a better wages grow households for when rates go,
12:03you get better demand for. Again, this is why we have a lot of soft men on the other side of the
12:09equation, right? Who think, hey, listen, we better watch out. No, this is all a positive,
12:15but you have to be a pro supply person because I see a lot of people who talk about, oh, we need
12:21inventory. Inventory is going zip, nothing. They ain't talking anymore, right? No. So the legit
12:27people are happy about what's happening in housing in 2024 and 2025. So that whole thing was like,
12:33really? Is that like, I could understand if inventory was going vertical and purchase application
12:39data were falling and home sales were crashing? Yes. That supply and demand equilibrium was
12:452005 to 2007. That's what happened back then. That is a legit case. That is a detrimental demand
12:52because inventory is skyrocketing. Demand is falling, right? Something is wrong with the ecosystem of
12:58housing. That is not the case now anymore. So I think in my context, it's a positive that we saw
13:04the whole thing that happened in 2024 and 2025 and the price cut percentage are positive,
13:10pound to fist, because when mortgage rates go lower, the price cooling makes demand get better.
13:16But you have to pick a side. You can't say you're pro supply and then look at the housing market in
13:202025 and go, oh no. You all see what Redfin, remember Redfin's what, 10 weeks ago, Redfin's like,
13:27it's the biggest buyer seller's gap in history. Every week since then is Redfin's off. Home prices are at
13:32all-time highs. Home prices, by the way, since the point of Redfin's article, purchase application
13:37data has been up every single week, double digits year over year. Come on now. What is wrong with you
13:43people? See, I just need to debate everyone. I need to get every single person in front of every TV
13:49camera out here and let's go to work because that's what we did for CBS News. We're on CBS
13:55weekly news over the weekend. And I was all, this is a positive because we did not like the seller
14:01market that strong. We needed to make a buyer's market and team higher rates go up. And this is
14:06what happens, right? So it is beautiful. It is a bango. It is a hopper. It's a Monet. It's a mana.
14:12It's everything beautiful for economics. And I love it. Hopefully that answers your question, Sarah.
14:18You know, it does. It really does. So we have a couple more things to get through. Don't have a ton of time.
14:23I wanted to ask you about, um, something that I saw come through was that I think Trump said that,
14:29uh, or, or someone said in the Trump administration that they're going to get rid of capital gains,
14:34that you owe capital gains. If you sell a piece of property, this would be huge news
14:39for our realtors, for people in this audience. So tell me, tell me what you think here.
14:44You know, it's funny. I did a joke that nobody got on Twitter last night. I said,
14:48oh, by the way, you know, we're going to have to raise property taxes to offset the revenue.
14:52Of course, property taxes are a state thing, how states and cities fund themselves.
14:56This would be a federal idea. So nobody got the joke. I was like, guys, you don't remember,
15:01we were supposed to get, uh, $5,000 dividend checks, like freedom dividend checks,
15:05because of the $2 trillion that Musk was going to cut. That didn't happen. Then it was the $120,000
15:11of income tax going away. Cause you don't have to, the president says things to make people happy.
15:18Now there is a bill out there. I think, uh, Margie, one of the Republican, uh, uh, congressmen has
15:23something in there for this, but you have to get it into the system and then you have to offset the,
15:29the revenue, uh, losses, you know, so take things with somewhat with a grain of salt, what the
15:35president says. Okay. But that would be one of the biggest favors done to baby boomers
15:41in the history and why baby boomers are homeowners and they're voters and Trump wants to make them
15:48happy. So just kind of let's, let's wait, let's wait, it progress out into Congress and then see
15:54what happens. But I, a lot of people jumped on on that. And I was just like, really, are we,
15:58are we buying this? Okay. Wait, wait, wait. If that did come to pass and I share your skepticism
16:05that this is something that could actually happen, but if it did, I feel like that would
16:09unlock some things where people who are just sitting on their, um, sitting on their homes,
16:14they don't need all that space, but they're like, but if I, if I sell, I have to, you know,
16:18pay this much money. It's appreciated so much. I think it's the, it's one of the greatest paid off
16:24gifts I've ever seen in my lifetime. And it's for baby boomers. Like people, listen,
16:30people can sell and downsize anytime they want. The baby boomers, when rates are higher are the
16:34biggest percentage home buyers in America. Right. And it's not like they, they, uh, pay cash and
16:40everything. They're, they're, they're still financing. They can do this if they want to,
16:45but hypothetically, let's take someone who paid a hundred thousand dollars for their house in some,
16:51some time in history that I wasn't born. Uh, and now that house is 2 million and oh,
16:57oh God, that $500,000. I mean, think about in general terms, most Americans do not have over
17:03500,000, uh, uh, plus of, of, of capital gains on their house, but cause the median home price is
17:10what four 30 or somewhere around there. But for those wealthy baby boomers that are sitting there,
17:15oh my God, I get to keep this 1.7 million of the, uh, of it. Oh yes. So I, it just looks like a,
17:22like a, like a payoff to me for voters, right? Because you can, you could index it to inflation.
17:29That's fine. Or, or something like that. But we're talking about like California and New York,
17:34right? These are, these are two blue States, you know, that would benefit from something like that,
17:41uh, uh, uh, in a very big fashion. So just be a little bit mindful. I mean, look what happened
17:47with salt. It was like Republicans in the house had to strong arm Trump to get salt deduction to
17:55go from 10,000 to 40,000. And they can do it because they had enough numbers to, to kill the
18:00big, beautiful bill. So that's why Trump had to fold. So just remember that, you know, California and
18:06New York are like two different countries versus everyone else in America. Right. I mean, just like,
18:12I mean, I, I, I look at my neighborhood, I got one bedroom condos, a million dollars here. Okay.
18:18If somebody bought that condo, when it came out in 2000, it was sitting on over $600,000 of gains.
18:24So that person gets to keep a little bit more from the deductions, but in general terms, that's,
18:29that's almost like a wealth transfer to voters rather than like, you know, because so much of the
18:34country doesn't have, you know, uh, uh, that kind of, uh, that kind of capital gains, but California
18:40and New York, disproportionately parts of Miami, parts of Connecticut, these kinds of places you're
18:45talking about millions and millions and millions of, of dollars, uh, uh, uh, uh, being saved for,
18:52for a kind of a small amount of, of homeowners in there. Okay. So, uh, I did want to let our audience
18:59know, we just compiled something where, where we put all of your, or most of your most compelling,
19:05um, articles that you've written about Trump and Powell or Trump versus Powell, this battle between
19:11them for mortgage rates or interest rates. And, and even all the podcasts, we put that together in
19:16an article on housing where you can find it Trump versus Powell, uh, the battle rages on whatever it
19:22was. And, um, so I wanted to, you know, we're going to update that. And that's, that's a great resource
19:28because you write about this. Now you write about this like twice a week because stuff is happening
19:32all the time. So I wanted to ask you what's the latest on Trump versus Powell, because we had some
19:37things happen over the weekend. I mean, they're, they're, they're trying to really push this
19:41investigation. I mean, you know what? It's, it's one of these things that what's that old saying,
19:48you know, if a dog catches an ambulance, it doesn't know what to do with it, you know? So if Powell does
19:56live, what's going to, what's going to happen, they're not going to cut the fed funds rate down
19:59to 1%. It's like, as I, I mean, I know no market person takes that seriously, you know? So what's,
20:06what's going to happen then to whoever takes now, Kevin Hassett is rising up in the, um, in, in the,
20:13uh, talks about him being the next fed chairman, but this is going on for some time. So you guys have
20:21to pick someone if you're going to do this, because every month that goes, we're getting closer and
20:25closer to Powell leaving. So I always tell people, think of October, October, if they're going to do
20:31a shadow fed, October would kind of be the timeframe where they start to get serious. But
20:35every month that goes by, he's, he's almost at the gun. So if this shadow fed is just to
20:41kind of, uh, as we talk about, um, play the, play the refs, you know, try to talk them down hammock
20:48Cleveland fed president came today, said, I don't think we should cut rates. We're almost a neutral.
20:53Remember she's the fed president that said, Oh, wait, wait, we're just going to wait and play
20:58catch up. So again, I stress this without tariffs, they would have done two rate cuts
21:03with tariffs. They look like they're going to do two rate cuts, possibly one now, maybe it depends
21:09on the inflation data, CPI reports coming out today. Uh, uh, and the fed says the next six months
21:14is what matters. So we'll, we'll, we'll take it one day at a time, but clearly they're trying to
21:21ruffle Powell up to resign. But again, what's, are they really going to cut the fed funds rate?
21:26The dollar would absolutely get torched, which I think they want. Okay. That's my view. That's
21:31my view since November 7th, 2024, but, uh, let's put some, a little bit perspective on what can
21:37possibly happen. Cause all, all I hear is all I see is these rumors. Powell's leaving. Powell's
21:42leaving. People take these headlines. They share them out. He's going to resign. Powell is not going to
21:46resign. He's going to sit there until the very last day. It would, it would kill him
21:50to resign. You know, he's just going to go for it all the way to the end. The integrity of the
21:55federal reserve means that much to him that he he'll take it, you know? So, uh, let's be more
22:00realistic on what can happen. A shadow fed theory is something that could happen, but Powell resigning
22:06in that case. And we'll see what happens with the congressional investigations of him and you know,
22:11the, the money situation with the renovations. Okay. Well, you guys keep up with it. Uh, the
22:17actual name of that article, uh, the updated list is the battle over rates, Trump versus fed chair,
22:22Jerome Powell. And that, um, puts everything that Logan's writing and our podcasts on the topic,
22:28uh, there one is the main topic. Like we, we talk about it all the time, but we're not going to put
22:32every single one on there, but when it's like really, really pointed about it. So it's a great
22:37resource. Logan, thank you as always for joining us and giving us the scoop.
22:42And always remember the best way to deal with inflation is supply, right? So supply is a positive
22:49good thing. 2025 is a good story. And 2024 is a good story.
22:53Love it. Let's end on a positive note. All right, Logan. Thanks.
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