- 4 months ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about Opendoor stock skyrocketing, new and existing home sales, and mortgage spreads.
Related to this episode:
To the moon! Opendoor is Reddit’s new meme stock | HousingWire
https://www.housingwire.com/articles/opendoor-ibuyer-stock-market-surge-reddit/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
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 C
Related to this episode:
To the moon! Opendoor is Reddit’s new meme stock | HousingWire
https://www.housingwire.com/articles/opendoor-ibuyer-stock-market-surge-reddit/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
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 C
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about open
00:09door stocks skyrocketing, new and existing home sales and mortgage spreads. Logan, welcome
00:15back to the podcast.
00:17It is wonderful to be here on Monday morning and so many headlines right off the bat. And
00:23this is why we're here four times a week. So true. And one day you'll give in and make me happy
00:31five days a week. But the first thing I want to ask you about is this open door stock. This thing
00:38is going crazy. What does this mean for the rest of the housing market? Like how are you interpreting
00:44this? Okay. This has nothing to do with the housing market whatsoever. This is when open door stock was
00:52really, really low. Some Wall Street firm bought it in a big position and, you know, another Wall
01:00Street talking head talked about it. Then Reddit got involved into it. And you know how these things
01:07could work. And it's gone parabolic. And it's not just that stock. There's a few other ones that have
01:14kind of really picked up steam recently. But this one has literally gone vertical. Just kind of think
01:20of it as money kind of piling in and what we call is exit liquidity for people that got in early
01:27because those buyers can make it easier for them to unload their position. Don't think anything about
01:35the housing market. Now, the builder stocks, right? You know, there's all these negative headlines.
01:41You know, housing construction permits are down. Starts aren't going anywhere. Builders' profit margins
01:47are falling. The builder stocks now have performed a little bit better since May. And that to me is
01:53just the 10-year yield was heading lower. Mortgage rates are not that far from their year-to-date lows.
02:01Mortgage spreads are also getting better. We talked about that in the tracker. And if the 10-year yield
02:07mortgage rate spreads, everything can facilitate near 6% mortgage rates. What it has done over the last
02:13few years is that builders' confidence for smaller builders, not the big publicly traded builders,
02:19gets better. Traffic gets better. Permits tend to grow. So traders try to get ahead of that. And
02:25they realize that if rates are falling, 10-year yields fall, and you want to get ahead of that
02:29move when that occurs, when it finally hits the data. So the builders with the 10-year yield has a
02:35little bit more validity, open. No, just kind of, you want to just kind of ignore that story.
02:42Okay. Well, one of those headlines, negative headlines about builders was your own when you
02:47wrote a couple of weeks ago that new construction is basically dead because of mortgage rates or where
02:53the 10-year yield is. So no matter what their stock's doing, how would you, has your assessment
02:57on that changed? Absolutely not. Until you see single family permits and confidence rising,
03:03it hasn't worked. Now, I think what happened last year toward the end of the year is that the
03:08builders' confidence data was picking up and a lot of people went with that. Our take was that the
03:13supply and demand and equilibrium for the home builders are going to be challenged in 2025 because
03:17when rates get towards 7% or even higher, they don't really perform well, especially the smaller
03:24builders. So I think the smaller builders went into it thinking deregulations, lower rates,
03:29we're good to go, and it has completely reversed. Now, if you told me mortgage rates are heading
03:37towards 6% and going to stay there for a while, builders' confidence picks up, the builder's stocks
03:44do better like they kind of have already to a degree, and then single family permits can grow.
03:49But going back since late 2022, we always talk about how structurally the housing dynamics shifted
03:55on November 9th, 2022. If you look at the builder's stocks, that was kind of like the bottom before
04:00their big run because so much was priced in on the negative side. Nobody had that, well, the builders
04:05can grow sales and pay down rates and things will be okay. So there's always this fine equilibrium
04:13between equities and the realities of what's happening on. But in this case, housing permits are
04:20early COVID-19 recession levels. Housing starts at early COVID-19 recession levels. Builders' confidence
04:26is not that far from the lows levels in COVID-19. Traffic, prospect, everything is down, down, down.
04:32And that makes sense. But if you just get towards 6% and stay there, it makes it easier. Why? Because
04:39when it comes down to it, it's all about can you sell that home and make money, right? And I think the
04:47the builder's confidence rising into the start of the year was a head fake and it quickly reversed,
04:54right? You know, tariff talks, higher rates, you know, stuff like that. But if mortgage spreads
05:00getting better, improvement, good, 10-year yield to go a little bit lower, you don't necessarily need
05:06sub 4% 10-year yield anymore to get mortgage rates near 6%, where in the previous few years,
05:12that would be the case. But the fact that the spreads are getting multi-year lows, it's a positive
05:19story. And investors and traders are mindful of that more than I would say the general public or
05:24even anyone in the housing industry. As you and I have seen going out on the nerd tour for the last
05:30few years, mortgage spreads is not something people know or talk about or understand. So we're trying
05:36our best to kind of explain it. And this last weekend's tracker kind of went into that.
05:41Well, that was going to be my next question is let's talk about mortgage spreads because
05:45they are making a difference. Can you give us the historical, like, here's where they usually are,
05:50here's where they are now, and where you think they're going to go?
05:56Mortgage spreads. Okay. So going back to the 1970s, if you take our data, remember mortgage spreads can be
06:04different from anybody who quotes mortgage rates. So we're just taking the, you know, the Fred data
06:09and the Freddie Mac mortgage rate data. 1.6 to 1.8%. That's the spreads between the 10-year yield and
06:1830-year mortgage rates. And why do we focus on the 10-year yield and 30-year mortgage rates?
06:23Because of the slow dance between these two.
06:26The slow dance. Oh my God. Just a passionate, lovely, we love intense, passionate, close,
06:32slow dancing. So when the spreads are normal, that's where it gets. Now, throughout history,
06:38whenever rates rise, market stress, spreads get wide. That's what we talk about. You know,
06:43the guy messed up. He looked at another lady at the club. The girl's not into it. And, you know,
06:49they're dancing far apart. Not a good thing, right? You're not going to get the job done after the
06:54party of that. But throughout history, right, when the Fed starts cutting rates and volatility,
07:01volatility compresses and, you know, time goes on, the spreads get better. Now, I think a lot of
07:08people just said, you know, in 2024, there was only a few of us in America that talked about the
07:13spreads improving in 2024 because people thought, well, the recession is going to come and spreads
07:17go vertical on a recession. That's not necessarily true. This is why we like to do the spreads in the
07:23history. We teach people how this works. But what's going on with the spreads is, looks very normal to me.
07:29And it can get a lot better, but we're almost like we're past the halfway point of the spreads getting
07:38back to normal. So if mortgage rates were priced on the 2023 spreads, which were really bad, you're 81
07:47basis points higher today. But if mortgage spreads just get back to normal, I'm doing an average
07:55between 160 and 180. You're six and a quarter with the 10-year yield at 4.42. 10-year yield down this
08:01morning, five, six basis points. 200-day moving average is being tested here. And then you're
08:07looking at lower mortgage rates. So naturally, the spreads improving is a huge deal to an industry that
08:13doesn't know much about it. But that's our job. The Neurator, the Chart Daddy, the Break Candy. My job is to
08:19explain the spreads and the slow dance and the 10-year yield and mortgage rates and say it in a way that
08:24people can understand. So as you mentioned, it's sort of right now because the spreads are getting
08:30better. It's sort of a buffer. Otherwise, we would be like high sevens, maybe even eight.
08:35No, no. We would be closer to 8% today if we had the 2023 spread. Even if I took the spreads from last
08:41year, we would be higher. A really good example, last year when the 10-year yield was rising up,
08:49we had 7.5% mortgage rates. We're not getting 7.5% mortgage rates, even if the 10-year yield
08:55got to those levels because the spreads are better. So now when Godzilla tariffs happen,
09:01market stress, spreads got worse, but only by 20 to 25 basis points. So it's doing what it normally
09:09does, right? And it's just that there is more upside for rates to go lower if the 10-year yield
09:15and spreads both improve. But we are finally in a spot where you don't need the 10-year yield to get
09:21below 4% to get near 6% rates, right? We're not there anymore. And if the spreads just improve,
09:29you know, 30 to 40 basis points, we're almost back to the normal level. And that was it. That was this
09:35cycle's version of mortgage spreads accelerating higher and working itself back down to normal.
09:40So, you know, when it comes to the 10-year yield, you know, you've given people a range,
09:46you know, people are looking at inflation to know what the Fed funds rate might go. How do you know
09:53how to predict where or how does our audience know how to predict where the mortgage spreads are going
10:00to go? Like what makes them better? Just come to the chart daddy every weekend. There's nothing else.
10:04Just come to the chart daddy or go to Instagram stories. We try to explain the spreads on Instagram
10:08source. We keep everyone updated on what's going on. But we also explain why as volatility compresses
10:16and the Fed, you know, for example, if let's just say that the let's just say that there's trade deals
10:22done and the tariff percentages is really down. And then the Fed goes, OK, we're back to our two rate
10:29cuts, you know, and then they talk about, oh, the labor market isn't as strong as we think. So we need
10:34more rate cuts, whatever it is. The spreads can get lower in that environment. But you're working
10:39from an elevated level where in the past, you know, sometimes you get market stress and the
10:44spreads go vertical in a recession. We saw that in 2008. We saw that in COVID. Here is a different
10:50case. The spreads got really bad in 2022 and then 2023 got the worst. And then they've been working
10:56themselves down. So, again, tracker, everything. You got everything there that you need for housing on a
11:02national story. But again, it's a little bit ahead of everyone else. So we keep everybody fresh and
11:07updated. And the mortgage spreads is a big deal because I love the slow dance between a 10 year
11:13yield and 30 year mortgage rates. And the spread is the second variable. Okay, well, let's talk about
11:18that Fed, right? Let's talk about the latest on Powell, because we've talked to all the other variables
11:24about mortgage rates and where they might go. Where are we on Powell? It looks like one of the
11:30Republicans brought up maybe possible criminal charges of perjury against Jerome Powell. We
11:35are at that stage right now. Of course, this is why I did that video of, you know, squid game where
11:41the doll chases Jerome Powell. Here we are again today. And I tell people this is this is kind of
11:47like the first step. If it goes to that next level, which I don't believe it should. And, you know,
11:53there are stories that Besant talked to Trump privately and said, hey, listen, don't do this. This is just
11:58going to be a lot more market stress and the legal cases, but it's not going to stop with him. They're
12:05going to go after regional Fed presidents. There are some regional Fed presidents that you could pull
12:09out some skeletons too. So this is why this is becomes a just a hot mess, you know, because it
12:16can't just stop with Powell. And again, if it is true, if we do get a shadow Fed president, at least
12:24that can take the firing and resigning of Powell out of the equation. I know one of my Wall Street
12:30friends had an interview talking about Jerome Powell should resign to for the Fed, the sanctity of
12:37the Fed. No, you do not give, you know, that monster a cookie because it's going to ask for a glass of
12:44milk, then a milkshake, and then a cake, and then ice cream. And it's not healthy, right? You get you
12:51cannot get into that area where you submit like that. We had rules on this to keep it separate.
12:56So we don't have bully ball, New York bully ball. You know how we deal with bully ball? You know,
13:01these, these men on Twitter who run around and yeah, we challenge them to live debates. We say,
13:06homie, let's go. I want your family, your kids and everyone. I want all of you. I want everyone
13:10in America to see your forecast and your models and let's do it live. So I can get it recorded.
13:15Powell should say, Hey Trump, let's have a live national debate.
13:18Oh my God. Why do you want emergency rate cuts? Like, why do you think the economy is that bad
13:23that you need the Fed funds rate so low that it's something that happens? Are you, is there something
13:29that you're not letting us know with a trade war that you think you need? I'll just go right at
13:33them. Of course that's never going to happen, but that, that'd be my tactic. Throw it back at people,
13:38force them to get in the open in, you know, and that kind of things. 99.9% of people walk away,
13:45but in this sense, you know, you put them at bay. The problem is Powell doesn't do that.
13:50Powell can't really do that. And he just gets bombarded day in and day out, just getting,
13:55and now it's perjury. And now it's this. And when, when that happened, when he hypothetical,
14:00let's say Powell, Powell has to be fired. Then the regional Fed presidents is like, this is why
14:05this doesn't work. We don't, we don't do that here, you know? So that's the latest Monday morning on
14:11this. So I just want to clarify, because you said the regional Fed presidents might have skeletons in
14:17their closet, but I don't think you're, you're trying to say there that you think they've done
14:21things wrong, just that there might be things that Trump takes exception to.
14:25They will find anything. Okay. If you did not pay a parking ticket in 1978, or you did not return a
14:33library book in 1985, they will find it. Right. And they'll just, and they'll just throw it at it,
14:39you know, uh, left and right. This is what, this is New York bully ball. This is, this is what he
14:43does. I, and, and Jerome Powell has to just sit there and not say anything. And, you know, you know,
14:48so, uh, it, this is, this is why this Avenue, I, I, I'm, I'm hopefully if the story is true, that
14:56Besant kind of took Trump in and said, Hey, listen, this is not, this is not going to really work like
15:01you want. And we've talked about that. Like if Trump, Trump's not going to get what he wants by
15:06firing power, you have to go after all the presidents, you know, and that stuff, Turkey
15:10does, right. You know, this is America, but I think the bigger question is why do you need emergency
15:16rate cuts? Like for us, we're just talking about just kind of guide down to neutral policy. If the
15:22labor market breaks, it doesn't matter. The 10 year yield will go ahead of that, but this is emergency
15:26rate cuts, you know? So, uh, but Powell can't do anything. The regional fed presidents can't really
15:32do anything. So it's just, it's just, they're all punching bags at this point.
15:36That is crazy. Okay. What are we getting this week as far as, um, housing data?
15:41Well, existing home sales and new home sales. And again, existing home sales, nothing much is
15:46happening. You can have a month to month decline. I don't think anybody has any, uh, a big forecast
15:50there, but if we do show year over year growth, which that that's even a question, um, the bar is so
15:58low. I mean, I cannot express to you, uh, how low existing home sales are going to be. This is the
16:05July report for June, June, all the way to October is going to be literally to me, the lowest bar you
16:12take COVID out of the equation. Of course you take the bottom of 2008 and the tax credit in 2010 out of
16:18the, this is the lowest bar of comps in the history of America, man. It is the third calendar year of the
16:25lowest home sales ever recorded in history. So this is, again, one of my contentions that I I'm
16:30worried about is that, um, the people of this country might turn on the federal reserve. Imagine
16:35if Trump actually could get mortgage rates down to like five and a half and 5.75 and people are
16:40start buying it. Do you think people would actually care, you know, that, you know, the regional fed
16:46presidents are booted out. So when you have the third calendar year of the lowest home sales, and I am
16:51not just saying that, uh, uh, out of hyperbole, when you adjust it to the workforce, this is what
16:57it is. Um, uh, people get frustrated, right? And, uh, Trump's doing the attacks on Powell and,
17:05and, and not the most effective way, but you can, you can, in a sense, you could, you could
17:10rally a country against the federal reserve. And that's the set actually talked about that this
17:15morning, that the entire federal reserve needs to be looked at in a different way. So there's a lot
17:20of drama there, but existing home sales don't expect much. I love 2025 for the reason that
17:26inventory is growing and becomes a more buyer supply, a buyer's market in the supply and demand
17:31equilibrium can function normally. It could not function after 2020. This is why the whole team
17:38higher rates, we need higher rates in 2022. We need even higher rates in mid part of 2022. Do you
17:45remember that quote I gave, you know, to the, to the news outlets in 2022, we had already had
17:52mortgage rates go from three to 5% and then from five to like six. And we were heading back down.
17:58I was like, this is not going to work, right? We need higher after rates rose 3%. I was like,
18:03we need higher rates to put home builders, home sellers, and investors on their ass. And the reason
18:08I use that language is that they had too much power and everyone was happy when, oh my God,
18:14multiple bids, high five, home sales are up, home prices. Nobody cares about the sustainability
18:18because everyone was making money. And the only mechanism we had was higher rates. And imagine if
18:24rates never got above 5%, it wouldn't, it wouldn't work. If rates never got above 6%, that we wouldn't
18:31get inventory back to these levels, but now I'm happy. I love it. I love the 2025 housing market,
18:37you know, just for that, because you have to think about housing in the long run,
18:41right? And shortage inflation is the worst because it's really like, it's just not having
18:47enough product. The housing bubble was a massive credit boom. Their sales were booming,
18:51but inventory was much higher during the housing bubble years. I did this presentation one where
18:57I showed people active inventory is like one and a half million higher back then. They're like,
19:01what? I said, yeah, yeah. Inventory was growing. Sales were growing, you know,
19:05cross a credit boom here. It's just a raw shortage house. Like we had only 240,000 homes,
19:11available for sale in March of 2022. That was savagely unhealthy. And now not the case. So
19:17every year that goes by affordability is on a better track than what it was before. This is why
19:22we were team higher rates, which is not popular. And y'all threw tomatoes at me and I dodged every
19:27single one of them because I'm Neo from the matrix. But in this case, good. I mean, so we're going to
19:33get the existing home sales report. I mean, the question is, do you even get year over year growth or
19:36not? But again, very low bar, not much is happening. Same story as always purchase application
19:42data. You asked me about, you know, all this year over year growth, but think about it in this light,
19:46very simple terms. If new listings data is growing year over year and we're not, we never got back to
19:52the normal trends pre COVID, but if it's up, that seller is a buyer. That seller is sitting there
19:58waiting for a buyer to buy that house. Then that purchase application data could go into the sales.
20:02So this is why we say 30 to 90 days, but that seller needs a buyer to be that next buyer. And
20:08that's how the ecosystems worked with housing. So I know a lot of people are confused about the
20:13purchase application. We're trying our best to explain it, but this is a very, very unique year
20:17where you had record low levels and new listings data grew and mortgage rates actually have been down
20:22for most of the year on a year basis. So kind of a, oh, once an anomaly backdrop.
20:28I do think that new listings part is so important. And one of the things you also cover in the
20:33tracker. So again, I would just recommend that to our entire audience and Logan.
20:38Yes. And, and, and the new listings data. I love that. The fact we got to 80,000, I didn't get that
20:43last year. That was one of the calls I got wrong last year. And my home price forecast was too low,
20:48but this year we got up to 80, but we never got the, at least between that, between 80 to a hundred
20:55thousand on a, on a week to week basis, 2013 to 2019 between 80 to a hundred thousand would be
21:02normal new listings during the seasonal peak period. But no, it looks like maybe 83,000 might
21:09be the peak of the year, but we never got that. And we're now in the seasonal downturn of new
21:15listings data. And just remember during the housing crash years, this was running at 250 to 400,000 per
21:21week, four years per week, four years, sellers that were not going to be buyers, right? That
21:27were distressed sellers. A lot of them underwater marketplace, whole different story back then.
21:31Not the case. Now we are in almost August, 2025. We ran the gambit. We had the three years of the
21:38record low levels of sales. And it looks a lot different than, you know, 2005 to 2008 for obvious
21:44reasons, different credit market back then we had some crazy crypto Twitter account that said it's a,
21:50it's a line the anti-central bank people use. If you're, unless you're a millionaire,
21:54don't ever buy a house until you get a 2008 housing crash. You guys understand this. And we go,
22:01imagine yourself as a man telling your, this is why I love, I never have to worry about the ladies on
22:06this. Single women, they buy homes more than the single men, but imagine telling you, I listened to
22:10some fake account and he said, I shouldn't buy a house until 2008. And if that lady stays with you,
22:15I'm telling you, man, she is in love because people would be like, ah, no, you just can't pull the
22:20trigger. You're just not that guy. Right? So most people don't operate that way. Millions and
22:25millions of people buy homes every single year. We're going to have near 5 million total home sales
22:28this year, as we did the last few years. But it is still, when I look at the existing home sales
22:34market, it's the lowest levels ever. When I look at the builders, new home sales still at 2019 levels,
22:39why sub 6% mortgage rate in that marketplace, not been the case here for a long time.
22:45Amazing breakdown. You did it in 22 minutes. We are, we are doing so good these days, keeping it to
22:51about 20 minutes so people can get their information and, and get on. But so appreciate you, Logan. And
22:57I will talk to you again very soon. Pleasure, Wheeler.
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