- 4 months ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how to read the purchase applications data and what’s going on with existing home sales.
Related to this episode:
Purchase apps are very confusing this year, but new listings are key | HousingWire
https://www.housingwire.com/articles/purchase-apps-are-very-confusing-this-year-but-new-listings-are-key/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about 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.
Related to this episode:
Purchase apps are very confusing this year, but new listings are key | HousingWire
https://www.housingwire.com/articles/purchase-apps-are-very-confusing-this-year-but-new-listings-are-key/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about 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.
Category
🗞
NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about how we should read
00:12the purchase app data and what's going on with existing home sales. Logan, welcome back to the
00:17podcast. It is wonderful to be here. It's going to be a very, very interesting day because did you
00:25ever see the movie Batman the Dark Knight? Heath Ledger with the Joker. Okay, okay. So for
00:33everybody that did watch that movie, there's a scene in there with the Joker where he goes into
00:37the boys club. All the villains are there. And he says, you guys want to watch a magic trick?
00:44And he puts a pencil, sticks it to the table, and some guy tries to get him. And the guy,
00:49you know, he whacks his head into the pencil and the pencil disappears. And he goes, voila.
00:53Oh, gosh. Pretty grim. But today, you know, purchase application data is very confusing.
01:01We've talked about that all year. But if kind of a high level official is starting to ask about,
01:08you know, what's going on here, let me give you guys a kind of a mindset. Imagine if a Federal
01:13Reserve president came on TV and said, we don't need to lower mortgage rates at all. Purchase
01:19application data is booming. It is up 22% year over year. And you don't understand the context of
01:26the data. Then it can lead you to a kind of a false assumption. And, you know, we've been trying
01:33to prep this for some time. And especially, you know, these existing home sales reports are going
01:37to have very, very low costs, even though the data was flat year over year. It's only flat because last
01:42year was really bad. And even if we have growth for the next four months, it's only because of a very
01:48low bar. So we're going to get into like a very sophisticated take on how to explain this purchase
01:55application data, because I think a lot of people have just given up. And even people who monitor
02:00economic cycles and try to make decisions off are very confused about it as well.
02:06It's interesting that you can, you know, someone could interpret this data wrong on either side,
02:10right? We know for a fact that people are like, oh, housing is crashing. And then for someone to look
02:14at the purchase application data and be like, no, housing is really good. We don't need to help it
02:18out. Like both of those things are wrong.
02:21Both of those things are wrong. You know, I debated someone earlier this year that thought home sales
02:27were crashing like they did COVID, where we're going to be down to 3 million soon and eventually go down
02:32to 2.3 million. That's obviously not, that's not in the data at all. Not the purchase apps data or the
02:38weekly pending sales. But purchase application data has this very, very funky backdrop this year.
02:44So we're going to go at kind of a line by line. Last year was a very, very negative year.
02:51Mortgage rates went from 6.3%, 6.63 to seven and a half. The entire kind of first half of the year
02:58was very negative. No year over year growth, 14 negative weekly prints, only two flats, only two
03:05positive. That is a very, very negative data line. Now, home sales weren't crashing at all, you know,
03:11but they weren't growing. They weren't flats. They were, they were, they were the forward-looking
03:15data. Remember, purchase apps look out 30 to 90 days. So after that kind of late 2023 run with
03:23purchase apps, they gave us about eight weeks of positive data. Rates went up. That was it. The
03:27year wasn't going to have any kind of growth. So you have an extremely low bar and then mortgage rates
03:33eventually last year fell from seven and a half to 6%. However, this year mortgage rates didn't
03:41really go up. They went down, didn't go below the key levels really that we've always talked about,
03:48like housing data gets better from 6.64 down to six, but it went lower. But this year, new listings
03:55data grew year over year. It grew last year, year over year, but the mortgage demand, the mortgage rates
04:02went up. But in this context, we always try to teach this. Supply in housing is a function of
04:10demand because unlike an investment, a seller can sell a stock and be completely free, does not need
04:18the investment. All that's left is a cash. When you sell a house, you need to find a form of shelter
04:25if you're, if you're living in there. If you're an investor, it's different. But if you're living in
04:29there, that person is either going to buy another home, is going to rent something else, or is going
04:35to be homeless. Most people traditionally do not want to go being homeless if they have a job and
04:41make money. So majority of sellers are buyers. So the easiest way I thought about explaining this
04:48is let's say last year during the summer in my neighborhood, there were three active listings,
04:55three people put their homes onto the market. Out of two of those three homes, they were sellers that
05:02were going to be buyers. They filled out an application, right? They, they went into the
05:06survey, but you know, they sat there and waited until somebody bought the house. And you know,
05:12it took a long time for them to sell. This year, because we're working from such extreme low levels,
05:19new listings data growing and getting to the bottom end levels to where we would,
05:25it would kind of be normal, right? Normal. We would have 80 to a hundred thousand new listings data
05:31in the seasonal peak weeks. We got to the 80 level. We didn't get much growth after that, but
05:37you have now in my neighborhood, 11 people listing their house. Eight of them are sellers that are going
05:45to be buyers. They filled out a purchase application. So when you're working from the
05:52lowest bar ever, you, we always try to teach analysts this, you have to be careful of percentage
05:56numbers working from very low. We, we constantly make fun of the foreclosure people that do this.
06:02Oh, foreclosures are up 700%. Home prices are going to cry. You know, in this context, you have to take
06:07that year over year growth. I mean, it, it is, it is very true. We have 25 straight weeks of year
06:13over year growth. We have 12 straight weeks of double digit year over growth. That is still a
06:18function of demand, but that is a seller that is filling out an application and sitting there
06:25waiting for a buyer to come in. When that buyer comes in, like if it's a first time home buyer
06:31that comes in and buys that house, okay, there's one out there. Oh, that seller then sells, buys
06:35another house. Then that seller buys. And then you have a whole transaction volume curve going.
06:40But this year we have a little bit more new listings, mortgage rates are down. So it can
06:45give you growth with this backdrop. We're not going to have this low bar next year, right? This is a
06:51very, very historical low bar. So it's confusing to people because, uh, existing home sales flat year
06:57over year. Uh, uh, but if you looked at the purchase apps, you're thinking, Oh wow, mortgage rates don't
07:03need to go any lower housing demand. And that's, that's not the correct take because the second phase of
07:09this conversation, do you know what it is, Sarah? Well, what is it? It is the week to week data.
07:17Oh yes. Okay. Sorry. I wasn't sure which part we were, we were going into, but yes,
07:21I don't, I don't. So, so we get into, we get into the other. Now let's take the week to week data,
07:2813 positive prints, 10 negative prints, five flat prints on the year to date. That's not bad,
07:37right? That's still a positive curve, but whenever mortgage rates get from 6.64 down to 6%,
07:44we see real positive weekly data. A good example was last year. Last year, we had no year over year
07:52growth until like October. And people are like, Oh my mortgage rates are falling down to 6%. Nothing
07:57is happening. No, no, no. But the week to week data was then all of a sudden we went from very negative to
08:02a very positive, 12 positive purchase application data weeks, five negative and only one flat.
08:10So the week to week data here, if that, if those five flat prints had 1% negative into them,
08:20we would have 15 negative week to week prints and only 13 positive prints. So it's basically a
08:27flattish year on the week to week. So we do have more sellers that are ready to be buyers,
08:33but we just don't have that week to week data. And if you look at it that way, and that we have very,
08:39very low comps, right? We, we were from, for some time we're saying, Hey, listen, just be careful
08:43that June to October, the reports in July to November, we'll have the lowest year over your comp.
08:49So we see growth in anything context, right? We'll know in our weekly pending sales, when things start
08:55kicking off, but we're just barely showing year over year growth on the weekly pending sales data.
09:00And hopefully that clarifies some things because people are really confused with the purchase
09:07application data, which we've always said for many, many years, it's a very funky survey data.
09:13We have said that. Okay. So when you think about new listings and there being more new listings,
09:19does that mean is the reason that it's affecting the purchase app numbers is because with more new
09:24listings, then you have, um, you know, the growth, the home price growth slows down. And so things
09:30are, no, no, this has nothing to do with home price growth or home prices. This is just, you have more
09:35sellers this year that will be traditionally buyers and majority of home buying demand are mortgage buyers.
09:42So if you are okay, honey, we are going to sell our house, Sarah, what do we need to do before we sell
09:49our house? We need to go to a mortgage person and go, okay, let's fill out an application to see what
09:55we could approve ourselves for, for after, when we sell the house, we're going to go buy something.
10:01Okay. So we know what payment levels and what's out there. So we got to go to the mortgage person
10:07first to get that squared off. We're filling out an application. Now it might take some time to
10:13eventually list the house and all, but we have to go there first because we are sellers that are going
10:19to be buyers. And if you think of it in that light, and because we're working from very low levels,
10:25you can see that growth and it might take five months, six months before we actually, you know,
10:32sell the house and buy another one, but the year over year data, because the bar is so low and new listings
10:38data grew, you got that extra growth. So it is a function of demand. Purchase application data growing
10:43year over year is a function of demand, but it's not so much like first time home buyers are really kicking
10:48in mortgage demand on the week to week is very strong. And there we go. And that's what we've seen
10:53especially in the previous decade where home sales are, you know, 5 million or up there with the existing
11:01home sales market. Okay. So I thought a purchase application only happened if you had an address
11:07of a house you were going to buy. No, you have to, it could happen with anything, right? I would tell
11:13you this majority when I was an LO, nobody had an address, right? Nobody had anything. They filled out
11:22an application first. They came first. And so what do you qualify? This is what you qualify. Okay.
11:27We're going to start the process. It was never in, Oh, by the way, we sent an offer in because we have
11:34an address. No, you got it. Now are there, are there people that actually go, okay, I'm ready to buy.
11:41I like this house. I've never went to a mortgage person. What do we call it? Yes. There are a lot
11:46of people like that. Realtors make fun of them all the time in their videos. You know, the faster you go
11:50to a, to a, to a mortgage person, the better it is for the game plan for the future. Cause we do have
11:56people that walk into a house that go, Oh my God, I'm going to go put an offer on this house. And then
12:00they go, Oh, are you pre-qualified? No. And they go, Oh, you're 200,000 over your qualification. Okay.
12:07So there are people like that, but in general terms, people go out, fill it application. And then
12:13they, you know, the whole process of housing starts after this is why there's a 30 to 90 day lag
12:19into that effect out there. Okay. Before we move on to existing home sales,
12:27what did this have to do with the Batman movie and the pencil?
12:32Because the person, if the person was going to go on TV and say, we don't have to lower mortgage
12:37rates, purchase application data is up 22% year over year. Okay. So we're going to get the guy's
12:42head, put the pencil down and Oh God, no, that's not how you read the data correctly. So that's,
12:49that's why I only thought of Batman when the person said that I was like,
12:52you ever see the movie Batman? That's what I think about your, come on.
12:57Okay. Could you imagine, could you, I mean, imagine, imagine seeing someone come on TV and say,
13:03there's no need to, for rates to go lower. Housing's booming. Purchase application data is up 22% year
13:10over year. It's double digit growth. And that could have been said for the last 12 weeks. Cause that's
13:16true, but you don't have any context to the weekly pending sales or anything like that. So you're,
13:22you're off the cuff. And that's, to be honest with you, that's like 99% of the people on planet earth,
13:28maybe 99.9% of the people on planet earth don't understand that. But I was like, no, no, no,
13:34you cannot do that. Uh, this is what happens. Our weekly pending sales would really show growth.
13:42If housing was booming. Remember we, we, um, what was it? Uh, it was a few years ago when they were
13:48like, Oh my God, purchase application data is growing. It's housing's booming. It's recovering.
13:52And I'm looking at the chart and go, what are you talking about? What, what, what, what, you know?
14:00So we used to do these tweets out there whenever someone used to come on TV and say that. So at least
14:07people are asking. No, that's true. That's a good thing. Come to the chart daddy. Right.
14:14There's certain things that I, I'm the best at what I do. What I do sometimes isn't very nice,
14:19but we could, we could talk about these things and explain this. And again, those that follow the
14:24tracker could kind of see what we're talking about. If we really saw like authentic kick up demand,
14:29we saw that last year, uh, um, toward the end of the year where our weekly pending sales data was
14:35really kicking out, but nobody believed it because the purchase application data had no year over
14:39year growth. So they're like, Oh no, home sales aren't growing then. And what is this? And all
14:43of a sudden we have a couple of hundred thousand more home sales that go, where did this come from?
14:46It is complicated. It is not that easy, but this is why I'm here. Cause I do nothing else,
14:52but look at charts. I eat charts. Did you see the video of me eating charts for breakfast?
14:57Wasn't that a tasty little thing looking?
14:59It was great. Now, listen, your AI game is very good. Like you do crazy things with AI. We can all,
15:05we can all talk about some of those things are crazy, but that was really good. That was probably
15:08my favorite. Okay. Let's talk about existing home sales came out today. You weren't expecting it to
15:15show much. What was the, what was the outcome? So for me, again, it's prepping people on the year
15:20over year data and the year over year data was basically flat. Uh, um, the month to month saw a decline.
15:25And I think though, what shocked people is inventory fell. Okay. Monthly supply grew a little
15:34bit and price growth on a year over year basis firmed up. And that's what not a lot of people
15:42were expecting. Some people were expecting like a big increase in inventory and the first negative
15:48year over year median sales price data, even though we don't really have any data lines that actually show
15:55that. Uh, and again, for myself, for my forecast in 2025, every month this year, the NARs median sales
16:03price is higher than my forecast. This means I need the second half to be weaker, you know, uh,
16:10and noticeably to make up for that difference in the first half. This is why I would say the case
16:14Shiller index is what I use and case Shiller is higher than my four. I need it to be weaker.
16:20I don't know how many people are really trained on like, so some people had like a 9% decline in home
16:26prices this year nationally, and they're stuck to it still. And I just, I don't know if they're
16:29trained enough to read that kind of data line. We had this episode last year where I was trying to
16:34teach somebody how to read the data and they didn't understand. And it's like that, no, that's,
16:38that's not a 5% decline. And that doesn't mean it's going to be a 12% decline. Like no. And then
16:43I could see the person got confused, but, but, um, uh, if you guys remember, uh, uh, before the July,
16:50the fourth, uh, uh, holiday, uh, a week, one of the things we said in the tracker is the data
16:57stabilizing mortgage rates are starting to get closer and closer to, and we just said,
17:01all it did is stabilize it when inventory. I love the inventory growth. So the inventory growth is
17:06positive. We love it. It's 100% the best thing for housing, but the inventory growth was starting to
17:10slow down. Uh, uh, and then the, uh, new listings data was starting to slow down as well. So that
17:16keeps somewhat of a lid. So if you're confused about inventory falling slightly, monthly supply
17:22only growing a little bit and the year over year, uh, median sales price picking up just a tad, uh,
17:28kind of just, again, if you follow weekly data, it's not that confusing for this. And then now we
17:33got to look out for the second half and always in the second half of the year, median sales price
17:38declines. That's the seasonality of median sales prices. There's a traditional seasonality of home
17:44sales data, a purchase application data, weekly pending sales, new listings. Housing is very
17:49seasonal. You do some adjustments to it, but in this case, it's not that shocking, but we got to now go
17:55on because rates are a little bit lower now than what they were at the high point of the year.
18:01Okay. We're recording this on Wednesday. We'll go live on Thursday. What's left for the week as far as,
18:05um, housing data? Well, there's the new home sales report that'll come on. And then again,
18:10I'm always keeping an eye on the completed units of sale in that. Uh, and then, you know, where are
18:16we in the stages of construction? Because that could look out forward for, for demand. The builder stocks
18:22are starting to perform better. Some people are catching on to that story as the 10 year yield
18:26falls down. So we'll keep an eye on that. But also, uh, this week, uh, we got the Japan trade deal
18:31done. Uh, just before I got onto this podcast, uh, they talked about the Euro, the European deal
18:37is done. The 10 year yield is picked up just a little bit. There's all these discussions about
18:41the fed and, you know, try, you know, Trump is attacking Powell and institution and other people
18:47are, but, uh, if the European deal kicks in, then that again, any deal is positive for the fed,
18:55because then the fed has a mindset of what percentage they need to work off of. We always talked about
19:00Japan or India's deal would probably be first. So Japan being first is not a surprise. The India
19:06deal might, it's a little bit more complicated because Trump's trying to use that against leverage,
19:10uh, against the, uh, uh, Russians on, on, on, on energy purchases. So keep an eye on if we see any more
19:18deals officially announced. Uh, again, all those things are positive going out in the future. Uh, we have
19:24jobless claims that'll come out. And again, jobless claims have done a lot better recently as well.
19:28Continuing claims are somewhat elevated, uh, uh, from recent history. All that is, is the labor
19:34market is getting softer, not breaking. So, uh, we want to keep an eye on new home sales,
19:39any more reports of trade deals and, and the, uh, jobless claims data.
19:44It's a lot. It's a packed week.
19:47It's a patch week. And just remember next week it's the federal reserve meeting. Oh boy. Oh man.
19:54The Q and A's on that one are going to be unbelievable. I can't wait. I'm already like
19:59telling reporters, ask this, ask this one, ask this one. Especially because we've had so many
20:05different people talk about July rate cuts or not July rate cuts and coming back on July rate cuts.
20:10It's been crazy. Yeah. I mean, I mean pretty much after that last jobs report, there was no way they
20:16were going to cut rates, even though Waller wants them to cut rates, even though the jobs report itself
20:21wasn't that spectacular. The fed, the fed has their own kind of agenda on this and it just
20:26popcorn, get the popcorn out every day, man, every day. I'm just like this headline, that headline,
20:32uh, speaker Johnson talked about, we might have to look at the entire federal reserve, you know,
20:37mandate, you know? So again, the white house and their group were playing bully ball. Um, one of the
20:43things I talked about today on social media is that Powell can't resign because if he resigns,
20:50all the regional fed presidents are at risk. Yeah. So he, he, he has to stand in just for that
20:57because those, those are his peeps. If he resigns, then they can bully ball any of them,
21:02right? Powell's a big one. The rest are easy to get rid of. And that's why he's got to stay there
21:08till the very end. And Bassett kind of, you know, started mentioning, Hey, listen, he should fill up,
21:13you know, close out his term and go out, but a lot of drama. This is what, this is what it is.
21:17We, we said second half of 2025, get the popcorn out, get there. And, uh, it's going to be a crazy
21:23show. It is. Well, thank you for walking us through everything today and we'll see you again tomorrow.
Be the first to comment