Powell faces a mutiny at the Federal Reserve

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about mortgage rates and a mutiny at the Federal Reserve, where several Fed presidents are now publicly calling for rate cuts.   Related to this episode:   ⁠The battle over rates: Trump vs. Fed Chair Jerome Powell | HousingWire⁠  https://www.housingwire.com/articles/the-battle-over-rates-trump-vs-fed-chair-jerome-powell/   ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠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.

Transcript

00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about mortgage rates,

00:11the Fed, new listings, and more. I want to thank our sponsor, Optimal Blue, for making

00:16this episode possible. Logan, welcome back to the podcast.

00:22We have a mutiny in our hands, Sarah Wheeler. Shiver me timbers.

00:27Yes, we do. At the Fed. Not here. No mutiny here. It's all at the Fed, right?

00:34Yeah. One of the things that we highlighted in the Weekend Tracker is that this week,

00:41we're going to have some Fed presidents, governors talk. So after that jobs report,

00:49what do they say? And I posed this question on social media that if the Federal Reserve had this

00:57jobs report three months ago, and we were printing sub-20K reports before the Fed meeting,

01:04do you believe they would cut? I was like, yes, they would, especially what happened last year.

01:11And some people are saying, no, they wouldn't. But now that it's the aftermath,

01:18now you have Fed regional presidents and governors talking. And San Francisco Fed President Mary Daly is

01:27like, oh, we need two rate cuts, but we might need even more. Mutiny, number one. Neil Kashkari,

01:35our favorite person, said, oh, the economy's weakening. Two rate cuts are appropriate.

01:42You know, we need to do, the Fed needs to act sooner than later. Okay. So there's two.

01:51I'm going to assume that when the others, except for Beth Hammock, I really love to hear what Beth

01:59Hammock has to say now. But not only do you have those two, with Kalger resigning soon,

02:07President Trump's going to get another person in there. So that's going to be number three. We hope

02:13it's team Neil Dutta. By the way, President Trump should have already announced Christopher Waller as

02:19the next Fed chair. That would be the best. Not Kevin Walsh, of course, not Kevin Hassett. I know

02:24Kevin Hassett today got a bump up and he's now in the lead. You know, Trump wants loyalist people.

02:33Waller would be a much better pick. Just it's completely out, you know, way above what Hassett

02:40is. But if that's the case, you're going to get now another Fed governor and then you get a Fed chair.

02:49Now you're starting to build a mutiny clause against Jerome Powell and Jackson Hole is going

02:56to come up soon. So you're going to get some statements from Powell then. But I wonder until that

03:02point, how many other Fed people go, we got to take the pirates captain off the ship and

03:10we go to the next stage of this economic cycle. So let's talk about what that September rate cut

03:18now would look like, right? You even said after that jobs report, maybe we're looking at a

03:2250 basis point cut because of how bad it was.

03:26It really depends on the next report as well. You know, and the 10 year yield is made its move

03:34already. So we're below 435 and we're hovering around at 4. So the bond market did what it usually

03:42does. It gets ahead of the Federal Reserve. And this is what we have to train because we keep on

03:46having people say, but the last time the Fed cut rates, mortgage rates went above. The bond market

03:52already went so well ahead of people. I'm going to puke if I hear that one more time. We had a 2%

03:58move lower in rates. Like October, I think it was October 19th, 2023, we had 8% rates and I think

04:03September 19th or 16th, it was near 6%. No rate cuts, right? This year, mortgage rates, year to date

04:12lows, no rate cuts, right? We went from what, seven and a quarter to 6.57. So the bond market gets ahead.

04:23Sometimes it gets way ahead with too much easing policy. Sometimes they get way ahead and too

04:28much too tightening, but it kind of does its own thing because it's an efficient marketplace,

04:34right? Of course, they exaggerate things at times, but they don't have to wait six, eight weeks for a

04:39meeting. So just you follow the data, but it is very telling that you've already had two Fed people

04:47already say, argh, mutiny. And now you're going to get a new Fed chairman. I mean, literally,

04:53I would have already announced Chairman Waller. I have no idea. Who is advising the president on

04:59this? By the way, Scott Besant didn't take the job. Good for him. Probably doesn't want that drama,

05:04but Waller, Neil Dutta, you got you. I mean, those are two things that the markets will love too,

05:12right? You know, cause they're not going to, you know, you're not, you're Trump isn't getting his

05:163% emergency rate cuts, but no matter what, just on the forward guidance and having coherent people

05:22to talk about it. That isn't a yes, man. The problem is Kevin Warsh and Kevin Hassett are yes,

05:25men. So you already lost credibility with both people right there. But Waller is the easy choice.

05:33Bill Pulte, talk to Donald. That's it. Talk. Everybody get, get Waller on board,

05:39get Neil Dutta. So that's where we're at. But it is, it is fascinating that after what Neil

05:45Kashkari says, you know, the bond market yields went down just a few basis points, but we're starting

05:50to get into another phase. And I always like to remind everyone that, you know, when we talk about

05:55economic cycles, of course, residential construction workers are very key to my work, but we've been

06:01losing manufacturing jobs for some time now. Like I put up a chart of manufacturing employment. It's

06:06been falling for some time. So you never want manufacturing and residential together. But if

06:12you took the last three months on average, I mean, you're probably going to get more revisions anyway.

06:18But if you took that, it's the three lowest months, three month average without having a negative

06:22report. Boy, the timing on Powell for his little snarky Fed press event, you know, and then this

06:32happened. I like your Pirates of the Caribbean inspired theme right now. So we don't need and

06:39your pirate talk. That's, that's great. That's a, that's a new Logan is a chart that he has some

06:44chameleon and we could get into a lot of different spots. Okay. So let's, let's revisit the possibility

06:50of what happened last year when the market got, the bond market got ahead of the Fed rates went down

06:56a little bit. We had purchase applications pick up. We had like a, you know, this, this period of

07:01time, the Fed lowers rates and mortgage rates goes up. Do you think? And it should have, and it 100%

07:07because the, the, the bond market was pricing in a recession, like a full blown recession. You and I

07:12had this discussion last year when the 10 year yield broke the hood door line. I got sick and tired of

07:20people just telling me you don't say it right. When it broke that, unless the economic data gets

07:25worse, you have very little room for yields to go lower, but you have a lot of room to go up the

07:31upside. And what happened is a lot of economic data got better and yields shot up as it should have

07:37because we were way too priced. And again, I, I, I, I would scream this like Hulk smash.

07:43We had a 2% move lower in mortgage rates from 2023 to 20 with no rate cuts people.

07:53Okay. But I want to talk about this year. Is that something that could happen this year? Do you

07:57see that? No, because of the 10 year yield is properly priced right now. Okay. So even if the,

08:05the Fed lowers the Fed funds rate, you think that mortgage rates are not going to go up on that.

08:11Well, if the economic data gets better, yeah. Okay. But do you see the economic data getting

08:16better? I mean, you, you need the economic data to get better, to get yields back up to let's say

08:21450 or 470. Absolutely. The high end, the high end range of the channel this year. So again,

08:28we even made a case for no rate cuts. The economic data has to outperform and the growth rate of

08:34inflation picks up. Now you, another way to look at it is that the inflation data starts to really

08:40get hot back and push yields up, but it's all based on live data. But we now have, we now have

08:47a factual here. The job growth data is noticeably slowing down. And just, you know, a few months ago,

08:53we wrote that article that for the first time, my labor forecast is below estimates where last year

09:00I was under all the time, but the revisions got me to where I thought we should be. So it looked fine

09:06to me, but this is the first year, even before all these revisions happened, we were already

09:10underperforming. And now it's like grossly underperforming, like terribly bad. So, but we're

09:17paper, rock, scissors, labor over inflation. A lot of people are saying, but tariffs are inflationary

09:22here. They come, but it depends on what you want because why 65 to 75% of this whole dance

09:29is Fed policy. So for people that say the Fed does not really, the Fed controls a lot of things,

09:35long and short and, you know, so policy directions, you know, language, but again, it's also nominal

09:42growth and inflation expectations. There's all these different variables that go into this dance.

09:46That's why we created the slow dance, right? The slow dance is this constant relationship between

09:52the 10-year yield and 30-year mortgage rate, and then you use the spreads, but it's Fed policy,

09:57nominal, I mean, wage growth, nominal growth, inflation expectation, all of these things

10:02moving. And then when you look at it, that, like it all makes sense from 1971 all the way to 2025.

10:08There's nothing really abnormal. There's some crazy periods here or there, but if you just think

10:12about that, there it goes. Okay. Let's talk about purchase apps, which we got this morning.

10:17We are recording this. Yeah. Same. I mean, kind of same story. Purchase app, 2% week to week growth.

10:23I mean, the lower rates now, now that we're below 6.64, we could start, you know, looking at it a

10:28little bit differently. So people said, oh, look, we had a week to week. I wouldn't count this week's

10:33data as part of the, but week to week up to 2%, 18% year over year, 27 weeks consecutive year over

10:41year growth, 14 weeks, a double digit year over year growth. We've explained to everybody why the year

10:46over year growth data looks a little bit funky. Again, new listings are up. By the way, new listings data

10:51peaked in May 23rd and it's been literally trending lower ever since. So thankfully crossing fingers,

10:57I got my ADK because it was not budging anything above that. So the few prints I got, I got the call

11:04right, but it wasn't because we were, you know, trending between 80 to a hundred thousand. So I mean,

11:10I barely got the number Wheeler, you know? So in that case, I lucked out and I got the forecast

11:18thing, right? But I did not get the duration that I was looking for. So I'm going to say 50-50 on the

11:25new listings data, but new listings data is growing. You got more sellers are going to be buyers and

11:29majority of those sellers fill out an application. So there's your year over year growth. The week to

11:34week data now, 14 positive weeks, 11 negative weeks, five flat weeks. So we talked about this in

11:42the article that we wrote today, you know, what does it look like when mortgage rates go from 6.64 to

11:48six? And we highlighted that really the weekly data really starts to pick up when that happens.

11:54And that gives us a couple of hundred thousand homes. The craziest data line was late 2022 when

12:02mortgage rates went down to 6%. It gave us 12 straight weeks of like positive data. It all fell into one

12:08report. It was like a freak of nature, like everything closed at one time. And it gave us

12:13almost half a million more home sales on a month to month. But you take COVID out, that is an extremely

12:17abnormal high print, but that's just a function of week to week data being better. Last year, we had

12:23the same thing. Last year, we had mortgage rates head towards six out of an 18 week period, 12 positive,

12:29five negatives, one flat, no year over year growth, a couple of hundred thousand home sales,

12:34right? So you get towards six, you get something going. It's the duration. Oh, if this could go

12:42from 5.75 to six and a quarter for 12 months, which is highly abnormal, but if it did, you get to see

12:48why the builders are at 2019 sale levels. Like I tell people that if we did a one-to-one with new

12:54home sales and existing home sales, existing home sales would be at 5 million. It's a million more

12:59home sales. We're missing, we're roughly missing a million mortgage buyers because I always look at it as

13:04total home sales. The peak, the peak in the last decade was near 6 million. We're near 5 million

13:12now. So we're missing a million mortgage buyers to where I think a trend sale base would be. But

13:17the builders are already there, but they're sub 6% when they need to be. And that's how it works for

13:24them. They're vastly outperforming. But now it just, it gets a little bit more interesting on the housing

13:30side because we're there. So week one, there it is. And we'll see where it goes. A little bit more

13:36slow moving lower. And the spreads are, oh, the spreads. Arrgh! We don't know how much I love the

13:44spreads. What have I done? We've unleashed a pirate Logan. This is- Yes, a pirate. Oh, a pirate Logan.

13:50Hmm. Ooh, AI ideas. Okay. In any case, yeah. So better spreads, everything. And it's more controlled

14:00and calm, right? Remember Godzilla tariffs, the 10-year yield went below 4%. I was like,

14:05we don't really belong here. We don't really belong here. And then the spreads got wild. We

14:11lost the good spreads for a little bit. And that's a little bit too volatile. It going slowly lower,

14:17lower is much beneficial like it was last year. And people have time and duration. And that's the

14:24thing. We always get these, we get to 6% and things get better. And then all of a sudden we shoot back

14:29up higher. And then it's like, so yeah, the mutiny. Arrgh! Mutiny! End! Rates below 6.64.

14:39It's, considering everything that's happened this year, that's as good as you could hope for with

14:45Godzilla tariffs and everything and, and all the headline drama. And we'll see. It gets,

14:51it gets, I think it's, I think it's a, it's, it's a tough spot for Powell. The timing was really bad

14:56for him to be that snarky in that Fed presser. And they just get absolutely bombarded, just destroyed

15:06by having three month average at 35K. So we'll see. I mean, again, you're going to see a lot more

15:12revisions on the labor data. I mean, they could even revise them up a little bit, you know, but

15:17I, I, to me, it's just like, we have economic cycle models. We follow them for a reason and

15:24it's never a good thing. This is the, I mean, this is like the first time since like 2010, I could say

15:29this. You authentically have manufacturing jobs declining and you have residential jobs declining

15:36together. That is not good. That's why I'm like shocked. I'm appalled. I'm absolutely appalled

15:43that the Fed staffers, we have all this money, all these beautiful buildings and all these people

15:49at the Federal Reserve. And y'all like saying, uh, now, now it's like, hmm, something's wrong. It's been

15:55here for some time. So it is what it is where we are here. So the question is, can rates get low enough

16:01to help the builders out? Cause it did that in 2023 when we had four months of decline in

16:06residential employment and rates went lower permits. So that boosted this four months.

16:10Decline is very mild in that the, can the specialty, uh, labor is already falling a little bit more

16:17though. So the mute is a good time for Powell to have a mutiny. I mean, it's, it's the best time

16:22possible. So there we go. Team pirates, team pirates. Okay. So you, you mentioned that new listings

16:30hit its peak in May, which would be normal, right? Is that a more normal?

16:34Not, maybe not, not may. I mean, you could say June, June up there, but it just, it just

16:39peak. We barely got above over 80 K. So I mean, that was my target, but it's just, we got no

16:46traction over that. And again, why do we, why do we care about new listings as majority of

16:52all sellers or buyers? If you, the new listings data in 2023 and 2024 were the lowest new listings

16:59data ever recorded history. So you don't have a rush of sell. You're not even back to normal.

17:04Like we're like in 2013 or 2019, like the traditional normal curve is between 80 to a

17:10hundred thousand every year, you know, and there's been some times where we even got up to 110,000.

17:15That's why I add that 110,000 here where it's just like the peak was 91,000 in 2022. And I believe,

17:23we had some eye buyer velocity into that new listings data, especially with Zillow trying

17:29to get out of the whole thing. By the way, Zillow lost, what is it? $800 million in the hottest price

17:37growth in recent history. I'm just, just saying, man. In any case, so I'm encouraged that at least

17:49we got to 80,000, but we're still just not back to normal. What it isn't showing is the stress,

17:55right? We had foreclosure data come out again. And guess what? Foreclosure data fell

18:00quarter to quarter. And I always love these charts because it literally took like four years to build

18:08up to the 2008 recession. Like it took four years to get to that level. And we are literally pre COVID

18:13and we have foreclosure crisis worse than 2008. See, it's one thing to be a crazy guy and say housing

18:202008. It's really bad, you know, to say it's worse than 2008 with the LTV data. So it's just,

18:26it's mind boggling that, I mean, I could, I could get kindergarten kids in any school in America and

18:32they will know more than adult men on X and YouTube and Instagram. Cause some of the stuff I've seen

18:37lately, like the worst of 2008 cried. I cannot argue with you on that. I cannot. I see it all

18:44the time. I'm like, homie drugs. You need help. You know, go to rehab, intervention, family. That's

18:52what they need. They need family intervention. My God, if they had family intervention, some of them

18:57are too old though. What's the line? Okay. So we'll say men will make up 2008 housing crashes instead of

19:05going to therapy. Yes. Yes. I've said, I've said that before. Yeah. But I mean, I, it's not,

19:11man, these guys won't even go to therapy, man. They're, they need intervention, but I just think

19:14some of them are like, it's too old, man. Like I said, when guys get old, it's tough, you know,

19:21there's no, there's, they're not Dorian Gray, you know, they're not the chart daddy. It gets harder

19:27for guys when they get older and they get frustrated, right? Things just don't work. And then you just

19:32wake up every day and you know, people are having sex or getting married. The economy still expand,

19:38whatever it is, it's just the pain of living after 1913. Can't escape it. Yeah. I have our

19:45podcast producer, Alyssa Branch in, in the actual office with me today. And she and I are laughing

19:50about some of these things they're saying and also shaking our heads. So if that means it's a good

19:55episode, but we're going to end it there and we will talk to you again soon. Logan, thank you so much

20:00for being on. Pleasure as always. Till I see you later, let's see.

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