Why inventory fell last week, plus a preview of inflation week

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about some unusual housing inventory numbers and he gives a preview of inflation week.   Related to this episode:   ⁠Did lower mortgage rates already lower housing inventory? | HousingWire⁠  https://www.housingwire.com/articles/did-lower-mortgage-rates-already-lower-housing-inventory/   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 Modashami to talk about some unusual housing

00:12inventory numbers and to give a preview of Inflation Week. Before we dive in, I want to

00:17thank our sponsor, Optimal Blue, for making this episode possible. Logan, welcome back to the

00:22podcast. Wonderful to be here, Sarah. It was another fun-filled weekend, of course. We had

00:28another Trump IPO post about the New York Stock Exchange. It finally happened where a lot of men

00:40finally threw in the towel on their Redfin, the biggest seller buyer gap in history. A lot of

00:48people just went with that as Redfin's medium price data is going to really start to tank big. I was

00:53like, that's not what they're kind of saying, but they went with it. Well, now it's mid-August,

00:58and that's been out for a few months. And the pricing for Redfin, you know, it started to decline

01:06noticeably in June of 2022. So we have a little bit of duration time. Not only does it not look

01:12anything like 2022 data, which their, you know, seller buyer chart doesn't even show anything,

01:21the Redfin's median price data is firming up that it's creating a bigger gap between 2024 data so

01:29people threw in the towel because we wrote in this weekend's tracker that inventory fell.

01:36New listings data is negative year over year. The price cut percentage is stable. What's going on

01:43here? So I had to do a little helpful presentation on X just to give people an idea, like you shouldn't

01:49do 2022 modeling out here, but we'll talk about that today. It'll be a fun topic.

01:55Okay. So let's dig into inventory because this is a really interesting story. It was the focus of

02:02your tracker this weekend. So tell us from your perspective, what the data, why this data is

02:07different right now than normal. Okay. So we believe in economic models. We believe that

02:12every American man that people listen to should show their forecast in their models, which none of

02:17them do for a very long time now. But what we have seen in our data since 2022, that when mortgage

02:24rates head down towards 6%, the supply and demand equilibrium changes, right? We had that at the end of

02:302022, which was the craziest time ever in US housing economic history. So it was tested by a very high

02:36velocity event passed. Last year in 2024, when mortgage rates went from seven and a half to 6%,

02:43the supply and demand equilibrium changed so much that my forecast was going to be wrong. Like I was

02:47like, oh, I'm going to be wrong. I'm going to be too low. Now let's go back to the end of June.

02:55What do we say in June? It just looks like it's stabilizing. We're not near 6%. It just looks

02:59like it's stabilizing. Okay. Here comes July the fourth weekend. These two weeks are going to just

03:04really mess up everything, but let's just hold after the July and see what happens. So what's

03:09occurred is that the inventory growth this year was the best story. It was like 33% really at the

03:16highest year-over-year growth print. That's now down to 24%. What's occurred is that the data is

03:24stabilizing, but it got to the point to where inventory fell on a week-to-week basis. That does

03:30not happen in August in recent history, maybe in the past. So we're now have to keep an eye on

03:38is if rates keep on going lower, are we going to have maybe a little bit early? And we brought this

03:44up a few weeks ago. Are we going to have a little bit early of a seasonal demand curve lower?

03:48Because new listings data has not been doing well recently. And it had a negative year-over-year

03:57print. I can explain why, but it had a negative year-over-year print. The comps for 2020, 2024

04:01was the second lowest new listings print ever in history. So now you have tangible variables all

04:07working in together. And these poor men on social media were putting all their eggs into the price

04:15basket of 2022 for Redfin. And Redfin's data is firming on them. So you can understand there's

04:21just, there was just like this white flag over the weekend that was finally risen because Redfin

04:25provided their data last week too. And then it was just, it wasn't heartbreaking. It was, it was,

04:31it was good to see that people are like, I want to learn. Right. And we always say in educated society,

04:36people that don't burn books, but read them or usually do better. Well, it's in life. So

04:41it was a fun teaching experience on X. I showed everyone what happened. We did this podcast,

04:47whatever, like in 2023. So very positive in sense, but it makes the data a little bit more

04:52interesting, especially if mortgage rates fall towards 6%. We wrote a lot of articles about

04:58mortgage rates last week. So I encourage everyone to read them all, keep an eye on the tracker out

05:03there. We have the housing wire tracker. Now you can link it up on housing wire to get to it right away

05:08and just follow the data. And remember we're well ahead of everyone else. By the time you hear it

05:14in traditional media outlets, it's just going to be too late. Be ahead of the curve. Don't be behind.

05:20So just more information, housing wire.com slash tracker. That's all you have to put in

05:26and you will get to the housing market tracker. And you can see all of the ones that Logan has done.

05:30You can see all the charts that Logan breaks out in that. You can click onto them. We've made it

05:36really easy. I'm super excited about that page because we get so many questions about where can

05:40I find the tracker? So we have made it easier. Housingwire.com slash tracker. Okay. So let's talk

05:46about that inventory piece because I think it's still surprising to people the correlation between

05:53mortgage rates and inventory, right? Most people think that lower rates means more inventory. Tell me

05:59why that's not true. Sarah, are you in one of those groups?

06:02I have been in one of those groups. I am now thinking, I've now seen the data for several

06:07years. So I'm less in that group. Okay. So the funny part is yesterday's podcast,

06:11because we talked about on Friday, I said, now that we're below 6.64 and the reason why we go

06:166.64 to 6%, we're not throwing up numbers. We don't believe in that. We believe in modeling out

06:21and what we've seen since 2022, that's 6.64 down towards six changes the supply and demand equilibrium.

06:28It changed it so much in 2023 that it took like till April to find the seasonal bottom,

06:35you know, and mortgage rates went up to 8% toward the end of 2023. So inventory is able to grow all

06:41the way out to November. Like we didn't have the peak of inventory until November of 2023, but here

06:46we're not at 8%. We're not at 7.5%. We're not even at 7%. So did lower rates create inventory to decline?

06:58Which would follow how, you know, Mike Simonson and myself have the same answer. We just come at it at

07:04different ways. But we're going to have to wait to see the rest of this month in August. Because,

07:12you know, when you start getting in September, you can really start making a case that, okay,

07:16where we're kind of like, like the past few years, October, November was the peak of inventory.

07:20So August would be very, very, you know, so, so we'll keep an eye on it, but we're not near 6%.

07:27That's not happening. So that, that was one thing about the, the, the new listings data going negative

07:34year over year, noticeably negative year over year. That caught everybody by surprise, but I do have an

07:39answer for this. I remember because last year I was hoping I'd get 80,000 in my new listings during the

07:44seasonal peak months. Didn't happen. So last year at this time, we had a spike, a one week spike that

07:51I was like, oh my God, if I get one more spike like this, I'll get my ADK. And it just, it just fell

07:56back. So it was an abnormal spike in the data last year. So it was an abnormal year over year print.

08:04So I wouldn't put too much weight on it. If it was that I'd be like, okay, this is something I really

08:10need to focus on, but I would tell everyone the new listings data in 2025, if I compare it to 2022

08:17since May 23rd, when it peaked around 83,000 is actually below 2022 levels, the majority of the

08:26time right now. So reason we say that is that when new listings data declined in 2022, it spawned 2023

08:34to have the lowest new listings ever recorded in history, right? Remember all these people,

08:38everybody's going to rush to sell their homes and get out of, you know, now. So we don't,

08:43we do not want that to happen again, right? So if this didn't have a one week explanation,

08:49I would be concerned, but I think we just go back to the normal trends because the best story,

08:55the growth rate of inventory, inventory picking up, we got to the bottom part of 2019, but it does look

09:00like the recent peak, unless rates got, if the 10 year yield goes up and rates rise, this variable

09:06changes. Like we've always talked about higher rates, higher inventory takes days, but you've

09:10got a functionality of new listings, data declining, lower, lower mortgage rates. Sellers are calling it

09:17quits and just say, okay, I'll just, you know, go, go at it another time, put them all together.

09:22It can maybe explain inventory falling in August in the first time since many, many years, we haven't

09:26seen that, but it just makes a tracker much more fascinating going out for the rest of the year,

09:31especially if rates do get toward that 6% and that 6% has duration. Unlike before.

09:39I appreciate this context because if you don't know, if you didn't know, Hey, this is why this

09:45one week looks different. Imagine the headlines that could be spawned just from that.

09:50Oh yeah. I mean, that was just like, I, I, I teased that out on X and everyone's like, Whoa,

09:54wait a second. What do you mean negative? It doesn't it? Yeah. There's a seasonal decline

09:58that happens every single year. Seasonal increases, but we haven't had a negative print. There's no

10:03holiday here. Right. Well, I mean, it was a noticeable print, like just by itself. You wouldn't

10:09be like, Whoa, that's something big. That would actually be a material thing. But for this week,

10:15this last week, I could explain it because last, last year I remember it. Well, I'm like, Oh,

10:19you're listening spike. I just need one more week. I could get 80 K. I get it. It just got

10:23completely. That was it. Next week it went down again. So again, another reason for people to

10:29follow the tracker. So they know these things and like this next week, does it fall again? Or,

10:34and then you have to really look at why or, or sure enough, was it just a fluke?

10:37I'm, I'm hoping that we haven't seen the seasonal peak, but again, this all started the last two weeks

10:44of June, which the irony was like the last two weeks of June was supposed to be the big decline in

10:49prices because Redfin had the greatest seller buyer gaps in history. So I, I totally get it.

10:54If guys, you got led, you got led by something that was never telling you that. So now that we're

11:00in August, right. You know, the seasonality of housing starts to kick in. So you, you know,

11:04in a few months, you've got to start prepping for 2026, but man, just, just so many people were bummed,

11:11you know, and it's just like that gap between 2024 pricing now on Redfin's data is just,

11:16you can't ignore that. So tracker is here, multiple variable sets. We don't just do inventory. We do

11:22the economics. I'm an economics guy. So the 10 year old mortgage rates, everything. And then why is it

11:26important now? Cause it's inflation week. Yes. Yes. So that's my next question. Let's talk about

11:32those economic factors. What are we, what are you expecting and how could it affect mortgage rates?

11:39So naturally this is going to be the first test, uh, after that jobs report, if we have a hotter

11:46CPI and PPI inflation, what does the bond market do? Now, normally the bond market would go up,

11:51uh, uh, but now it going up with a 10 year yield with spreads being good is a little bit less

11:58impactful, but you know, you, now you get into this battle between, because the fed is not near

12:04neutral policy. Uh, it puts them in a bind because as Jerome Powell says, the labor market is strong.

12:11If you're looking for work tough, but still the labor market is strong, they could, you know,

12:17so it's, it's, it's, it's a, it's a tough spot between now until September. And we have one more

12:22jobs report, you know, and usually you don't have like back to back real negative jobs report,

12:29like something like that. But, um, uh, to me, it, this'll be the good test case because right now

12:35so much of the forward looking pricing is already in, you know, uh, uh, of the rate, if I, if I,

12:40if I knew the rate cut was happening, where the 10 year yield of mortgages right now, it looks

12:43perfectly normal. Um, and, uh, again, we've had all the big moves in mortgage rates heading lower,

12:50all kind of happened before any rate cuts. So that's not, people shouldn't go, well, let's wait

12:56until September. That's not how it works. So I I'm waiting to see how the bond market reacts.

13:00If it's a strong report, if it's a softer report, do yields finally break under that 418 level? We've

13:07only been able to break that really with Godzilla tariffs. And that was, you know, that was a market

13:12anomaly. So, uh, very interesting week by the time anyone listens to this podcast, the report's already

13:17out. So we'll, we'll, we'll take a closer, but it becomes a really good fight now between labor and

13:23inflation and the fed and Jerome Powell and, you know, the mutiny that's happening at the federal

13:28reserve against them. Well, there is a lot going on over there. Let's just say that there,

13:34uh, there's just numerous stories. We have to decide every day in the newsroom or, or you and

13:39I, like, what are we going to cover? Because multiple things happening. It's like, we always

13:43try to stay really tightly focused on how does this impact, you know, housing mortgage market,

13:49real estate agents, title appraisal home building. I mean, that's what we're trying to focus on.

13:54And, um, there's just a lot that we could, we could talk about and that we do talk about.

13:58We report on a lot of it. Economic cycles are very beautiful. There are waves and dances

14:05between data lines, but everything revolves around the 10 year yield. So that's just my thing,

14:12right? The bond market rose all. So, um, and just remember 65 to 75% of where the 10 year yield

14:20and 38 mortgage rates can range in within a cycle of still fed policy, nominal growth,

14:25inflation expectations, labor day. Those are the things that can drive that within a cycle,

14:29but we're in a, like a little precarious position here because I think the fed wanted more time

14:35to wait on tariffs. And that labor report was just what, I mean, what, I mean, Powell just like,

14:43if he just had a few more days, you know, things would have changed, but that's, that's,

14:47I mean, that's the exciting part. And we said this July, July 1st, man, the second half of 2025 is

14:53going to be lit. There's going to be a lot of different variables, you know, at Halloween's

14:58way we are. So they're selling Halloween candy already. By the way, did you see, do you see my AI?

15:04Oh yes. Yes. Where I'm having coffee in New York and all of a sudden a demon vampire creature is

15:13right behind me about to say, is everyone ready for inflation week? You know, so.

15:19Okay. So, uh, quickly before we go, we're trying to keep this a little bit short today,

15:23because we have all sorts of things going on. Um, I did want to revisit the story that we wrote over

15:29the, um, that you talked about the top of this, which was that Trump seemed to indicate that like,

15:35Hey, you know, we could even have that to, to support the story that came out on Friday that yes,

15:40he wants to, uh, do an IPO of Fannie and Freddie before the year is out. So he, he then put on

15:46truth social, a picture of him at the New York stock exchange, obviously some sort of AI picture.

15:52And it had like a new great American mortgage corporation, something like that seemed to do

15:57that. But tell me your take on that. Cause I thought it was really interesting.

15:59Well, like we said, tests, you know, test balloons to kind of see what it happens. I'm just assuming

16:07that that sent and the people in the white house that are working on this went to banks

16:13and had a discussion and went to traders, right? Because if you're, if you're doing this now,

16:19you've probably, I'm assuming they've talked to banks and traders on what's going to happen.

16:24What, what do they need to say? And they move it forward just for everybody to like,

16:27people were asking me this. I do not own Freddie or Fannie shares. I do not plan to invest at all

16:34into this. My job is the economics of this. I don't care about the investment side. I've given

16:40presentations to wall street, people who managed two to $3 trillion on builder stocks, but I talk

16:45about the economics of it. I don't own anything or anything like that. This, this whole thing,

16:50I think the timing was crazy because we talked about it on Friday and then the next day this happened.

16:54So I have no privy or no information about any of this, but going down in the future, I think

17:01we should get a little bit more clarity on how much they're going to share a sell. You know,

17:08what are the terms, what's the guarantee that the government's going to do, but I'm just assuming

17:13they went to traders and bank bankers to see what can they do and make sure that pricing doesn't get

17:20impacted anything. Especially now that mortgage rates have come down a little bit and spreads are

17:27a little bit. I think the, that that's, I mean, the set set himself, not that long ago, we're not

17:33going to do this if mortgage rates rise and we're going to make sure that the spreads get better. So

17:37again, there's a lot of things going on. That was just, you know, what happened over the weekend.

17:42And we just, like we said, the second half is going to be lit and it's only August. So get ready for some

17:48fun. That, that image that he shared had November, 2025 on it. Right. As he was doing that. But you

17:56know, everyone we've talked to is like, there's no way to get that timing. Like it's just, it's hard

18:01to see a path toward timing by the end of this year. You know, they're just going to have to wait

18:07to see details. But I mean, again, the test balloons are out there. Obviously there's, there's not new

18:13information in terms of details as of Monday, but, um, over time things should be like that,

18:20but it's, this is not abnormal to just throw something out there now to kind of get the

18:25market response. And, uh, we'll, we'll, we'll take it one day at a time. Of course, the last podcast

18:30was my take on it. You know, Freddie and Fannie just, they function very well. This, whatever you're

18:36doing now better be on par or better than before. It can't be worse because it just, you know, but,

18:42uh, these are two humongous giants that are just gems of the United States of America that the envy

18:48of the world, right. Uh, uh, they hate us for many reasons. And this is one of them. They know,

18:53no other country has the plumbing system as, as we do. Uh, and I've known people that have traveled

19:00in other countries and talk to other governments to try to like replicate this. And they just don't have,

19:05they just don't have it in, in, in their economic system to even do something like Freddie or Fannie or

19:10FHA or VA or anything like this. Okay. Well, Logan, thank you so much for weighing in on these

19:16important topics. We will talk to you again soon. Appreciate you. Pleasure, Whaler. The week's early

19:20and get ready for some fun and inflation week.

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