Trump pivots to shadow boxing the Fed Chair

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the lowest mortgage rates of the year and Trump’s new tactic to undermine Fed Chair Jerome Powell.    Related to this episode:   ⁠Mortgage rates drop to another new low for 2025 | HousingWire⁠  https://www.housingwire.com/articles/mortgage-rates-drop-to-another-new-low-for-2025/  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠   Enjoy the episode!  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 the lowest mortgage

00:11rates of the year and Trump's new tactic to undermine Fed Chair Jerome Powell. First,

00:17I want to thank our sponsor, Optimal Blue, for making this episode possible. Logan,

00:21welcome back to the podcast. It is wonderful to be here. Today is going to be a shadow Fed

00:27Boxing Technique Day. It is. But first, let's talk about the good news. We are recording this on

00:34Wednesday, and we have had mortgage rates drop to the lowest of the year. Where are we at right now?

00:39Yeah, 6.53%, but taking mortgage daily news and coming off of that CPI inflation print,

00:49some people didn't like it, some people did like it. We had a whole bit of news with

00:56Besant and Trump and Powell. And it's a very interesting week. It's been a very interesting

01:01week with our tracker since mid-June. So it gets a little bit more exciting for, like we've always

01:08said, the second half of 2025 is going to be lit. And it's been a fun week so far regarding all the

01:16things that matter to housing. Listen, anything going lower, that's significant. That's not just

01:24one basis point, right? No, no. I mean, it's, to me, we are now having a trend with mortgage rates

01:33that is a little bit different than the last few years. And that's the constant variable that I try

01:39to teach with. If mortgage spreads do what they need to do, then it becomes an easier time to get

01:48towards 6%. And that's our thing. We've talked about this for a few years. Housing data gets better when

01:54it gets closer to 6%. However, we've had inflation week. We've had a lot of people that say rates have

02:01to go up higher because of inflation. They typically empty central bank people. But in any case,

02:06to have this kind of positive move now, right, really kind of shows the labor over inflation

02:14debate. But if bond yields go up again, the damage is much limited now. And last week was a really great

02:23example. Last week, the 10-year yield got all the way down to 418, that key level we've talked about

02:30for those that follow us on Instagram stories. But here, you know, bond yields went up and didn't see much

02:37of a negative move. But now, bond yields just go down to 423, 424, fresh new lows in mortgage rates. The spreads

02:46are working. It goes back to that. Eventually, there's going to be a time where we have the double

02:51whammy effect, where you get lower yields and good spreads working together and trying to get to

02:59someone back to normal. Because again, if we're back to normal, we're sub 6% mortgage rates.

03:04Okay. So we're at a level to where it's acceptable enough to get some growth in home sales and get some

03:11things moving. And that's how I've always tried to frame it since the end of 2022. And this is why

03:16I always say it's very essential to track models and what happens with housing, with what rate and

03:22what level of inventory and all these things. And I just don't think there's a lot of males in America

03:27who are trained or versed in tracking housing data weekly, fresh. But they do do really good

03:33doom porn, given that they do doom porn exceptionally well. Were you surprised given the inflation numbers

03:39that we are where we are with mortgage rates? If I'm a labor over inflation guy, no. If I'm not a

03:46labor over inflation guy, then you could look at the CPI report in many ways. There are so many

03:53different takes on that. Some people said, oh, look, there's nothing happening on with tariffs.

03:57Some people go, wait a second, we just had a core CPI inflation print above 3%. What?

04:03What? You know, Sarah, I mean, I could talk for like five hours on this topic, because if you look

04:10back to 1910, the baseline average of CPI inflation is like 3.2, 3.4% around there, around that level.

04:19So the question is, do you stay restrictive? If the labor market is breaking, that's on your onus,

04:26that's your dual mandate. There's all these different variables are here. So I understand a lot

04:30of people's stakes. So people can make a really great case that if the jobs report was fine,

04:35there's no rate cuts this year, because inflation on the core side is picking up. But

04:40the fact that we're here today, because you remember, there was a lot of people that said,

04:46well, because of the tax cuts, because of tariffs, mortgage rates are going back to seven and a half,

04:53eight percents. Inflation is going to go rampant. And, you know, all, and kind of none of that has

04:58happened. But I would say it comes from people that I would say are not versed with economic cycles.

05:03So you should take those people with a little bit of grain of salt. But in this case, if the labor

05:08data didn't get weaker, then yeah, we're we're still in that 435, 470 10 year yield range rates

05:15would be higher. But the fact that the spreads are doing what you know, they should do. And to see it

05:22to see to watch people actually kind of visually get to see, wow, yeah, the 10 year yield was like,

05:28much lower and rates, you know, so it's a positive that this is happening this week. Again,

05:33by the time this report comes out, the PPI inflation will come out and we'll see how the how the data

05:38works on that front.

05:40Yeah, the spreads are the heroes, along with new listings, which were up this year, the spread

05:46spreads getting better are the heroes.

05:48Well, the new listings was a positive active inventory was a positive, but both things

05:53are slowing down. New listings data has really slowed down since May 23. Again, most sellers

06:01are homebuyers, I did not want to see that. And we've talked about this always, I said, I never

06:05got what I really wanted is to have a few weeks between 80 to 100,000. But the spreads are a positive

06:13that it's going lower active inventory, the growth rate, I love the story, especially when it was over

06:1830%. But that is also slowing down after that negative week we had, where growth rate is now

06:25down to 24%. I'll take whatever victories I can with the inventory data, because now I'm not so

06:30worried about mortgage rates getting down to 6% about, you know, anything bad happening with prices

06:38in any meaningful way. Now that inventory is back to the near 2019 levels.

06:43Okay, so let's get into the drama at the Fed, the shadow, the shadow box.

06:49Shadow Fed boxing, a little homage to Method Man out there. You know, it's interesting, Trump has kind

06:59of somewhat changed the tactic a little bit. And Bessette came out this morning and said,

07:03you know, I don't really want to do the shadow Fed president anymore. You know, and it was like,

07:10we're going to have 10 to 11 people basically go out there and maybe be the Fed chairman. So this

07:16tactic is like, I understand what Trump and Bessette is doing. They saw a bunch of Fed presidents say,

07:25we need to do aggressive rate cuts, or we need to do more and all that stuff. And all of a sudden,

07:29they got, oh, look at all these talking points now. Right? You know, so if you think all these people

07:35are going to talk good about rate cuts, because they want the Fed chairman job, put a whole bunch

07:40of them in there. And so interesting. Yeah. So see what they want, because you could use that

07:45technique. See, if you really wanted to go after Powell, what we did is we talked about the civil

07:51war with the Federal Reserve a few months ago, you have to go after Powell with his own people,

07:57right? In that context, you can't really go after Powell in the sense about trying to fire him or,

08:04or, you know, sue him for what, you know, all this stuff, but you can systematically go after him

08:11if his own people are not agreeing with them. Right? Because while you have this time before the next

08:19Fed meeting, if you have more Fed officials saying, oh man, listen, the labor market isn't looking,

08:25and that's, that's the thing, you know, that's what came out today and said, well, the federal,

08:29the, the Fed should cut about 1.1, one and a half percent to 1.75 percent because, uh, the labor data

08:37is getting weaker. Well, that's what we wrote back in June that Trump should forget this deficit and

08:44emergency rate cuts. There's all this crazy stuff that he's saying out there. Forget about that.

08:49Keep it very constant. Go after the Fed with a knife that could cut him. Right?

08:55Dual mandate. You, the, the Congress has only told them for inflation, price stability,

09:01and the labor market. The, the interest expenses are not anything they control or do or look at

09:07at all. They never do, but you can go after him. Well, you kept on talking about this labor market

09:14being, you know, here it is. You're wrong. So the change of tactics is clever. Get all these people

09:21out there. Say, Hey, you guys all want to be fed chairman. Okay, go ahead. Talk. So today, a few of

09:28the Fed presidents, schools being boss, they're like, Hey, we, I don't know. I want to leave rates

09:32where they are. You're done. You're not, you're no longer, you're, you're not in this group. Oh,

09:37you're not in this group. You're not running. Uh, the Kansas city fed, you know, I don't want to cut

09:41rates at all. Okay. Gone. But the Fed officials that are in the group that might get the job, if they

09:47keep on saying that, use them against Powell, get the American public and fed officials. There's the

09:54way to go after him before the Jackson hole meeting. And then the fed, uh, fed meeting in

10:00September, that's a more coherent tactic out there than saying, you know, Trump, I want, I want the

10:07fed funds right at 1%. You know, these are emergency rate cuts. These are, these are things that happen

10:12in a recession. Okay. These are things that, that don't happen in the greatest economy ever or the

10:17wealthy, whatever it is. He's saying that now, but this tactic is more core. And again, best that

10:23lives in the real world. And he's just kind of wants one and a half to 1.75. Why does he say that?

10:29It's what we've talked about since the end of 2022. If the federal reserve went back to the old

10:34pre-fed model, that's where the fed funds rate would be. If you use three, six, 12 month PC inflation,

10:41right? That that's, that's where it'd be. So best in acknowledging that the labor data is not hot,

10:48you know, getting the fed funds, all that is a more coherent attack, you know, and now you have

10:53other fed officials coming in. They've got him cornered, right? So when you get someone cornered,

11:00you get the job done, right? Make it a joint attack. And, uh, that's at least that was my impersonal,

11:06like that. That's the first thing that came to my mind that expanding the reach is like,

11:11why are all these people going to be fed chairman? Why haven't they called Waller yet? He wants to

11:16use them against the fed publicly, right? Because now it's like, Hey Powell, your own crew is telling

11:22me you're wrong, right? Who else do you have left now? Who else, who else is on your side? You know?

11:28So it's one of these things that we haven't had to deal with a fed situation like this in a while,

11:34but, uh, for, for Besson to say, I don't want the shadow fed president anymore. I was like, Oh,

11:40they just want people to just do it publicly for him. And in a sense, shadow fed boxing, right? Just

11:47like a method man would like it, right? Do that. And then all of a sudden you're putting punching blows

11:52in Powell's, you know, uh, ribs out there from his own people, you know, being punched in the ribs by

11:57your own people. It doesn't, it doesn't feel good for Powell. He's 72, right? So here we are getting

12:03closer to September and, uh, we have a few more big economic reports. We have a few more inflation

12:08reports and jobs reports, but it just makes, it makes it, uh, it makes it harder for Powell. If his

12:14own crew is going against them. It's significant that as you said, uh, Besson said, Hey, I, you know,

12:20no more shadow fed president. Cause he's the one that came up, you know, that, that floated that

12:24idea back. Um, I think even before the election, that was October before Trump won, they had this

12:31whole game plan, which means they knew what was going to happen. Right. It wasn't going to be,

12:36it wasn't going to be easy to get, to get rates down unless the labor market was, uh, uh, breaking

12:41because, you know, they were so far from their 2% target. Well, I mean, they weren't really that far

12:46away, but you know, what Trump wanted to do can be, you know, a little bit more drag. And if you

12:51look at that inflation reports, you could see, again, some good stuffs are kicking in. So it's

12:56one of these things where this was a, this was a thought out plan. The execution is very difficult.

13:02So they changed it up. Uh, uh, the fact that fed presidents last week went after, went after

13:09Powell's kind of mindset that we might need two rate cuts. We might need more. We've got to be humble.

13:14The jobs data, you know, it's, it's the, it's the only thing you could do in this situation

13:19because you can't fire him. And even if you did fire him, you know, you, you still have regional

13:23fed presidents that you have to deal with. So it's a whole process. Okay. One more topic before we,

13:29before we go today and that's purchase apps. Let's talk about purchase apps, purchase application data.

13:35Now, now that we are officially kind of under 6.64 and you know, when we go from 6.64 down

13:43towards 6%, we're not quite, you know, in that downward trajection yet, they've typically

13:50done better on the week to week. So the last two weeks have been positive, nothing big, 2%,

13:55uh, week to week, two weeks ago, 1%, uh, uh, week to week. So in, in this context, we've had double

14:02digit, 18% year over year growth, 17. But if the weekly data stay positive with the year over

14:09year growth data, staying positive, that's what you want to see. What we were lacking is that we

14:15would get a few positive weeks, few negative weeks, flat weeks. We weren't getting any clear

14:19direction. It wasn't anything negative, but wasn't anything positive. But the year over year data was

14:25positive. The new listings data, uh, was picking up on a year over year basis. But, um, uh, in this

14:32context, I think it's, it's, it'll be good to see what purchase application data, if rates go down

14:37towards six and stay there because the last two times this has happened before looking data, both

14:43has gotten better for the, uh, existing home sales market, but it's only done that really from 6.64

14:49down to six. It's so fascinating. You know, um, obviously the, the refi share, uh, grew in this

14:55purchase application index, but I mean, how, you know, I mean, it's not like we've dropped so much.

15:01You're like those poor people, if they're refying into this, into this environment, that doesn't sound

15:05good. Well, I mean, you can have some rate and term people already, you know, you can have people

15:11that were 7.375 and then they could get a, you know, a 6.375 out there. So there, there are,

15:19there are more rate and term refinance, uh, uh, people in the mix. Whenever rates go down 25 to 50

15:25basis points, it really depends on when they purchase their house, uh, uh, out there. So, uh, I mean,

15:32it's, it's the first, first time this year where we have a, a, a very positive trend on purchase

15:38application. But, you know, I really want to see what, what it looks like when we head down towards

15:42six, because the last two times, uh, it's been positive, but it's been positive in a way that I

15:47don't, not a lot of people saw. Like last year was a really good example. Last year, we had 18 weeks

15:52where 12 weeks were positive week to week, five was negative. One was flat. That is a very positive

15:59curve. We showed no year over year growth at all. So people discounted it. Then all of a sudden,

16:05bam, a couple hundred thousand more home sales came out of nowhere. You know why? Because the

16:10weeklies got better, even though the year over year did it here, it's kind of in the opposite.

16:15The year over year data is looking good. You've got all those people putting their homes on the

16:19market and waiting for something to buy. The weeklies were okay, but we've never really broken

16:23under 6.6. Now we are. So if you get those together, if it follows what we've seen in the

16:29last few years, we would get a better data. Okay. So, um, we're about to end, but I had to say,

16:35so we, I was at the AI summit yesterday. Lots of people asked where you were. Uh, they were like,

16:40where's Logan? I was like, well, I don't know that AI is Logan's thing, right? Like, uh, but,

16:44but they thought they'd see me. Have you seen my AI game out there? Oh, you haven't.

16:48No. AI is definitely my stuff. Are you kidding? 100%. You, you use AI. I don't know that you can

16:55speak to what lenders should be doing with AI. Fair enough. But anyway, I met a lot of people who

17:02were fans of this podcast. They're listening. And one of them said, you know, you guys talk about if

17:07you're watching, she, and, and this person said, I never watch it. And I would, and she said, but I

17:12feel like I'm missing out because I would miss out on some of the things that Logan does. And so right

17:16now, if you're watching, you get to see Logan's cat in the background, one of his cats, you have

17:21what? Three cats, right? That is Romulus. Yes. Romulus is a tuxedo. He's the old man. And he does

17:30not like the new, uh, uh, the strays I took in, but, uh, uh, we're, I'm trying to keep him more and

17:39more into the, the office, but he was a pest today as some of you probably heard.

17:43No, it's great. So that would be another reason to watch, um, you know, people do what they

17:49want, but, uh, the, the cat video is great. So Logan, thanks for being on. Thanks for explaining

17:54things. I'll talk to you again soon. Pleasure.

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