Existing home sales and what to expect from the Jackson Hole summit

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about existing home sales and the pressure on Fed Chair Jerome Powell as he heads to the Jackson Hole Economic Symposium.   Related to this episode:   ⁠Existing home sales surprise with positive growth in July | HousingWire⁠  https://www.housingwire.com/articles/existing-home-sales-surprise-with-positive-growth-in-july/  ⁠⁠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 deep

Transcript

00:00Welcome, everyone. My guest today is lead analyst Logan Bodeshami. Once again, we're going to talk

00:11about existing home sales and give a preview of what to expect from that Jackson Hole Fed meeting.

00:18First, I want to say thank you to our sponsor Optimal Blue for making this episode possible.

00:23Logan, welcome back to the second time we are doing the podcast in person.

00:28Yes, and I recovered from your little martial arts kick that you did. You know, I understand after

00:33losing a lot of debates to me, you're resorted to Bruce Lee tactics, but you know, I'm still here.

00:39This is in the AI generated video that that Logan did. He took the footage from this and made it AI.

00:45So it looks like I'm doing these karate moves. I wish I had those moves in real life. It was great.

00:51Okay, well, let's get to it. Existing home sales. What happened? And were you surprised?

00:54We're not surprised. Sales beat estimates on the month to month and showed slight growth. For those

01:04of you that follow the tracker and have been following the podcast, one of the things we've

01:07been talking about for months now is that, you know, we're going to have such extreme low comps

01:13really up until the month of October. So that report in November would be the last one. So if we see

01:19growth on a year over year basis, just kind of take it in context. And two months ago, it was flat year

01:25over year. This one beat estimates. So our tracker data is designed to be a little bit ahead of the

01:32home sale report. So it wasn't shocking to us. I thought this was a very healthy report. You know,

01:37price growth is cooling down. I need price growth to really cool down for my forecast to be right for

01:432025. But in this regard, inventory still stayed healthy. The NAR's active inventory typically

01:49peaks around June to August. So we pretty much hit the highs of the year. Our weekly fresh inventory

01:56data is now for the month of August is actually declining. Our new listings data is falling. So

02:01NAR kind of will follow backwards with us. But a healthy report considering that mortgage rates are

02:08nowhere near 6%. We had the biggest crash in home sales in 2022. And we've basically been flat

02:16in the articles. You can see, you know, I take existing home sales going out to decades. It's

02:21not kind of abnormal what's happening now. It's just the next leg typically is rates fall and sales move

02:28up higher. And we go all the way back to 1968 to show a lot of economic cycles regarding that.

02:33I love hearing like you think this is a pretty healthy report given our situation, given that

02:39it's August, given that mortgage rates are where they are. I mean, and inventory.

02:43Yeah. I mean, to me, affordability is going to get better by not rates getting down to three or

02:494%, but by wage growth, household formation, price growth had to cool down. For price growth to cool

02:54down, you need inventory up because we had such an extreme seller's market that home prices went

03:02savagely unhealthy. But now, you know, this is as good as you could hope for with rates of where

03:07they are. So it was not a shock to us because we've been talking about, you know, we're going to

03:11probably see some year over year growth, but rates finally got below that 6.64 level. They're not

03:18heading towards six, but much different backdrop in our tracker data that we've seen recently that'll

03:24come into the sales reports. You know, our weekly pending sales, those are contracts that fall into

03:30the sales reports, 30 to 60 days out. So we're looking at kind of October, November and December

03:37timeframe for some of these data lines that we're seeing currently.

03:40Okay. We are, you know, filming this on recording this on Thursday, tomorrow when this comes out,

03:47big, big day on that Jackson Hole meeting. We have been wondering what's going to happen here.

03:53And not because we expect, you know, that this is not a, you know, a federal open market committee

03:58meeting where they're going to raise rates. It's like, what is Powell going to say? The man is under

04:02incredible pressure. Now his Fed governors are under pressure. What do you expect?

04:08You know, knowing Powell in this, he probably stays as neutral as possible. It's not shocking to me what

04:17the 10-year yield is doing. And now that the spreads are better, mortgage rates aren't as big a story in

04:23the sense of, you know, aggressively going higher. It's been hardly moving at all, especially this is

04:28another week to show, you know, the spreads, it's kind of doing the thing. The volatility is just not

04:32there anymore. But it is, it is interesting. Beth Hammock came out today and she said, oh,

04:38everything's good. We don't need to cut rates. You know, we highlighted her probably next on Trump's

04:45list. We've always had this thing, labor over inflation, right? The labor market needs to break for

04:52the Fed to really want to pivot and jobless claims data today, slightly higher, nothing really big,

04:57but the continuing claims just hit another three-year high. And as we talked about, manufacturing

05:02jobs have been lost, nothing spectacular, residential construction jobs, nothing spectacular.

05:06They don't see that as a need to pivot anything more than what they've done because they believe

05:12they're closer to neutral. So again, if we had no tariffs and the labor data was a little bit firm

05:19up, we're having the same conversation. You know, what do we do? You know, if the jobs data was

05:25better, but the inflation data was, was improving, they would always highlight the labor data. And

05:32for them, unless the labor data is breaking, they're just going to hold it as restrictive as possible

05:37until then. And with Beth Hammock, she talked about playing catch up. Well, when the labor data breaks,

05:42we'll play catch up there. So her statement isn't shocking, but I think Powell to me stays kind of as

05:47neutral as possible. I know some people say he's got a green light to sound dovish. It just,

05:54he doesn't come off to me as somebody that wants to be dovish in this meeting at Jackson Hole.

06:02We're in such an unusual time when those Fed governors, what they're saying were like,

06:07they could have, what they say could get them in the crosshairs, right? Because we reported yesterday

06:13how Fed Governor Lisa Cook was, you know, being called on to resign over allegations of mortgage

06:20fraud, which come down to, I think, her having two primary residents listed and in the same year,

06:28which obviously she could only be living in one. So, you know, we're not talking like some

06:32incredible kind of fraud here, but, but, you know, if that's true, that is something,

06:36something to look at. Well, I think that ratcheted up today. Tell it right. The Department of Justice

06:43is basically telling the Federal Reserve, you need to let her go or else, you know, too late.

06:50You know, we're in Dallas right now. And Dak Prexcott is still the quarterback and they can't

06:55get to the playoffs and win a playoff game. So, you know, you know, it's, you know, there are,

07:00there are people out there that have done more egregious things and not be fired, but I'm a 49er fan.

07:06I can't wait. I'm so happy that football season's coming up. In any case, yeah, they're using the

07:11Department of Justice tactics that, hey, hey, you, you guys take a look at this. You let her go.

07:17You should let her go. They want the ball on their court to do it. It'll get kind of sloppy if the

07:24Department of Justice starts going in there. And, and, you know, a lot of people are just looking

07:30this as a very, you know, not politically driven, just, you know, ideologically driven. I need

07:36votes, right? And if Lisa Cook is gone, I can get my person in. I got more votes in Powell and I'm

07:42neutralizing him. So look at it in that light. So the Department of Justice got involved and

07:47this is just how Trump operates. So it's not, we should not be shocked about this. This,

07:53this is a definitely a much more aggressive approach to everything, to tariffs, to negotiation

07:59tactics, to going after Powell, to going after Fed governors out there. I know Bostick talked

08:06today and he was now maybe one rate cut coming in. But I think what, what Trump and Pulte and

08:13everyone saw is that after that jobs report, you saw a lot of Fed presidents come out there

08:19and say, we need to cut rates. And, you know, this isn't good. I think they, they enjoyed that

08:23aspect because it challenges Powell. But we, we have to be a little bit realistic on what's

08:29happening. The growth rate of inflation is picking up. And the Fed had their target at 3%. And if goods

08:37inflation starts to pick up a little bit more toward the end of the year, the Fed is just following

08:43their mandate. You would probably need to see a new Fed chairman to change that direction.

08:48That would be Christopher Waller if you wanted to make a smart choice. But until then what the 10

08:55year yield and mortgage rates are doing is perfectly normal to me considering where inflation expectations

09:01are. What do you think the bond market reaction is going to be tomorrow, right? Because obviously

09:06there's not going to be a Fed funds rate change. What do you think the 10 year yield could do?

09:11I still think the 10 year yield has a very hard time breaking under 418. And the only time we did it

09:17was Godzilla tariffs and that was more market oriented. So I, even, even a very dovish Powell,

09:24I don't see that level of getting broken unless, you know, he comes out and says, Hey, listen,

09:30labor is a concern now. I mean, the, the, the, the backdrop is there for him to say something like

09:36that. I mean, three months average of 35,000 K. That's so bad. I would tell you this, you're starting

09:43to get more Fed presidents talking about, well, population growth is slowing down so much that

09:4750 to 75,000 K is normal. So we're, we talked about this before that the Fed can use that tactic

09:54as, Hey, listen, it's okay. At 50, 50,000, you know, that's fine. They can extend this, but they

10:01can't extend jobless claims. Like they, if that thing breaks the, you know, the bond market goes well

10:08ahead of them. And it looks like every single economic cycle that we've seen post-World War II.

10:12So, uh, claims data rules all continuing claims. Is that a three year high again? Job growth is at

10:19the lowest. I mean, there's so many things that Powell can move. I just don't know if he'll,

10:23he'll do that. Uh, God, they had a picture of him coming in the airport. He looked old and tired and,

10:30and, and, and dragged out. And, uh, um, it'll, it'll be interesting to see how the bond market reacts

10:37to it, but we still have not been able to break under that 418 level outside of Godzilla tariffs.

10:43And of course, I mean, the bond market could do something, get ahead of the Fed. Then by the time

10:46that the Fed actually cuts Fed funds rate, um, you know, like we had last year, then the mortgage

10:52rates actually went up. Yeah. And I just, I, I think a lot of people talk about that, but it's so

10:56funny. Nobody wants to talk about mortgage rates fell 2% first before that. It's like, oh my God,

11:01rates went up. No, they went down aggressively first and they were, oh, the bond market was well

11:07ahead of the Fed policy. So the economic data gets better, you know, manufacturing ISM data was,

11:12was fine today. So the flows of economic data kind of run this, the policy gives you a bandwidth of

11:19where the 10 year yield and 30 year mortgage rate is. Oh, it's going to be October soon. And you

11:24remember that in October, people said, nobody's ever going to buy the 10 year yield at 5% because we're

11:31broke. Y'all are some sorry, crazy people. It's beautiful. I think the reason I keep bringing

11:37up like the Fed funds, they, they lowered, um, the Fed funds rate and the mortgage rates went up

11:41is because consumers, everybody who had to deal with consumers, whether they're mortgage people

11:46or real estate people had to explain to consumers who all they heard was like the Fed lowered rates

11:52and my mortgage rates up. Since we're here, get your hand. What? Hand here. Okay. What is a 10 year

11:57yield? Okay. It is the slow dance, right? The slow dance back and forth, but it could be that

12:06someone goes, no. And that, yes. If the, if the, if the guy did something bad on the date, pushes it

12:12off, right? The spreads of the difference. So whatever drives the 10 year yield will drive mortgage

12:17rates. Fed policy is 65 to 75% of that. But economic data, we, people were flagging such a recession in

12:242024 that the bond market was well. That's why we created the whole door line, whole door line,

12:29right? We didn't think that it should break below that. And, uh, the labor data wasn't breaking. Now

12:34we're here, lower job growth than last year. And we're at 434 on the 10 year yield. So, uh, what the

12:41Fed says, what Fed policy is does matter what the fair funds rate is. So, uh, the ball is up to

12:47Powell's, you know, court. He can, he can do a lot of things with it. Um, being super dovish,

12:53he, he could easily make that claim. I just, I just don't see that in him. I see a guy just tired

12:59and man, he just not look good. And, uh, now one of his own people are getting, you know, uh, um,

13:07threatened to be prosecuted. So, uh, there's a lot going, there's a lot going on. That's just not,

13:11we're not accustomed to. So, but we have to take it one day at a time. And always remember economic

13:15data matters more than all of this. If jobless claims were at 300,000, we're not having this

13:21conversation. Bond yields are already down. Mortgage rates could even be, you know, right

13:25at 6% today, but that's just not the case. Claims hasn't broken yet. So, you know, everybody

13:31who's listening to this, we will be writing up what, what, uh, Powell says specifically,

13:36Logan, you're going to be writing it up because, and interpreting what we should expect, um, the

13:42Fed to do based on what he says tomorrow. Yeah. It should be an interesting Friday. But, uh,

13:47again, as we said from July 1st, the second half of 2025 is going to be lit. It's going

13:54to be get your popcorn out and everything. It is not disappointed. Uh, uh, we're almost

13:59at the end of August and we still have some time left for the end of the year. So, uh,

14:03just kind of not buckle up, man, just get that popcorn out. It's going to be drama.

14:07Yep. And listen to us. So, you know what to tell your clients, because this is crazy. I mean,

14:12you're following this, not just daily, but like constantly and things are changing all the time.

14:16Yeah. Yeah. We, we, who had Lisa Cook being prosecuted for mortgage fraud and getting kicked

14:22out on the bucket list. I mean, we, we brought it up a few weeks ago that they're going to go

14:26after Fed governors, but this is, you know, for a lot of new people, they go, Whoa, can they do this?

14:31Yeah. And it's still, so, I mean, part of what happened today, um, is that Lisa Cook came out

14:37yesterday with a statement and said, I am not resigning. Cause the first thing was like, Hey,

14:40she should resign, um, or we're going to investigate her. And she came out and was like,

14:44I'm not resigning based on a allegation in a tweet. And, uh, so that didn't work. So now they're

14:49like, Hey, you should fire her. So we'll see what happens. Looks like it's going to be another

14:54interesting weekend. Okay. Okay. Well, Logan, thank you so much for being on and we will talk to you

15:00again soon.

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