- 5 months ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about a claim that adjustable rate mortgage (ARM) loans are going to crash the housing market. The two also discuss the new home sales report.
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 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:
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 deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Content Studio.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the housing market
00:10in 2025 versus housing 2008. We'll also talk about new home sales and other things. First,
00:18I want to say thank you to our sponsor Optimal Blue for making this episode possible.
00:23Logan, welcome back to the podcast. It is wonderful to be here. You know,
00:27it was Sunday night last night. I was doing my thing. And all of a sudden, I was getting a ton
00:32of messages as Zero Hedge, as we refer to them as Zero Brain Dead, sent a tweet out saying that 41%
00:40of all the loans, all the mortgages in America on the bank's books are arms now. Didn't give any more
00:48details to that. And they sometimes do creative tweets just to get attention. But that set off
00:55a firestorm because then everyone's like, ha, we told you, or there's arms everywhere,
00:59you know, housing 2008, everything. And then, of course, me quickly, I just brought the data out
01:05and shut that down. Oddly enough, very poor timing for them and everyone on X who fell for it. The
01:12Federal Reserve actually just came out with a paper on August 7th about this and where they highlighted
01:16that, you know, other countries have a much higher housing stress than ours because they're
01:22tied to short-term debt products where the U.S. is, you know, 90% plus 30-year fixed mortgages. So
01:28it's a much different marketplace. So we had to shoot that down. But I was thinking about, you know,
01:31it's like the three years now, now that we're kind of in the peak period of the existing home sales
01:38inventory data, and we're going to go over the new home sales report after this. Three years of
01:45the housing market crashing in 2005 to 2008, and three years of the housing market having the
01:51fastest crash in home sales ever in 2022, and just basically staying here. But you cannot have two
01:58different housing markets over the last 100 years. And one of the things I want to say is when I die,
02:03I just want people to remember that we fought against the Russians, the Chinese, the Iranians, but
02:08also the zero hedges of the world, which is very prone to anti-central bank fanaticals out there.
02:14But here, it's done. It's history. It's in the books. And we could really show the difference now,
02:19because now we have three years of both. And it's glorifying to see how qualified mortgage really
02:27changed the landscape, not only just for the housing market in America, but for the United States of
02:32America's general economy, too. Okay. So wait, isn't there something you want on your tombstone?
02:38Yes. When I die, you put chart daddy, and then you put the foreclosure data on there. And we always
02:44say, Uncle Dave, right? Everyone says, it's housing 2008. And then we have the real crazy people say,
02:51it is worse than housing 2008. By the way, I saved everyone's tweets to me on that. There is going to
02:55be a day, oh Lord, there's going to be a crucible someday on this. And everyone who ever used my name
03:01on anything, I'm just going to smash everyone one day. But in any case, when that glorious day
03:07happens, what happened was the housing market, to go with zero hedges analysis, was very tilted
03:16toward arm loans being part of the massive growth in credit back in the run-up from 2002 to 2005.
03:24You could see the arm percentages were rising, except the real problem was the arm percentages
03:29were going with exotic loan debt structures and guidelines being very poor. So the massive
03:37credit sales boom, which we've never been able to replicate for 14 years. This is why I always like
03:43to highlight the purchase application. We never, ever had a massive credit sales boom, nor do I believe
03:47we can ever have one ever again with qualified mortgaging. But in this case, home sales were booming back
03:55then. But when the credit markets broke, if you do not have the ability to keep credit flowing,
04:02then the system breaks. And what happened was in 2005, when home sales started to crash, it took
04:08three years to get down to the bottom. And then during that three-year period, inventory escalated
04:13from $2.5 million to $4 million. But we were having foreclosures and bankruptcies rise in 2005,
04:19six, seven, and eight. And in 2008 was the highest levels of monthly supply. And we had
04:27underwater mortgages, deteriorate, all these things. The exact opposite happened here, where you had
04:36total active inventory break to below a million on the NAR side during COVID. For us, it was down
04:43to $240,000 in March of 2022. But back then, which a lot of people don't remember, because you have
04:50lives and I'm not a loser like I am, inventory and sales and prices were growing from 2000 to 2005.
04:57And we were at $2.5 million active inventory in 25. And then the vertical inventory data went off in
05:042006 and 2007, and we peaked out. Completely different marketplaces. But now, the three-year home sales
05:11is over with, right? We had three years of sales data, three years of sales. They're both at very
05:15low levels. I would argue sales are historically even lower today than back then because of population
05:21growth and household formation and labor force. But the inventory data is much different, right?
05:27Here, we're at $1.55 million, which for me takes my low inventory conversation out of the... I mean,
05:33I was never a low inventory person up until we got to 2020, which took us to a whole brand new ballgame.
05:38But $1.52 to $1.93 was the five-decade low in active inventory. It's good enough for me to get
05:45the low inventory conversation out. But we're at $1.55 million. Back then, it was $4 million.
05:51Back then, we had years of credit stress, foreclosures and bankruptcies. Here, we're not
05:55even back to pre-COVID levels. If you look, 30-day delinquencies, you take the ICE data, we're still
05:59near record lows. The trick they do with FHA is that if you actually take FHA percentage of
06:05delinquencies and you string it out for the century, all of a sudden, the data now doesn't
06:09look very abnormal, but they cut it off. These people always cut off the charts, just to make
06:14their point. But in any case, the credit markets are so different. And now you can understand that
06:20prices never followed volume, as that crew always says. We didn't have the biggest home sale crash
06:26and home price crash in history like some of them had forecasted. By the way,
06:30some of you are off by 29% to 62%. I kept all your forecasts that I elongated it out to do a
06:37cumulative advantage. And I got your name and face in every single one of them. You're all toast.
06:41You're cooked for the rest of your lives. So the smart ones have realized never to talk to me again
06:45because I just keep on showing it. People figure that out now. But yeah, two different marketplaces.
06:50So what Zero Hedge tried to do last night is try to trick people by saying mortgages or 41% of all
06:56mortgages in America held by banks are arms, not given any details that people go, oh my God,
07:01all these arms are out there and everything. It's just not the case.
07:05So what is the real statistic there?
07:07I mean, if you look at the purchase application data that actually tracks the arms, whenever rates
07:14go up, the arm percentages do pick up, but they're like never above 10%, where in 2002 to 2005,
07:21that thing rose up. But the debt, the mortgage growth volumes are so low that on a, if you really
07:29want to use a per capita basis, it's really, really low now, the arms loan. So the accumulation of 14
07:35years, again, reading is a good thing. There's actually no mathematical way to have 41% of all
07:42the mortgages in America to be arms, but they are a disenfranchised fanatical cult group that has
07:50taken advantage of men, kind of like how Al Qaeda takes care of, takes advantage of men who don't
07:57read to form them into terrorist groups. The Zero Hedge or Zero Brain Dead readers have been sucked
08:01into a, you know, dealing with the Russian trolls in the last decade, I learned a lot. And there is a
08:07very, very dark correlation between the Russian trolls and the Zero Hedge readers. But in any case,
08:14even the craziest people in America were like, wait a second, that doesn't sound right. Like we
08:18don't even, we don't even have that many like armed loans that were growing for years. How can, how do
08:23you, how do we get from like 5% to 41%? It's, this is what this crew does. So, and the data just
08:30basically shows that a monthly supply back in 2008 was like 10.8 months, something like in that level,
08:37monthly supply, like the last existing home sales report is 4.6. So completely different market
08:43lists. Homeowners are doing good. They live in their house. They have sex. They have kids. They
08:48go to work. They come back from work. They go to sleep. They watch TV. They watch Love Island. They
08:53watch football. They act like normal human beings. They are not the fanatics on X or on Instagram,
08:59on YouTube and all that stuff, right? This is why we've created this holy economic war against this,
09:05this group. And it was encouraging to see that even the craziest of the crazies were like, dude,
09:12this is completely wrong. There's nothing in the data. And that's just the function of the credit
09:16markets, right? The credit markets changed because qualified mortgage came in and all that changed.
09:21And I say this with short-term rates coming lower and long-term rates staying higher,
09:26you're probably going to get more arm growth out here. But the arms, like you have to qualify for
09:31the recast payment and they're not even saving you as much as people think, but it's just such a
09:36different world. And that's because regulation changed the U.S. economy with the 2005 bankruptcy
09:42reform laws in the 2010. And now that we have three years of home sales from 2005 to 2008 and 2022 to
09:492025, everyone can visually see. Even if you couldn't read your eyes, as long as you could
09:55visually see, all the data looks really different in that context of the credit side of the marketplace.
10:01And that's why we never had the escalation of inventory. I mean, think about it this,
10:07before home sales even crashed, active inventory for the NAR was like 2.5 million. That's almost a
10:12million higher than where we are today before the sales crash even happened. So completely different
10:18marketplace. It's not fun and sexy to talk about boring economics the right way, but we try to do
10:24this in a way that's entertaining, but now visually could see, right? If you can just look at this,
10:29you go, wait a second, there's something, but you have to figure out why. Why is it so different? And
10:34it really is the regulations that were put in after 2005 and 2010 that paved the way for 14 years of data
10:42looking like this. I think that's such a good point too. What you said, even if there were more arms,
10:49these are not the arms that led to 2008. These are not something that's like, you know, oh, I'll just,
10:54I'll just slap this on you. You have to qualify for the higher rate, whatever that arm is going to
11:00adjust to, right? I mean, that's, that's one of the reasons why it's, it's not really popular,
11:04nor it's going to be popular. It can be popular in the sense that if I qualify for a 6.5 mortgage
11:11rate on a 30 year fix, but I could get a seven year arm at 5.625 and I could qualify for the
11:19recast rate and your wages grow during that period of time. You can see arm growth in that as short
11:25term rates come down, but it's just, we don't have that kind of credit boom. Like I always, I always
11:30like to show the purchase application data going back to the 1990s. And we had a massive credit boom
11:36really from 2002 to 2005, but we've never been able to replicate, nor do I think we can ever replicate
11:42that ever again with qualified mortgage in place. So two different cycles, but now that we have three
11:47years in the books, it's over, right? For the next hundred years, all of these people who were 2008
11:53and worse than 2008, their children, their grandchildren, you know, all of them are going to go,
11:58dude, grandpa, you're crazy. Like, what are you doing? You know, why do you embarrass us like
12:03this? You know? So it's just the way, it's just the world works. It's so different than how it used
12:08to be a thousand years ago when we just had simple scrolls to read and candles. Now you have TikTok and
12:13people dancing and doing charts and... And you are part of that. I don't know that you're on TikTok,
12:20but you know, you do do charts on the end. I know, but you know, it's just, it's just,
12:23you know, you have to fight fire with fire and unfortunately the academic world. Most of them
12:29just can't, they don't have the luxury to be that free to do it. Oh, but this devil, this hellhound,
12:37oh, he's ready to throw down 24 seven, but we do it. Especially, what do they think in doing that
12:43on a Sunday night? They know you're watching. I mean, they should know you're watching. Maybe other
12:48people are going to let that go, but you on a Sunday night you're going to go.
12:50It is encouraging to see that even some of the crazy people are like, that just sounds
12:55really off. And then a lot of people are following up on that today. I mean, if you technically could
13:01put commercial loans in this and categorize it in a three month time for, you know, there are ways
13:07to manipulate data to get a headline, but they did what they wanted to. They wanted to, they are the
13:12ultimate doom porn out there. So, and their name is Zero Hedge, but we call them Zero Brain Dead.
13:18And if you look at the last 14, 15 years, a very fanatical disenfranchised group that just
13:25basically hates everything about America because they were born after when, Sarah Wheeler? They were
13:30born after 1913. And some people that are born after 1913 is just the hole, the black hole in their
13:37soul. Nothing you can do that could fill that void unless death because, you know, living after the
13:43Federal Reserve was created was too much for them. They don't ever leave America. They don't take
13:47their pirates of the Caribbean gold pieces and go on an island and become a libertarian, you know,
13:51Mad Max. They sit here with their 30 year fixed mortgages and their nice single family homes and
13:56nice cars living a life and just crying about it every day. So you have your choice. You could be
14:00part of the devil's crew or you could be part of the light, right? And this is the conflict that has
14:05always happened since the Peloponnesian War. I love it. Boy, if I had a bingo card right now for
14:10Loganisms, I would have so many on here. That would be good. But I think it's a great point to bring up
14:15because this is what the people in our industry have to battle all the time because this, you
14:20know, lots of lots of people follow zero hedge. If it's not the people in our industry, it's their
14:25consumers. It's the people they're trying to sell a loan to or sell a house to. And those people are
14:31like, oh, this is a bad time to buy or oh, the housing market's about to crash, which we know
14:34as a media company that for a long time that that was the biggest search engine, the biggest search
14:40question for our company was, will there be a housing market crash in and then just put in
14:47whatever year it is. And that is like the most searched term. So we know that these kinds of
14:51things have, you know, have an effect on consumers. To counteract fanatics in history, you get names,
14:58you get faces, you get five years of forecasts, and then you drag their carcasses out for the next 20
15:04years. Because if you think intellectually, you could go head to head with me. But knowing that
15:10my whole life, just getting up in the morning is to crush as many American bears as I possibly can.
15:16Cycles come and go, right? That's what models are for. They're designed to keep us in line.
15:20But this kind of goblins, this kind of thing's, oh, it's going to get Halloween soon. Oh my God.
15:25Sarah, AI Halloween, Logan's. Oh gosh, I'm scared already. I'm already scared. Okay, well,
15:31let's turn now to the new home sales, which we got that report today. Really would love to get
15:38your take because on the one hand, it looks negative. On the other hand, it beat expectations.
15:43So tell us what you think about that. So the question is, have lower rates already
15:46helped the builders? Now this goes back to, you know, kind of what I talked about on CNBC,
15:52that the builder stocks are ripping, right? They're just ripping it up. And
15:57people just don't understand why that's the case when housing starts and permits are at recessions.
16:04This is a very complicated cycle. But if you look at new home sales out for like 10 years, even,
16:12we're basically in a sale range from 2018 to 2025. You take the COVID burst and then the low levels of
16:1922 out of the equation. And what happens when mortgage rates get towards 7% and higher, it's harder for
16:25the builders to sell homes. And then when they come towards 6%, it's easier for the builders to sell
16:30homes. Corporate profit margins are falling for the builders, right? So they have less leeway.
16:35Smaller builders don't have that advantage. But mortgage rates are heading down towards 6% again.
16:40And we don't ever break below the 2022 lows ever. So many months of positive revisions. In fact,
16:49the only reason we had a month-to-month decline is because they revised the last month's data higher.
16:54So again, it's just a story about, it's more about supply, right? And in the article,
17:00I show the shorter term durations of total units. And to me, it's just like, I felt so bad going back
17:07in the last decade. I never explained this clearly enough. I just assumed people knew that the monthly
17:14supply for the builders doesn't mean active units for sale. And looking the last few years,
17:20I just realized a lot of people see that 9.2 months of inventory. They think it's like millions
17:24of homes. And the easiest way to show this is if you go back many decades, it's rare for the
17:31builders to have more than 120,000 total completed units for sale, right? Those are the homes that are
17:37active and live. And now some of those houses are going to get sold in the next few weeks or
17:44months, but it doesn't typically go above that. And people think that's like a massive amount of
17:49inventory. Guys, two weeks of our new listings data, just two weeks, takes out the entire builder's
17:55completed units really for like five decades because majority of inventory comes from the existing home
18:02sales because majority of the stock is. So here we are 9.2 months, but it's like 120,000, 121,000 homes.
18:10So I think when you break it down, it's like two months of supply. If you just look at that,
18:15if you look at like 4.9 months of supply are homes under construction, right? So they're not
18:20out there sitting, you know, they're in a lot of those homes have a contracted buyer. You don't see
18:27very high cancellation rates for the builder. So they have product, they get rates a little bit lower,
18:32they could sell them. The problem for this now is that the builders don't usually typically
18:36issue single family permits or housing starts don't really grow in this environment. So that's
18:41why I like to show the short and long terms because completed units is the real thing.
18:46But if mortgage rates are seven and a half percent or eight, we have a whole different story with the
18:50builders, right? You're not going to see that rally in builder stocks, but what typically happens,
18:56rates were going lower. This is somewhat similar to what happened at the end of 2022. But back then
19:02there was a very high cancellation rates, new home sales were so low, corporate profits were still
19:06good. So the builders can, when rates go lower, they can sell homes. So here we are again,
19:11is this going to be the third time rates go down to 6% and the builders do well? Big publicly traded
19:17builders are telling you yes by their stock performance. And this is similar to what happened
19:22before. But again, if rates shoot back up, then we're back here again. This is why we can't get any
19:28traction going with housing starts. And we said this, you're not going to grow housing construction
19:34this decade unless rates fall because the builders are simply, they just don't move fast enough. They
19:39don't put their heads down and build to pile up units of sale and have their corporate profits.
19:45That's not how you run a business. So I'm hoping now doing this for two years and showing those charts
19:50that people could understand, but it was never the marketplace of millions of homes. They've never done
19:55that. The highest they'd ever got was like not even 200,000, slightly under 200,000 in 2008.
20:01That was it. And we had 4 million active listings back then. The builders never even got over 200,000.
20:07So different marketplace, different structure. And you could always sell like people have never read
20:12a new home sales report because they never read how the monthly supply is broken up. So they think,
20:18you know, well, the builders have 9.2 months of monthly supply and the existing home sales market is
20:23a 4.6, but why are the builder stocks running up? They could sell these. If rates go lower,
20:27they can sell them, right? And they sell them to make money and kind of that's how they operate.
20:31I think that's, to me, has always been the most valuable part of what you put in your coverage of
20:37this topic is when you break it up and you're like, yes, 9.2, but how many of those where the
20:42construction hasn't even started yet? And then how many of those are still like, we've got still quite a
20:47while before they're going to come to market. And I do think that's the missing piece that most people
20:51don't know. Yeah. I mean, I really saw this post 2020 because when the builders had that big spike,
20:57you had people talk about like, there's millions of homes. I was like, what the hell are you talking
21:02about? And then I realized, oh my God, they've never ever read a new home sales report. Like
21:07they've never seen, you know, they'll see a headline. And Sarah, what do we say? Reading is a good thing.
21:13The history of human civilization has taught us those that read have a benefit over those that don't. But
21:18in this case, I think, I think we've made a good enough progress to kind of teach this.
21:23And, you know, you, now that the builder stocks have rallied so much and Warren Buffett has a big
21:28stake, you know, we've, we've saw this before in recent history. So I think there's a little bit
21:34better understanding. And, and I, you know, I fully blame myself because this is not something
21:38that I really talked about much because I just assumed and I assumed people read and I've learned
21:43that they don't. And in the last decade, my thing was that we're going to have the weakest
21:47housing recovery ever in history. Like, I don't believe the builders are underbuilt. Like this is
21:52the, this is where I like divert from every person in economics. The builders only build off
21:58of the demand curve and they had missed sales in 2013, 2014, 2015. I remember going on CNBC in 2015
22:05and saying, listen, the builders stocks are way too high. They're not going to make these numbers.
22:10And in 2018, there was a monthly supply. So there was all these things in the last decade.
22:15You don't see that now because new home sales are at 2019 levels, right? That's a sub 6%
22:20mortgage market world. Their corporate profits can do better and they can feel more better when
22:24rates go lower. But if that was the existing home sales market, we have a million more home sales
22:30today, right? So that's the divergence between the new home sales market and existing. But yeah,
22:36the 9.2 monthly supply for people just like, they see that and go, oh my God, that must be millionist
22:41homes. It's just not. There's over 147 million total housing units in America, right? So it's not,
22:47it's a, it's a small percentage of that. That's why the existing home sales market has the biggest bulk
22:53of inventory capacity. It's why we don't talk about those two things. We don't get that mixed.
22:59Club rules, baby. Fight club rules, which is funny because Zero Hedge, you know, Tyler Durden,
23:05they, they kind of take the theme of fight club, but everyone needs enemies. I think it just makes
23:10life more fun, right? Niners versus Cowboys, Lakers versus Celtics, you know, but here, here, it's good.
23:17It's good. It's good. It's good to, it's good to fight the American bears every day.
23:20Yes. And all of these topics and much more, you're going to be covering as our keynote speaker,
23:25keynote economic speaker at the mortgage banking summit that we're having here in Dallas in October.
23:31Cannot wait for that. We already have people being like, okay, what's it going to be? I think
23:35the title of your session right now is what the bleep is going on in the housing market. And really
23:40that covers between now and then that that's a perfect title. I know. I mean, it's, it's, you know,
23:45even though we, we, we picked up some of the changes in the housing market mid-June we just got the
23:52tracker inventory. I got nothing. I active inventory was barely anything. And if I take
23:57it from the peak of where it was, we're going to have a decline. We only have one more week left.
24:01And then we have the holiday weeks would screw up everything. But I don't think anyone had it in
24:07their bingo card that inventory could be negative in August with rates, not near 6%. We're heading
24:15that way. And again, spreads again today, 10 year yield was up a few basis points, mortgage pricing up
24:20just a smidge. You know, the, the negative story of 2023 was the spreads, but the positive one in
24:272025 is the spreads. The, the tracker data is gets, it's getting really interesting that we might have
24:33a normal year. Like I always say 2025 is my favorite year out of everything, you know, because it
24:38resembles balance or resembles something normal out there. And, and I love the fact that we had over
24:4430% year over year growth in inventory and we're not holding it up at this pace. If it continues,
24:49we're going to be in the teens, uh, uh, but it's still a positive year. We're something back to
24:55normal. And that's what you want. You, you want housing back to normal. You don't want the unhealthy
25:00housing market of 2020, the very unhealthy housing market of 2021, the savagely unhealthy market of
25:06early 2022, you get balance. And remember, this is going to be here for decades, very low, very long
25:12time. You want stabilization in something like housing because it's a cost of shelter, something people
25:17need every single year. Logan, we are out of time again. Thank you so much for being on. Thanks for
25:21that special Saturday edition. I thought that was a great podcast. We heard from a ton of people who
25:26were so happy to have that this weekend to try to figure out what was going on with rates. So thanks
25:31for always being our analyst and, uh, so, so timely on the spot. Pleasure as always Wheeler.
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