- 4 months ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about Trump’s attempted firing of Fed Governor Lisa Cook and how markets have reacted to the news.
Related to this episode:
How will mortgage rates respond to more turmoil at the Fed? | HousingWire
https://www.housingwire.com/articles/mortgage-rates-federal-reserve-cook-trump-powell-student-debt/
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 prod
Related to this episode:
How will mortgage rates respond to more turmoil at the Fed? | HousingWire
https://www.housingwire.com/articles/mortgage-rates-federal-reserve-cook-trump-powell-student-debt/
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 prod
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about what mortgage rates
00:12are doing after the big Fed news last night. Before we jump in, I want to thank our sponsor,
00:18Optimal Blue, for making this episode possible. Logan, welcome back to the podcast.
00:23It is wonderful to be here. And before we start today, a lot of people were asking,
00:28what were the exact numbers of the ARM loans? Just to give you guys some numbers that are
00:34thrown out there, the Dallas Fed last year had 96.4% of the loans mortgages in America are 30-year
00:43fixed or long-term fixed loans. They could categorize anything above 10 years as a long-term
00:47fix. The purchase application data that the MBA tracks for this 21st century, really the ARM
00:56applications just basically ranged between 5% to 10% in 2000. Running up to the 2005 peak,
01:02it was about over 35%. And also the Federal Reserve just came out with a paper in August,
01:09August 7th, actually, to talk about 90% plus of mortgages in America are long-term fixed
01:14debt products. So just for those that were asking for exact numbers, I honestly believe Zero Hedge
01:20just basically put all the commercial loans into the mix. And that's just, you know,
01:25single-family homes are different.
01:27Okay. I appreciate that clarification because we did get people asking, we're like, okay, well,
01:31what was the exact number? So I appreciate you giving the sources and the exact number.
01:36Okay. Let's turn to what happened Monday night when Trump fired or, you know, fired is a tough term
01:45because he sent a letter saying he was firing. It's unclear if he has the authority to fire.
01:50I don't believe he can do that. It's an attempted firing. This legal stuff is not my wheelhouse, but
01:57she hasn't been convicted of anything or anything. So I think there's the whole due process stuff. But
02:03of course, a very interesting reaction. Monday night, bond yields went up a little bit,
02:09dollar fell a little bit. And today, as we speak, the 10-year yield is slightly lower than it was
02:15last night. Mortgage rates are down just a tad. We're back to year-to-date lows. Mortgage spreads,
02:21hug a mortgage spreads, take a selfie, buy dinner. You know, if you see one out there,
02:27show it some love.
02:29Okay. So this is surprising to many people. It was surprising to me, although, so one of the
02:33reasons that Trump has backed off of just outright firing Jerome Powell is because it's very unclear if
02:41he can do that. And the markets, every time he brought it up, he brought it up in April. And
02:46then in July, was it June or July again, he was like, no, I'm really going to do this. And the
02:52market reacted really badly. So he pulled back on that. So you've always said, like, now he's going
02:56after the Fed governors. And I guess the question is, why don't people see it the same way? Like,
03:01I would have thought mortgage rates would go up on this news.
03:06So we brought up this point two months ago that Trump's going to move toward Fed governors because,
03:12you know, he just needs votes to go against Powell. In the big scheme of things, Lisa Cook and her
03:22views, she's kind of slightly dovish. So it's not like you're losing a very hawkish,
03:29like if Beth Hammock was a voting member, and they went after Beth Hammock, because she doesn't
03:35want to cut rates. And now you're going to put somebody, the marketplace kind of still looks at
03:40as this is not a big deal, as long as it doesn't escalate out. The history of governments trying to
03:48run interest rate policies, it's not never been good. But in this case, it advantage, disadvantage,
03:56the marketplace kind of just says, you know, she's kind of a dovish person. So Trump just wants his
04:02people in their kind of the loyalist crowd. And in that context, you know, the market didn't see it
04:11as that big of a deal. That's why you didn't see the dollar really react too big last night. I mean,
04:16if we were a third world country, man, you know, there would be huge, huge ramifications of the
04:22market, you know, kind of like what happens when Turkey, like always fires their Federal Reserve,
04:26when things don't go their way. But yeah, so it's not, it's not surprising to me.
04:33If you go after the big dog, yeah. But Cook is slightly dovish. So it's just, this is just how
04:43Trump plays bully ball out here. And, you know, when we got a lot of discussion about this,
04:49the whole Trinity game plan that we brought up late last year, that Trump believes this,
04:56you have to look at it. This man has now been president twice. He never hides who he is.
05:02He does these tactics. And in a sense, he believes, at least this is how I look at it,
05:07because I could care less about politics. But Trump believes if lower energy prices and lower mortgage
05:12rates happen, you can deal with whatever happens with tariffs, because people pay less for energy,
05:17and they can buy homes. So and he wants the dollar lower. So he's got two of the three,
05:22but lower mortgage rates is the one thing that hasn't happened yet. So he doesn't, he's not too
05:28afraid, but he always likes to do test balloons to see how the market reacts. And we all saw what
05:34happened. The only time that Trump and the White House turned is when Godzilla tariffs came in and the
05:40bond market rejected that. And it wasn't even the stock market being down 20%. It was the bond market
05:46shooting up higher. We always say the bond market runs everything. And in this case,
05:51there wasn't much of a reaction. Godzilla tariffs, it was all chaos out there. But now,
05:56a much different response. And oddly enough, mortgage rates actually fell a little bit
06:01today back down to the year-to-date lows.
06:05You know, we've talked about this, about what can drive the bond market, what can drive some of
06:11these things. And when there's uncertainty about certain things, that's what, that's not our friend,
06:17right? It's not the friend of mortgage spreads getting better. Generally speaking, that's sort
06:22of the variables you talk about that could come in and influence bonds yields and mortgage rates.
06:28And so I think, I think the thing that I thought was interesting is that on the whole, if Trump is
06:34able to, you know, get enough Fed governors on there that support his lower rates, you know,
06:40even if there's not like a huge reason to do that, isn't that the same thing? I mean, I guess I thought
06:45that volatility or that uncertainty would change. Not really, because there's enough Federal Reserve
06:49people out there that that's not going to give him a blank slate on what he wants. So you only have
06:56so many pieces of the puzzle. And again, like we talked about last week, if the labor market starts to
07:02pick up on, you know, the rate cut story starts to go away, as long as if core inflation is running
07:07at 3%. That's one of the reasons why the 10 year yield isn't below 4%. So the market is oddly enough
07:16acting very, very normal. In this context, you don't lose a hawkish person when you if at least,
07:23and I think people realize you can't just fire Lisa Cook, she's still going to be here until you
07:28actually, you know, get get something done. So it's not it's not something where it's an immediate
07:34response out there. So the market, I thought the market acted accordingly to what the the news was
07:41going out in the future, who knows what can come out of this or if it expands out there. But the
07:47first test balloon came out and there really wasn't much of a reaction. We've had times in the last few
07:53years where I literally stay up to one o'clock in the morning tracking the 10 year yield and Japanese
07:57bonds and everything and putting on Instagram like a total loser. Yeah, that's me. You know,
08:03so I last night wasn't it. I mean, you can like shorten the duration of dollar charts or whatever
08:08you want. Not much happened yesterday. Not much happened today. If you didn't know the news,
08:14you'd be like, Oh, it's pretty normal day out there. So that is crazy. You know, as a, as a news
08:20organization trying to cover this administration, it can be very challenging because they do announce
08:26things that it's unclear if they either can do or actually are doing in this case. Um, he did send
08:32a letter, right. That said you're fired. But I, you know, I was the one writing the story and writing
08:37the headline. I'm like, do I say fired? Do I say attempted to fire? Do I put fired in quotes?
08:42Because it's really hard to say what actually happened.
08:46Uh, so, uh, until the courts, uh, fix this, this is just kind of up in the air out there. But again,
08:53uh, Lisa cook is slightly dovish. So it wasn't like, you know, if Beth hammock, who I don't believe
09:01is a voting member is on the, uh, uh, reserve list, but if she got knocked out, she's very hawkish. She
09:10wants no rate cuts. You know, that becomes your, your, your pulling out pieces because you don't like
09:15the person, but so far that, that hasn't been the case. So, um, again, after July 1st, we said,
09:21get the popcorn out. The second half is going to be lit and it's just, we're not even at the end
09:26of August. And there's been so many things and expect a lot more to happen for the rest of the
09:31year. I do think that like, um, the bond market, just like all of us, I mean, you sort of get immune
09:37to like constant barrage of news. That's like, I mean, uh, a president has never tried to fire or
09:43a fed governor before in the history of the country, but like, we just have a barrage of
09:48news. That's like, so it feels like the bond market is like everybody else where it's kind
09:52of like they're, if, if this had happened under Biden, I think that would be a huge reaction,
09:57but I don't know. Here's, here, here's the thing. We talked about this two months ago.
10:01We said, watch for fed governors. Um, they said you, uh, guys, you better let her go away or else,
10:11you know, I think the market was anticipating it. See Godzilla tariffs created chaos because
10:16nobody was ready for Godzilla tariffs. They just went full nuclear Godzilla attack on a city
10:22by announcing that and all hell broke loose with the markets. You know, the stock market was down
10:2720% 10 year yield fell down into reverse. When the markets don't anticipate something,
10:31traders are not in a position to offset hedges or anything like this. I mean, it isn't really that
10:37shocking that something like this happened because it was kind of told forehand. So
10:41uh, nobody should have been surprised, uh, about this cause they've been talking about this. So
10:47I think that's the difference that the market was like kind of getting ready for it. Um, Godzilla
10:53tariffs. That wasn't the case. Godzilla tariffs were, were huge. Nobody was ready for it. Stock sold off
10:59bonds made a huge rally. They made an unbelievable reversal and that reversal really changed things,
11:05uh, for the white house. Okay. So we are coming up on the labor day weekend, right?
11:10Um, a time when a lot of people in our industry, uh, head out for some vacation. I can tell you that
11:16already as I call people or try to set up things and they're like, yeah, you know, they're, they're
11:21out of the office, even if they're listening to our podcast or reading our site. So how does that
11:26affect like what sort of, um, economic news are we getting this week and what should we look for as
11:32we come into this, um, pretty big weekend? So, I mean, this week we, we have a lot of, of course,
11:39housing data. We had new home sales. We've talked about the home price indexes came out today. Um,
11:44uh, case shall are still a slightly higher than my forecast. So again, I need weaker data for my
11:50forecast to be correct. And, you know, we're, we're going to see negative year over year pricing with
11:55our, uh, all toast data in September and October because of last year, FHA is the same thing.
12:00It's quite not weak enough for me. Uh, we have pending home sales coming out this week,
12:04but the following week, uh, um, uh, we're going to have jobs week. Now we're going to have the PC
12:11inflation report coming up this week too. So that's big because that's what the fed tracks,
12:16right? That's their main inflation indicator. So I think that's a very big report that typically
12:20happens during a jobs week, but, uh, next week it's, it's the only jobs report before the fed meeting
12:27and labor over inflation. If it ever was a thing before, it is a huge thing now, because again,
12:34if the labor data gets better, you're going to have more and more discussions about no rate cuts.
12:41Uh, um, so this is the one report. I don't think they're going to make a shift from their stance on
12:47one report, but, uh, it is such a low bar to beat now with after the last, uh, three jobs reports
12:54running at 35,000 and you already see manufacturing jobs being lost residential construction. So it
13:00doesn't take much to move the needle, but, uh, jobs week will be really critical, uh, uh, going out for
13:05the rest of the year. Uh, but that's the last jobs week we have before the, uh, uh, fed meeting
13:11September. I love that insight. Okay. I wanted to bring up something that's really interesting.
13:17We've had a couple of, um, home price things come out. So you mentioned Kay Schiller, right? So, um,
13:23we reported on that, but that, you know, that's, that's pretty old if you think about it. Like,
13:28um, so we've got, uh, on the site right now, we have home prices rose nearly 3% annually in Q2 from
13:35FHFA. So we got that data today. So that's Q2. So that's a couple months old home prices rose 3%
13:42annually. Then we get Kay Schiller, home prices are still rising, but June numbers mark a decisive
13:47shift in the housing market because the, the growth rate of home prices is slowing down. And so I just
13:53want to say, you know, we appreciate both of those reports. We write them up because they are
13:57important in their own way, but the, the housing market tracker and what you put out is like the
14:03freshest weekly data. And I think that that's really important because like, if you're, you know,
14:08those are important for, for different reasons, but it's great to know what's happening right now.
14:14So I always base my forecast on what the Kay Schiller, I think is going to end the year on,
14:19but the Kay Schiller is like three to four or five months behind us. Um, uh, last year, uh,
14:25I thought I was going to be right because I anticipated again, I'm a higher rates, higher
14:31inventory person. So, uh, we're not, we weren't starting the year off at 6% or anything in that
14:37major. So we have the ability to increase inventory and price cut percentage grows. What happened last
14:43year was when mortgage rates got towards 6%, the supply and demand equilibrium really changed
14:49and nobody picked up on it because people saw purchase application data and they didn't see
14:53any year over year growth. So they didn't think anything of it, but we could see it in our weekly
14:58pending contracts and total monthly contract data. And that divergence, uh, shifted prices to be
15:04slightly higher than my forecast. So what we're doing now is that we picked up on the housing
15:10market changing its dynamics in mid June. So the question, if rates keep on going, uh, lower,
15:16am I going to lose my forecast again? Uh, are we going to be up just 2.1% and I'll be off, uh,
15:24once again. So this is the benefit of having a live tracker and in case an FHFA are slightly lagging
15:32everything. Um, so we're keeping an eye on this, but the thing, the thing for me is that majority of the
15:37year has already been above what my forecast is. So I really need weaker data to, to happen to get
15:45my forecast. Right. And I don't know if this trend keeps on continuing that inventory could be down
15:50in the month of August. The year over year percentage is gone from 33% now to 22%. It could
15:56go to a teens. So we keep an eye on that. And then, you know, four or five months down the line,
16:00Case Shiller eventually, uh, catches up to us, uh, out there. So, uh, it's very interesting. I I'm very
16:06mindful of that because last year I could just tell I lost September, October home prices, uh,
16:12were firming up in a, in a way that it doesn't usually do. Uh, and, and, and of course, um,
16:18the whole Redfin thing was brought up again today and I had to do, uh, videos and, um, I feel really
16:25bad for the people that thought home prices were crashing at the second half because of what Redfin
16:29said, this, the biggest seller buyer gap in history. And then all of a sudden their own data is
16:34firming up on a year over year basis. Uh, they kind of have a four week moving average. So,
16:38uh, uh, Case Shiller is still a little bit too strong for my forecast still. Uh, um, but, um,
16:46we saw weakness. We saw inventory growth. We saw price cut percentages. There's parts of the country
16:51that prices are declining year over year. There's parts of the country that are, are, are increasing.
16:55So we try to work off of that shift. Uh, and just for like, uh, everyone to realize that, uh, early
17:031990s home prices nationally, like fell 0.7% in 1990 and 0.2% in 1991. A lot of that was because
17:11Southern California prices actually, uh, crashed. If it wasn't for Southern California, we wouldn't
17:16even had that. So we take into effect that there is weakness in Florida and other places. Um, but as
17:22of right now, I'm keeping an eye on if I'm going to lose this forecast again, if rates keep on going
17:27lower, uh, so far, there isn't anything that's been too crazy out there, but mortgage rates have
17:32not gotten down to 6%. But again, year to date lows. Uh, so we'll see how it goes. Uh, by the time
17:38tomorrow comes up, purchase application data will be out again. And so far, so far we'll see if it
17:45continues, but once rates got below 6.64%, every week with purchase apps have been positive on the
17:51weekly side and the year over year side. And remember that the key is that I've only seen
17:56housing demand get better in real terms when mortgage rates go from 6.4 to 6%, not anything
18:02else outside of that, outside of the seasonal moves we have sometimes. I love this. So, um,
18:08one of the reasons that we bring up like, you know, all of these things and that you report on it every
18:12week is just the disinformation that's out there. And you see it a lot on social media, but, um, you,
18:17you mentioned the Redfin data, um, today, the Daily Mail, which is a UK based newspaper, but
18:22very popular in the U S here's their headline on, on Zillow, some Zillow data about home prices
18:29cooling off. Housing panic grips half of us cities as record price cuts, send home values,
18:35tumbling housing panic. And I'm like, what do you want to tell you? You know, it's, it's interesting.
18:45Zillow's pricing is the weakest out of everyone. Cause they attach condos into it where
18:50Case Schiller is single family. That's kind of, I just work off a single family. The condo market is,
18:55is of course, especially in places like Florida is much weaker, but Sarah, we live in a world where
19:01do poor selves. Okay. That's just how it, that's just how it is. Not everyone can be the chart daddy.
19:07Not everyone has, you know, fancy charts and try to make it funny. And, um, there's a few of us,
19:13we we've taken an oath to try to make it as we have to make it as entertaining because
19:18unfortunately there's a really low bar for me because my fellow economist friends aren't the
19:22most exciting people in the world. Oh no, come on. You can't just, you can't grip, you can't grip
19:28people by, you know, standard old economic discussion model. So, so it's not shocking that
19:34that stuff works again. We, we have, we literally have people out there that if you took their forecast,
19:40they're, they're off by 29 to 62. Do you know how wrong do you have to be off 62% on nominal home
19:47prices in America? I mean, that takes talent, but that's just the world we live in. So myself and
19:54a few others, uh, we, we try the best we can, but we always said we're pilgrims in an unholy land,
19:58right? But that's the, the, the business models. If it bleeds, it leads. You got to get people to read
20:04this stuff. And not everyone's got the chart daddy hair or the smile or the chart, you know,
20:09so it's, it's hard for organizations and certain people to try to get attention. So do important
20:15sales. This is the way the world is. And of course, I mean, the reason that we always bring this up is
20:19because this is what consumers are reading. So they're like housing panic prices are plunging,
20:24you know, in some ways, maybe they're like, Oh, I should buy. And maybe in other ways they're like,
20:28no, I shouldn't. Anyway. You know what? I, I, I would say this. I I've looked at the data for
20:3325 years, no matter what has happened. And we've had some crazy things happen in the, you know,
20:39uh, uh, uh, this century, millions of people have bought homes. When affordability gets worse,
20:47demand slows down. When affordability gets better, demand picks up. They were buying millions of homes
20:52in 2008. They were buying millions of homes during COVID. Uh, but the affordability, uh, gaps or the
20:59credit gaps when they, when they happened, uh, really tends to be the big drivers of home sales
21:04up or down. Uh, of course, 2008 was such an anomaly that that's where a lot of people get
21:09remounts, but also a lot of the doom porn people realize that not everyone owns stocks, but everyone
21:14lives somewhere, right? And a lot of people own homes. So that's just kind of what it is. And, uh,
21:19I mean, I'm here, Sarah, you and I would not be here today talking if it wasn't for the doom porn
21:25people. Cause it was in 2014 when I saw people say, Oh my God, QE three is going to end mortgage
21:32rates are going to go to 10%. The world's good. And there's nothing. And now I thought to myself,
21:35there is a group of people in this world that do disinformation and I'm going to make it a goal
21:40of my life to fight them. So through darkness, angels appear and fight the darkness with the light.
21:48So, uh, but it is what it is. So we try to keep the information live and fresh and teach people.
21:53Cause if I teach people economics, Oh my God, if I could teach people economics, every fanatical
21:59disenfranchised nutcase in America and Russia and China, Iran, Oh my God, how could they, how could
22:04they, how could they, uh, handle this? They can't an educated society makes better choices than an
22:10uneducated society. So. Love it. No, that's why I have you on. Thanks for jumping on to talk about Lisa
22:16Cook, especially we weren't planning on having on, but I was like, I need, that's the second week in
22:20a row, five times possibly. I'm just saying, I'm just saying Sarah, we, we, we, we did this once,
22:26twice, three, four. Now we're all of a sudden we're doing it five times a week. So I have a lot
22:31of other things I have to consider. I appreciate having on saying that, but it's like, it's always
22:36five days a week now. Come on. And also just want to remind everybody, make sure you go and register
22:43for the housing, our mortgage banking summit on October 7th here in Dallas, meet Logan. We're
22:48going to have a really fun Q and a as well during the cocktail hour. So there's going to be more
22:53Logan than you can even imagine. He's going to be our keynote and then also doing a lot of mingling.
22:58So. Yes, I cannot wait to see everyone in Dallas. Of course I'm in Dallas a lot lately because housing
23:03wire office is there. And, uh, uh, why by the time October comes, we've got probably a lot more
23:10things to talk about. And, uh, it'll be interesting by where the tracker data is at that point,
23:15because last year, last year, September and October really changed it for us. And it was funny
23:20because last year we were trying to tell people, guys, this is like, the sales are picking up and
23:24pricing's firming and nobody's like, nobody's like, no, they're not purchase application data is down
23:2820% year over year. We try, we try to get people, we teach. We do indeed. Well, thanks for being on.
23:36Um, talk to you again soon and thank you.
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