- 1 year ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about housing inventory and what to look for during this inflation week.
Related to this episode:
Housing Market Tracker
https://www.housingwire.com/housing-market-tracker/
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:
Housing Market Tracker
https://www.housingwire.com/housing-market-tracker/
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 modashami to talk about
00:10the inventory numbers and also of course inflation week we have so much to dive into
00:15logan welcome back to the podcast it is wonderful to be here by the way
00:20how about brock purdy and the 49ers i don't want any more hating on brock purdy because he didn't
00:28have debo or a uke or kittle and pulls off a victory in seattle to all our seattle seahawk fans
00:36tough i can't believe 49ers won really that was a crazy game i cannot believe it so congratulations
00:42we are doing our in office fantasy football so we're competitors but uh i i give that one to
00:49you because that was great yes yes it was okay well let's talk about our tracker and and what
00:53you've seen um of course we had all such a big week last week with the fed and we're going to
00:59get into inflation but first let's look at that housing data on inventory specifically what did
01:05the tracker show this uh week so i got a lot of questions on the tracker this this weekend and
01:12if it wasn't for a holiday week you know before um we saw a noticeable decline in inventory and a
01:22noticeable decline in our price cut percentages so that is material in the sense that you know we
01:29kind of highlighted you know there's the market is stabilizing in mid-june and then july came and
01:36august came well august for the first time in many years inventory actually declined okay and now
01:42mortgage rates are closer to six percent so here it is uh in our tracker article we saw a noticeable
01:50decline in inventory and a noticeable decline in the price cut percentages but i would say you know
01:56because it's a holiday i always no matter what wait two weeks and inventory should pick up next week
02:04but if it doesn't uh we might have seen the peak in inventory and uh if inventory decline in august
02:11which does not happen for us lately uh the last few years it's usually october november uh this would be a
02:17this would be a little bit change from the previous time and one of the more compelling things is that
02:23you know i was so happy to see year-over-year growth of inventory at 33 because i know how hard
02:27it is to get inventory to get back up here that number is now down to 20 percent and because inventory
02:35was growing you know october uh a little bit later in the year if if it is the decline we might see
02:44a noticeable decline even from the 20 percent level to even get down to single digits if lower mortgage
02:52rates do their thing and we see an earlier decline so we have to put it in context that we just in the
02:59past few years we haven't seen inventory peak and decline in august and we'll we'll keep an eye on that
03:05but uh we're near six percent now and traditionally what's happened after 2022 is when rates start to get
03:12closer to six percent the data starts to pick up the supply and demand equilibrium change it it kind
03:18of changed mid-june uh with rates closer to seven percent but it makes the tracker a little bit more
03:25valuable because you don't want to wait three months uh to to see kind of what's going on and uh we'll
03:32take it from there but uh it definitely caught my eye uh but i'm going to be a little bit mindful of
03:37let's wait until next week i even wrote in the article i think you know inventory should rebound
03:42next week but if it doesn't then we show the respect to the data that it deserves i love that
03:47um i think the thing that i really appreciate about the tracker is that you have all of the data points
03:53in there that can help paint the picture so you have mortgage rates and 10 year yield you have
03:57purchase apps you have inventory and your job is to put that all together and say here's what you
04:03should take out of this here's the here's what's happening in the housing market with all of these
04:07different variables you know and the best example i try to give is late 2022 when everybody was convinced
04:14that the big housing crash is coming it might be 10 to 15 years before home prices ever see
04:21an all-time high there's all these things and literally from what date sarah november 9th
04:28uh the forward-looking data got better and you know we thought okay it's going to be like
04:36maybe six months before people figure it out you know so we have to like do videos and teach people
04:41hey listen the housing market's changing if home sales get down to 4 million the supply and demand
04:47equilibrium is really going to shift well home sales got down to 4 million even faster than i thought
04:51and the supply and demand equilibrium shifted it shifted not in the greatest way because home prices
04:56were still up almost six percent in 2023 but uh um these things we have not only overall history
05:03for it but recent history as well in this crazy market uh so we're going to keep an eye on this
05:09and keep everyone uh uh up to date on the data so you don't have to wait two three four more months
05:14from the existing home sales report to kind of show it and highlighting the case that you know the last
05:20existing home sales report we saw some year over year growth something we've talked about in our
05:24tracker very very little but you know our weekly pending sales data had been picking up on a year
05:29over year basis and now it gets a little bit more interesting now that rates are down here super
05:34interesting yes rates uh hit an all new yearly low um again today that happened i think three times last
05:40week i mean they're not it's not dropping by like double digits right i mean we're not we're not
05:45talking like uh basis points i mean so um but hey we will take it so do you expect to see like okay we're
05:52now that we have had a couple of weeks of these new yearly lows do you think that's going to show
05:57up in the purchase apps here coming up so purchase application data is that what 31 weeks in a row of
06:02year over year growth you know 18 19 weeks of double digit year over year growth but what what i want to
06:08see is the weekly data firm up because in the past few years the week-to-week data really starts to
06:16become become positive uh that was something that did not happen so much this year the year over year
06:22growth was there and we can make sense of that because the new listings data is picked up so most
06:26sellers or buyers they pull out an application that makes sense because we got to the bottom end range
06:31of what we've seen a normal year but if the week-to-week data starts to improve like the last five weeks
06:37was the first time we're under 6.64 we see housing data change when rates go under 6.64 this is why a lot of
06:43people asked about the inventory data but last five weeks we had four positive weeks one negative
06:49double digit year over year growth on inventory if we get that strung out for 12 to 14 weeks then that
06:56becomes like what we've seen since late 2022 a couple hundred thousand more home sales and we we work off
07:02of that but now it's a little bit different because labor over inflation now here we are labor and now we
07:08get a first test of inflation week yes we do let's let's uh transition into inflation week so labor
07:15over inflation week had a wild week last week with the four different reports with the big big miss on
07:21friday of course we did a special episode on saturday um so let's talk about what you're looking for what
07:27is the fed prioritize in this inflation week so i think uh with cpi uh inflation because over 40 percent of
07:35the index is rent um the federal reserve to me what it's really going to start to look at well
07:41we have the service disinflation and then we're worried about tariffs okay so we're going to look
07:48at goods inflation but if service inflation is not declining or slowing down as much as we'd like
07:56you know they might make a a a fuss about that that you know uh medical service inflation or you know
08:04rents are not coming down enough something to that nature i think for this week because obviously
08:09the obviously the bond market cares about the labor market more than the growth rate of inflation but
08:14i think that's that'll be the key this week to see if we still see the service disinflation that was
08:21the story that the fed thought okay we're heading towards uh two percent but now is that not going
08:28down as much and we're we understand the tariff inflation they think it's one time only and then
08:34they'll move off with that so that'll be i think the the the theme of this week with the cpi data and
08:41then of course then there's the ppi inflation uh but again we're sitting here the 10-year yield is i
08:47think it's got as low as 4.04 we're still not under 4 which were common 2023 2024 um jobs data was much
09:00higher back then you know the job growth uh now it's not so you could still see that there's still
09:06a modestly restrictive tone to where the bond market is unlike last year where the 10-year yield
09:12got all the way down to 363 broke the hodor line so we'll keep an eye on uh how the bond market reacts
09:19to the inflation data interesting thing when you when you talk about rent and the fact that they're
09:24you know that that takes up so much of the inflation data in that report because rent is so you know
09:30that that goes to like how many apartments were built did those things stall um you're always looking
09:35at the construction workers like how many of those are employed on things that are residential homes
09:40either single family or multi-family so when you look at all that do you have an expectation of
09:45what this is going to look like i i would say this housing starts and permits have been at recession
09:51levels for some time if the federal reserve is fearing that rents are going to pick up again
09:59then the case is that they have stayed so restrictive that it's impacted the future supply of production
10:07um and the best way to deal with inflation is always supply right demand destruction can be a very
10:13short-term fix but supply is the real thing that does it so i if this is the case where
10:20they're not satisfied with the rent inflation
10:24it's time for the man to look in the mirror
10:28you know and say maybe
10:31we we've waited a little bit too long here and we need construction to start picking up again
10:38and i think that'll be something that you know down the line maybe the federal reserve members
10:42start to talk about that so we'll see how the service inflation looks for the cpi data this week
10:48so we knew that the bond market would be reactive last week to all that labor data is the bond market
10:52going to be as reactive this week when it comes to the inflation data so regarding uh this week with
10:57inflation if some people would make the case that some of the cpi components that were hot last week
11:03uh or last month are not going to be as hot and if that's the case maybe you know inflation comes in
11:10lower that's a maybe a better case for a 50 basis uh fed funds uh cut in the next quarter next meeting
11:20i i i don't know so much about that but i think it becomes a little bit more interesting now with
11:25the inflation data and the bond market because job growth is so low um and if jobless claims were
11:33rising i think it's a whole different ballgame i think the bond market wouldn't care because they
11:37would see that you know we're starting to lay off people and it gets more problematic for inflation to
11:42stay elevated if jobs are lost but i really want to see how the bond market reacts to a softer data
11:50or hotter data now because the 10-year-old is much lower now right we are we are we only got 24 basis
11:56points away from my bottom end forecast which is the hood or line again right you know i always have
12:04this joke that whenever the 10-year-old goes below four percent i bring this picture out and go we all
12:08survived the four percent tenure because all these grown ass men start freaking out when the 10-year-old got
12:14at four percent they're like we're doomed we're gonna cry oh in any case it's gonna take weaker
12:20data and a dovish fed to get us lower and break that but now we don't have that much leeway room as
12:27we did up when we're at 470 or 450 or 435. so fascinating to see how the bond market reacts to
12:34the inflation data at this stage so i feel like even since friday when we did our podcast um friday
12:42afternoon because one of the questions i always ask you is like you know do you think a rate cut
12:46is is priced in um do you think the fed's going to cut rates and then we you know we heard talk of
12:51people saying oh with this jobs report you know 50 basis points but that's not what they said on
12:58friday afternoon what what do you think you know austin goldsby one of the fed presidents like i'm not
13:03sure about my rate cut i don't know i don't know what do we talk about you know that they're going to be
13:07fed presidents not going to come out and go the unemployment rate is low jobless claims are low
13:14you know population growth austin goldsby chicago fed president said i don't know about rate cuts okay
13:21now i think he's full of it 100 because i know austin and i think he's in the 100 rate cut camp but you see
13:27the language they're using right so uh we need to be a little bit more mindful of what people like beth
13:34hammock and other people say but to me the market is pricing in a lot now even a 50 basis cut it gets
13:41harder when we get down to 380 it's like you know there's a reason why i really don't forecast below
13:465.75 percent look what's happened right fed funds rate going all the way to 2026 and 2027 neutral policy
13:53three percent that's kind of already in the marketplace it depends on the speed of how we get
13:58there so the fed hasn't turned dovish they haven't said a discussion of accommodative stance all they've
14:06said is neutral policy it's going to take a while to get to neutral policy do they say it might be a
14:12we might want to get to neutral policy a little bit faster that would be a change but all this is really
14:18the fed funds rate is still priced in at neutral policy at three percent so it's difficult to take that
14:24next level to get below 5.75 unless the spreads get better the economic data gets weaker or the fed
14:31gets more dougher so a lot has been priced in already just like last year last year was my god
14:37so many things we we priced in such a recession last year that you had vertical up move in in rates
14:45different story now we already have one percent rate cuts in the system we already have the jobs
14:49data is getting slower we're not even below four percent much different backdrop than 2024.
14:54again we might have that situation where um you know the bond market's already priced in
15:00these things the fed cuts rates and then we see mortgage rates go up well just like we did last
15:05year last year the economic data got better so if the economic data gets better you know uh it's not
15:11going to have the violent move like we did last year last year the 10 year was at 3.63 percent we are
15:1640 over 45 basis points lower uh uh last year than we are right now currently so a much different
15:23backdrop but uh again labor data runs all either positive or negative you know if the jobs data
15:31starts to pick up then you know the the case against rate cuts starts to go away then that's the
15:38paper rock scissors labor over inflation but we always keep an eye on the inflation reports
15:44to see especially you know how categorizes service inflation goods inflation you know
15:51do we just discount the tariffs for one year and then move on with it but what about service
15:56inflation now is that you know so that becomes a little bit more interesting and a little bit more
16:00nerdy on the inflation talk we have so many variables and i would say to our audience you know
16:07we're less than a month right at less than a month before our mortgage banking summit here in dallas on
16:13october 7th come in here logan he is going to give the most up-to-date thing there there will also be
16:18a time to ask him questions i believe it's at a cocktail party but he's our keynote speaker
16:24for the economic side and my gosh anything anything could happen between now and then and we will need
16:29your insight on that day come to dallas it's going to be a lot of fun and boy who knows what the fed and
16:36what's going to happen by i mean you think about what is the possibility between now and the end of the
16:41year shadow fed president you know who's the new chairman what's going to happen to lisa cook i mean
16:48just it's like what we said sarah from july 1st the second half of 2025 is going to be lit
16:56and brock purdy had a fourth quarter come back in seattle we're loving it all die now
17:03uh even even people who aren't niners fans are probably loving this rate drop so logan thank you so
17:08much for being on we will talk again very soon and it'll probably be about inflation so thanks for
17:13thank you so much for joining us pleasure
17:23you
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