- 4 months ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the latest drop in mortgage rates and whether the Fed rate cut has already been priced in.
Related to this episode:
Have Fed rate cuts already been priced into mortgage rates? | HousingWire
https://www.housingwire.com/articles/have-fed-rate-cuts-already-been-priced-into-mortgage-rates-today/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
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:
Have Fed rate cuts already been priced into mortgage rates? | HousingWire
https://www.housingwire.com/articles/have-fed-rate-cuts-already-been-priced-into-mortgage-rates-today/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
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 Fed meaning,
00:11but also the fact that we've had mortgage rates fall to another new yearly low right before that
00:16happens. Logan, welcome back to the podcast. It is wonderful to be here. Mac Jones and the 49ers
00:24come out victorious. I got to tell you this. When I get to scream, who did that? And the Niners beat
00:32the Saints on their home turf. It's always a good day for me and having all those injuries. And I
00:37was just not sure about Mac Jones. It was a wonderful victory. As you can see, I'm very
00:42excited for football season and we are good to go. No, football is what unites this country. Listen,
00:47we need football. We need all the sports. So yay. Well, let's talk about some good news today. We
00:52had mortgage rates hit another new low. We're down to 6.25%. And that's, of course, ahead of
01:00the Fed. So what's leading mortgage rates down that far? Another day showing the benefits of
01:06mortgage spreads. This is a very, very small, narrow example, but the 10-year yield fell a few
01:12basis points early in the morning after the manufacturing data, the headline missed estimates,
01:17but the internals doesn't look good. And it's funny, right when that report came out, I was making
01:22a video chart about manufacturing jobs. And manufacturing jobs actually peaked in November
01:27of 2022. It's been falling ever since. Not a lot of people know that, but it's been very slow.
01:34Usually, manufacturing jobs by itself won't create a recession in America. We had this,
01:41we had manufacturing recession in 2015, 16. But when manufacturing data and residential construction
01:46workers lose their jobs together, that's never a good sign. So the 10-year yield fell a few basis
01:52points. Didn't get to a sub 4%, it's about 4 or 3 right now. But it gave us fresh new low mortgage
02:00rates of the year right before the Fed meeting. For two this time, because by the time this podcast
02:05comes out, the builder's confidence data, retail sales will come out. So if those data lines tend to
02:10improve, yields go up a little bit before the Fed meeting. But yeah, it's what a way to start the
02:16week off. Yeah, really. And we're talking like, I think we're down one basis point from the previous
02:22high, which was down like two basis points from the one before that. So it's ticking down very slowly,
02:28but we will take it. It's going in the right direction. Yeah, I think the yearly low was 6.27,
02:336.27, and then it went up to 6.29. And then now it's six and a quarter. So we're kind of in the
02:38officially in the lower range, half a percent left for the downside. And again, look at all
02:44these things that happen, you know, the labor data getting really softer. Some of the manufacturing
02:50data is coming in weaker. Housing starts and permits are in recessions, and yet we're still
02:56six and a quarter with, you know, 4% plus 10-year yields because the Fed is, again, still modestly
03:02restrictive, and they raised their inflation expectations this year. So those things actually
03:07matter. And it could maybe, you could get an idea why we're still at six and a quarter with
03:13mortgage rates today. And of course, the big question is, does, what does that mean when we're
03:18on Fed week? We're looking at what the Fed's going to say. And that's something that you talked about
03:23with the housing market tracker over the weekend. That's kind of what you were looking at. You did
03:27a deep dive there. I would encourage anyone. That was great. Remember, you and I had a good
03:32discussion because I was like, maybe we should just publish that as its own thing. We'll publish the
03:35tracker. All that went back and forth because it was such a good deep dive into why we are where
03:41we are with mortgage rates. And I told you, no, Sarah, it goes into what?
03:47You did. We had a good discussion.
03:49You know what? Haven't I improved on writing the tracker? It used to be like 2,000, 2,500 words.
03:55And it's just like, you know.
03:56When you, listen, when you first started writing for us, it would be like 4,000 and 5,000 words. It
04:01would take me hours to edit. You're so good at it now. And most of your trackers are, you know,
04:06right around, you know, under 1,000. This one was a little bit longer because you did a deep dive
04:10there. But I appreciate it. And yeah, no, you've just gotten better and better.
04:14Yeah. And with mortgage rates, again, as always, 65 to 75% of where the 10-year-old and 30-year
04:22mortgage rates can go is Fed policy. And we're just, we're in a very unique spot with the Fed
04:27meeting. And, you know, I mean, if it was up, it was up to me. It's more or less trying to hold these
04:35lower rates for a longer period of time because some of the data lines get better and the Fed doesn't
04:40have to worry about it. But, you know, again, housing starts and permits have been a recession
04:44for years. So I think we talked about this last year. And I said, when residential construction
04:50workers lose their jobs, the Fed tends to ignore it, right? It happens every time. They tend to ignore
04:55it. They don't acknowledge it. And they say, well, the economy's strong. And all of a sudden,
04:59recession happens here. They have time. And you don't have to have rates at 3%, 4%, or even 5%. But
05:07housing typically does better when rates are near 6%, especially for the builder. So when this comes
05:12out, the builder's confidence index is one of these things that are now working for very low level. So
05:18it's a low bar to beat. And these are the smaller builders, not the big publicly traded builders or
05:22stocks are doing really well. So I think to me, I'd really love to hear their verbiage on trying to
05:28maintain these instead of, you know, allowing the marketplace to say, oh, listen, the Fed
05:36Fed is going to fight inflation. And, you know, they want higher rates. There's something where
05:42you can kind of get to the point that we'd like to get to neutral faster. And we're discussing what
05:50would need to happen for an accommodative policy, which means an accommodative policy changes the
05:56entire landscape for the bond market, for the Fed and everything out there, because we've never talked
06:01about trying to stimulate the economy ever. All we've done is how long does it take to get to
06:07neutral? That's the whole modestly restrictive stance.
06:09So I think it's interesting that you picked up, you know, you were talking about manufacturing data,
06:14because we know that a big part of what the Trump administration is trying to do is to drive
06:20manufacturing back to the United States, right, to grow that sector. So maybe talk about that. Like,
06:25what does that look like? If it's been in decline since 2022, maybe that's one of the reasons it's a
06:30focus of his to try to get those jobs back? You know, one of the bigger things I've ever
06:37written in my life was the 2016 article about manufacturing under President Trump, and that
06:43there's limits. There's the simple laws of limits to how much growth you can have in a sector where the
06:49output is so much different. You know, housing needs labor to build homes because we still build homes
06:57with hammers and nails. Manufacturing, it's not just the exporting of manufacturing to cheapers. The
07:05dollar is very strong here in the U.S. and technology that, you know, you're not going to get
07:12this massive big boom of manufactured jobs. You know, I laid that case in 2016. You can get some
07:19growth here, but we have to be realistic on what can happen or what promises can be made.
07:25But again, manufacturing has been slowly moving lower since November of 2022. It's been quite a
07:33negative sector in the U.S. here. And I just think it's hard when you're a consumer-based economy and
07:40people love cheaper things and you have the reserve currency of the world. It's hard to
07:46get people to, you know, build stuff here in America, you know, pay more and then have the
07:53costs go up and have consumers that are not disproportionately even with the income scale
07:58all of a sudden think, okay, can this work? And I don't believe, I think one time they kind of let
08:05the cat out of the bag when they said, well, we don't, we just want manufacturing as a percentage of GDP
08:10to grow. And, you know, some of the charts that I wrote in 2016 gives you a kind of an outlay.
08:15This is why I've always said that Trump really needs a lower dollar. You cannot have a strong
08:19dollar. If you want to be a manufacturing card, if you want to build stuff and sell it or, you know,
08:23outside, you know, you need, you need a weaker dollar. So two of the three things he's has,
08:30now the third one is, we always say the Trinity effect, you know, he wants a lower dollar,
08:34lower energy prices, and he needs lower mortgage rates. So what Trump's whole,
08:38at least how I interpret it, what Trump's whole game plan was getting those three things. And
08:42finally, mortgage rates are coming down to a lower part of his plan. And he thinks,
08:48he believes, at least I think he believes this, with lower energy prices, lower mortgage rates,
08:53and a weaker dollar, he can offset some of the chaos that the tariffs can cause.
09:00You know, I did want to bring up, because we were talking about mortgage rates, we're talking about
09:03last week, I mean, we've been mentioning mortgage fraud, and them going after, you know, Federal
09:09Reserve Governor Lisa Cook. And we did get some, on Friday, news broke that her, her loan estimate,
09:17at least, had that she had put down that her property was for vacation, a vacation home, so not
09:24primary residence. So now there's a lot of question about like, okay, well, where are the other documents
09:30that that Pulte talked about? Are these, you know, what's going on there? It was, I was not able to
09:35find the documents across the board from Pulte, or the loan estimate. So I know that other news
09:41outlets have the loan estimate document. So I thought that was interesting, and something to
09:46bring up, because we have said, okay, you know, this is something she's done. So I wanted to bring
09:49up also that there might be some question now on whether that is mortgage fraud, and whether Lisa Cook
09:54will continue, may continue, and definitely to be a member of the Federal Reserve.
09:59Loan estimates are loan estimates. They're not official documents of the paperwork. I actually
10:06thought it created more questions about this. To me, her, if she, if she says it was a, if her attorney
10:15says it was a clerical error, and that Biden's team didn't look at it enough, and then somebody comes
10:21out with a loan estimate, something doesn't add up there. Like, you know, you know, I mean, if it
10:28was, if it was simply, hey, listen, I, it was, it was a vacation house, then the attorney would say
10:34it. A loan estimate can give you a preview or a rate, or whatever it is, in that you need the final
10:40paperwork. But again, this is all smoke and mirrors in the big picture of things. Trump is playing New
10:47York bully ball. He's already got one Fed member to resign early. He's going for another person.
10:54It doesn't really matter too much for this Fed meeting, because Dr. Cook was one of the more
11:02dovish people out there. So it's, it's not going to be an issue if you can't get somebody else in.
11:11Then going out, it's a little bit different. But again, to me, this is more about putting his rubber
11:14stamp in it for the next few years out there. And again, it's, it's very, it's, we said this many,
11:23many months ago, they are going to go after Fed governors, right? And they are literally researching,
11:30they are hiring specialists to find anything possible to hold it against you. And we said,
11:37there are skeletons out there. And Kalga retired early. We'll see what happens with Cook. This
11:44still might not be over with, right? I'm lucky for Beth Hammock. Beth Hammock is not a voting member,
11:52because she would have been, you know, Trump would have been all over that, you know, what are you
11:55talking about? You know, no rate cuts. So it's one of these things where it's, it's very unorthodox.
12:02However, if you've seen how Trump has operated for the last few decades, it's very normal for him.
12:08So, well, well, whatever it happens for the, it's not going to matter so much for this Fed meeting
12:13going out in the future. It is. And again, they have not pulled a shadow Fed president
12:18card yet. Again, partly, I believe Trump likes to have a punching bag, but also I don't think he's
12:25quite sure about Christopher Waller because he's a Fed member already. Trump wants loyalists and Kevin
12:33Hassett will do what he's told, you know, and Trump might feel a little bit more in control with having
12:42Hassett or Kevin Walsh in there rather than Waller, who a lot of Wall Street people will respect and say,
12:50okay, listen, we're not going to go crazy land here. You know, if rates do need to be go up or
12:57there's, or rates need to go down, he'll have at least a coherent argument and he'll try to rally
13:02up the board members to join him. I think the important thing here is no one expects that even
13:08if he packs the Federal Reserve, I mean, you can't really get to the emergency rate cuts that he wants.
13:14I mean, I think if you did that, it would, it would throw, you know, a lot of things. I don't think
13:18that would be good, right? I mean, how could they, how could they cut rates?
13:22Emergency, emergency, we're talking about emergency rate cuts. That's how crazy this
13:25role is. To get the Fed funds rate down to where he wants below inflation, that's, that's not going
13:30to happen. I mean, I don't, I mean, Scott Bissett wouldn't even advocate for that. I mean,
13:35he hasn't been advocating for that as well. So I think to me, it's like if the 10 year yield is
13:40between 380 and four and a quarter and the spreads are better, I think they could live with that to a
13:45degree out there. But I've always, I always thought this to be, they want a lower dollar.
13:52And I think that's, that's just, that's my, I'm an economics person first, housing second.
13:57So to me, you, you cut rates and you lower the dollar because that's what he needs for
14:01manufacturing. That's, that's why I always say that he, Trump's going to go after a lower dollar
14:05because that'll work better. The dollar got too strong early on. You know, my joke was always
14:11in the last few years, I'm going to be the dollar, the U S dollar for Halloween. You know,
14:15if the dollar hit one 15, that's going to be an absolute wrecking ball. And I'm just going to be
14:20the dollar. Like I was John wicks pencil one time for Halloween, you know, so the U S dollar at one
14:2615 would be worse than John wicks pencil. You know, listen, I do enjoy a good John wick movie there.
14:32I don't even know how many of them there are. They're always on TV. And so I've seen all of them
14:36multiple times. Yeah. The John wick thing. I went and watched some of my debates with the
14:44doobers when I went on their YouTube pages and stuff. And I got to tell you, I'm like the John
14:49wick of America going after the American bears, you know, for this. I mean,
14:54Okay. I don't want that. That's too hard.
14:56These people actually let me go on a show with them. And they've actually, I encourage everyone
15:02to go back and listen to some of these things. This is, we had a gentleman come on our housing
15:06wire, two of them, two of them in 2022 and 2023. And they just threw stuff up in the air. And we're
15:13like, y'all just making stuff up. Y'all just throw it. We always say people just make stuff up. They go
15:1710%, 15%, 20%. Why? That sounds very good. You know? And I think the thing that's surprising
15:25about you in a debate with people is you are very gentlemanly, but you kill them with the data.
15:31You're not like yelling at them. You're not disparaging them. You're just like,
15:35okay, so what about this? Okay. Well, let's talk about the five-year. Okay. What about,
15:39and it just, it becomes obvious pretty quick that like they, they may not know what they're
15:44talking about. So I would say that. My mentor taught me that if you're going to be in a war,
15:50make sure your enemy is very overconfident and allows you to get close enough for a sword.
15:56Use their overconfidence against them. And then when you get them into a live debate and
16:00everyone gets to see the name, face, and for, and then for the next 20 years,
16:05they have to forecast and they can't do it. I know that, right? So not only is the accumulation
16:10of 14 years of crazy calls, but it's the next 20 years that I want, because you force these people
16:17to do something they cannot do that. I know they can't do. You just got to make them lull them to
16:22sleep to let them get you in. And then you go, okay, I'd like your last five years forecast in a
16:26working model. You can't do it. And then the next 20 years, like, like, so I think people have
16:30finally figured out what I'm doing here. And now it's like quiet land. Nobody's ever saying
16:34that's the John Wick of housing right there. Okay. Less killing involved. Okay. Let's talk about the
16:43other things that you pointed out in the tracker, especially housing inventory. Cause that has been
16:48kind of weird in August, right? Well, again, for us, we always believe looking current and forward
16:55and the housing tracker kind of picked up a little bit change in the data mid-June. Mid-June is when
17:02actually the 10-year yield started to go lower. And then when the 10-year yield even reversed,
17:06it wasn't very bad because the spreads were getting better. So all I saw was a stabilization.
17:10Then July, the fourth weekend came, it ruins everything for two weeks. But then in August,
17:15we had a very, very rare decline in total inventory. And part of that is I think the
17:20percentage of inventory grew very good this year. I was very happy. That's still to me the best story
17:24of housing in 2025, but it was just very hard to hold up. I didn't believe we peaked in August.
17:31I thought, you know, we could get maybe a few more weeks where we get a little bit higher, but
17:35that has not been the case. And then two weeks ago, inventory had a big drop and then it correlated
17:40with rates falling and people were saying that's the peak of inventory. And I was like,
17:45no, no, no, wait two weeks. You've got to wait two weeks and then let the holiday weekend work
17:51itself out. And then we get back to normal. And that's exactly what happened. Last week,
17:56I talked about, you know, inventory should pick up, inventory picked up to where it kind of was
17:59before. The new listings data is negative year over year, but I think that works itself out.
18:04You know, as we get closer and closer to the end of the year, the new listings data starts to
18:10compress lower and lower like it does with other years out there. So I still think we're showing
18:14year over year growth and new listings. It's just a holiday working itself out. The only thing that
18:19did it that surprised me about the tracker is I thought the price cut percentages would pick up
18:23just a little bit. That didn't case that kind of stabilize. So you can see now the aggregate data
18:28from, you know, June, we go to July, August, and now September. So we have three months of data
18:34it's stabilizing, right? So what was happening earlier in the year is different. And now mortgage
18:39rates are lower. And so far we've had six positive forward-looking purchase application days. You need
18:4612 to 14. What we've never had in many, many years, positive weeklies and positive year over years
18:54together. It could be the first year in many, many years that I could actually say we have 12 to 14
19:01weeks of a positive weekly and year over year trends. The whole year we've been pretty, pretty
19:06much positive year over year, but the weekly data just wasn't as strong rates, you know, volatile just
19:11a little bit, but we just were never under 6.64. So as soon as rates got under 6.64, it has been a
19:17pretty clean, positive weekly and year over year data. So it'll be very interesting if the next six to
19:22eight weeks gets that full thing complete and then purchase apps usually take 30 to 90 days to fall
19:28into the sales. Our weekly pending sales and pending contract data are still showing slight
19:33year over year growth. So we will take it at that point, but it is encouraging that we saw all of
19:39this with elevated rates. And now we're getting down to here. And this is not the sub 6% mortgage
19:45market world because, you know, the builders, new home sales are at 2019 levels. That's like a million
19:50to 1.2 million more existing home sales if we wanted to run a model based off that, but we don't have a
19:56sub 6% mortgage market. So we don't go there at all.
20:00I love it. Well, there's so much there. The reason that it takes you, you know, a thousand words to do
20:05the tracker is because you're tracking like 10 different things. So it's very succinct on each one,
20:09but I would encourage people to go look. We've made it easy. Now it's at housingwire.com slash
20:13housing market tracker and also encourage people. We are getting really close to October 7th when you
20:19are going to give your, what the bleep is going on with housing at our mortgage banking summit.
20:24So people should come, they can interact with you. We've got a lot of great speakers. It's going
20:28to be incredible. You know, it's funny how things change so fast, you know, with housing data,
20:36because when a sector revolves around the bond market, right? And the chart daddy says,
20:42I wake up, I get, I'll go to sleep. The 10 year yield is right next to me. I'll get up at two o'clock
20:47in the morning and I'll look at the 10 year yield and I'll put some tweets out and people go,
20:51you never sleep. And I go, that's absolutely right. Um, how things can shift since late 2022,
20:59right? Since late 2022, we've had some supply and demand equilibrium shifts and it really revolves
21:04around the 10 year yield. And it's when the 10 year yield gets toward 4% or under that some of the
21:10data lines has shifted late 2022. It shifted, uh, last year. Uh, but it's usually when rates get
21:16towards 6% and we've tracked this and we show people this. And I think the trackers,
21:21the trackers job is to get everybody in line to what's happening now. And that'll happen in the
21:27future. And the sales reports, because everyone is still reading old data. Like it is funny to me
21:31that people are still reading data from like three months ago and they go, Oh my God, this is really
21:35up. So I have had people literally tell me this is exactly what happened in 2007 and eight.
21:40This case Shiller price. And I said, you know, case Shiller is still up year over year. Like
21:44what? I said, you don't read it's okay. But in any case, this is the like exact opposite of the
21:50supply and demand equilibrium of, of 2008, but how fast things can change. Right. And then last year,
21:56you know, mortgage rates had gone up. Uh, uh, uh, we got back up with over 70%. The question is,
22:01does this happen again? And we're going to spend another year in 2026 trying to,
22:06but the one thing about, you know, uh, short-term rates falling is that those arm products are
22:11starting to look juicy. Right. And, uh, uh, if you, if you, if the spreads are still wide, like
22:17if the spreads were normal, we're at five 65 80 on the 30 year mortgage. Right. So, but if the
22:23spreads are still wide, but the short-term rates keep on going lower that, that those arm products
22:27look, uh, uh, more enticing out there. Oh, it's going to be really interesting. Of course we are
22:33on pins and needles about the fed. We'll be covering that, um, completely every, every
22:38single day. So Logan, thanks so much for being on here. John wick. Thanks for being on pencil.
22:43He killed a man with a pencil. You know, that was one of the greatest scenes. He's totally
22:49telling the kid, do you know who you're talking about here? Oh, very, very apropos. Okay. We'll
22:56talk to you later, Logan. Thank you.
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