Why housing demand and pricing have firmed up

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about why housing demand and pricing have firmed up.  Related to this episode:  ⁠Mortgage spreads are the hero of the 2025 housing market | HousingWire⁠ https://www.housingwire.com/articles/mortgage-spreads-housing-demand-2025/ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠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.

Transcript

00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about why housing demand

00:12and pricing is firmed up. First, I want to thank our sponsor, Trust & Will, for making this episode

00:18possible. Logan, welcome back to the podcast. It is wonderful to be here, Sarah. And boy,

00:25today's podcast is going to be a treat. Okay, so really good news that we've seen some

00:31firming up as far as demand. What did you see in the tracker this weekend? Okay, it's Monday morning.

00:38Pending home sales just came out. It showed 4% month-to-month growth, 3.8% year-over-year.

00:46But one of the things we've done over the years since late 2022, we believe our tracker data

00:53and how we look at housing economics is a little bit more prolific than other people because I

00:59think other people just highlighting like all about price. And there's a reason why I don't put our

01:05new median sales price data into the tracker. I want to focus on the economics, the equilibrium

01:11of housing, the slope of the curve, just to keep everyone at bay because this is now the third

01:16time since late 2022 that when we flag the market changing and we think that people are going to

01:25wait many, many months before they figure it out, this is another year of this. And I say this because

01:32now our median sales price data firmed up. And last year at this time, when people thought home prices

01:40were falling 5%, 10% nationally, what happened is our forward-looking data started to get better

01:47and then our pricing data firmed up. And last year, I knew it in September and October that I was going

01:54to lose my price forecast. I was 2.33% last year. And because the pricing firmed up late in the year,

02:01I was going to be wrong. So whenever you have back-to-back negative real home price forecasts,

02:06you believe pricing is materially weak. But in this case, I had assumed that we were going to have

02:14negative year-over-year data with our pricing in September or October because of what happened last

02:20year. The comps are very hard. So not only has housing demand, the forward-looking data start to

02:26pick up, our weekly pending sales data just hit a multi-year high. Our year-over-year growth and

02:33purchase applications for the calendar week hit a year-over-year high. We had another positive

02:38week-to-week purchase application data. Pending home sales were positive month-to-month and year-over-year.

02:45This kind of all started in June, mid-June, when we started to say, you know, it looks, things are

02:52starting to change. And by the time, it's going to take like three to six months before people figure

02:57it out. And our inventory growth went from 33%. And I think people are still stuck in the inventory

03:04growth being 33% and rising. It's now down to 18%. New listings data peaked May 23rd and been slowly

03:12moving down. So the supply and demand equilibrium changed and then rates went lower. Rates went below

03:186.64%. Mortgage spreads, August spread, hit the lowest levels of the year. So here we are.

03:27We have multiple confirmations of data and now the pricing data firmed up. So the Case-Shiller

03:34Index, when it comes out, is now materially old. And I'm just going to wait and see how many people

03:39actually figure that out. Because in late 2022 and last year, it was months before people figured out

03:46what was happening here. We can connect the dots so we can be the detective, not the troll. And all of a

03:54sudden now, it's like, now what? How many people back in mid-June were starting to flag this? How many

04:00people talked about this in July that the growth rate was slowing down after the holiday adjustments?

04:05How many people talked about the forward-looking data is going to get better after 6.64? And now,

04:11here it is. We have the whole, again, enchilada of data to prove that this is a functioning,

04:16working model. But it's also months ahead of everyone else's standard reporting that they

04:23listen to all the time. So here you're giving, and you have been pointing this out for months,

04:27that anytime we go from 6.64% of mortgage rates down to 6%, that's when we see this data getting

04:35better. So I know you just said that's part of it. Is it also the time of year? Because the same

04:39thing happened last year at this time? No, it isn't. November and December is starting to be

04:46the traditional seasonal demand curve with purchase application data, which is not normal. Usually,

04:52it's the second week of January to the first week of May. But in the last few years, we've seen

04:57purchase application data picked up. Last year was rates were actually heading higher, and the purchase

05:01application data picked up. But I put that into the seasonal factor. Just when you have a seasonal

05:08factor of people applying, you just get a natural burst of demand. So I kind of ignored that toward

05:15the end of it. This started eight weeks ago. And that's exactly when rates went below 6.64%. So the

05:22last eight weeks, the majority of our weekly pending sales take some holiday adjustments out positive

05:29year over year. Purchase application data out of the eight weeks, seven positive, one negative week.

05:34The double digit year over year growth the entire time. When you start to get 12 to 14 weeks of

05:43positive weeklies, then it becomes something material. See, last year, I could kind of understand

05:48what people were thinking. They saw the purchase application data negative, and they thought sales

05:53were declining, right? And inventory was rising. But that wasn't the case. Our weekly pending sales data

06:00started to deviate from the last few years. And then it takes like two to three months after the

06:07year started by the Case-Shiller and everybody else to kind of pick up on it. So here, it's the third

06:13time now since late 2022, right? So inventory went from 33% year over year growth to 18. Last year,

06:21inventory, you know, it took to October. And usually it takes to October, November. So if we get any kind of

06:27seasonal decline early, the year over year percentage will start to decline, but now rates are lower,

06:34right? And the demand is picking up a little bit. Nothing spectacular, nothing big. But at least now

06:41you have 2022, 2023, 2024, and 2025. The slope of the curve with live, fresh weekly data looks current

06:49and out, you know, 30 to 90 days. And it gives you a better idea that, you know, rates just getting

06:56down to 6%, like I've talked about on CNBC, Yahoo, and many other networks. Housing is okay, right?

07:05The builders, of course, are at 2019 sales levels. They've sub 6% mortgage marketable. That would

07:11equate to 1 to 1.2 million extra existing home sales. We're not that marketplace. But just getting

07:18down to 6%, you know, things get better. But this last week was the first week where pricing actually

07:24firmed up. And it's almost October. It's not the time of the year for pricing data to firm up.

07:31We always kind of joke that the Redfin data, the greatest seller-buyer's gap in inventory in the

07:36history of America, that data is actually starting to pick up on a year-over-year basis their median

07:42sales price index. So here it is. Now it's another time in a row. Like, you know, and I had to ask

07:49everybody, how many people were you listening to that in mid-June started to say, hmm, something's

07:55changing here, and then followed through with it week after week, week after week, week after week,

08:01to the point now, pending home sales beat. Existing home sales, year-over-growth. New home sales,

08:07you know. So there is a working theory here. This is why I always ask for people's models. I want to

08:13see, like, why are these people always wrong all the time? They don't have any working models. They

08:17have a theory. They have a theory that doesn't work. If your theory doesn't work, you need a model.

08:22You don't have a model. You're just throwing stuff up in the air. And I know this because I went on one

08:27of the Doomer's YouTube pages last year around this time, and he was like 5% decline in 2024,

08:33and then a 12% decline in 2025. That would equate to this, you know, the biggest price crash in the

08:40history of America post-World War II matching 2007 and 2008 in the housing market. None of the data

08:46was here for that. So you have to ask yourself, who's the bigger fool? The fool or the fool who

08:54follows him? Obi-Wan Kenobi, Star Wars, great movie. Some of you kids should go see it.

08:59Oh my gosh. Okay. So I think that's important to talk about because a lot of times, you know,

09:04if you just hear someone and they're like, if rates fall, then, you know, demand picks up. Well,

09:09yeah, that's true. That's not what you're saying exactly. What you're saying is when rates just fall

09:14down to 6%, because we know, like, yes, you know, anytime rates go lower, demand picks up. But where

09:19you see actual things happen is as it gets closer to 6%, and it has to get below 6.64. That's where the data

09:27has shown it makes a difference. Yeah. And early in the year, we had positive year over year growth

09:33the entire time. So people are like, whoa, we have like positive year. We haven't had that in one. But

09:38the week to week data was choppy, right? It was just, there wasn't any traction there. One week

09:43would be positive. The next week it would be negative. And then the other week would be flat.

09:46So we didn't have any traction. We need about 12 to 14 weeks of traction. Last year, we had that.

09:52Last year, out of an 18 week period from seven and a half percent mortgage rates down to six,

09:5712 weekly positive, five negative, one flat, no year over year growth really until October,

10:03right? But during that whole time, people thought sales were declining. So they naturally went into

10:07the home home prices will fall 5% nationally on a nominal. That wasn't the case. And this is a

10:13difference by having live tracking data because our weekly pending contracts that, and people come up

10:18and say, well, all these homes are being canceled because Redfin, but Redfin is like really like

10:23leading people to some bad, you know, they need to come in there and like teach people how to read

10:27their data, right? Redfin's cancellation rates have pretty much been the same for the last three years.

10:34What they always do is they revise their previous year lower. So even if it shows a little bit of

10:39growth the next year, it's an all time high, you know, and that's just, that's just not working here

10:46in that sense. So the man just picked up a little bit, pricing firmed up a little bit,

10:52you know, inventory growth has slowed down, but how many people were showing this to you on a week

10:58to week basis, comparing it to the year, but what got us here, right? Labor over inflation,

11:03the 10 year yield, the spreads, right? Mortgage spreads. We made the whole tracker about

11:08congratulations, mortgage spreads are the housing story of 2025 because we are 0.2% away from my

11:16peak improvement forecast in 2025. That means that the spreads just improve

11:21a little bit more than 0.2% basis. I was too conservative out there, but here at least we

11:27get to show it because I believe if you educate a society, if you teach people how to read and

11:32write and everything, they become so much better than that YouTube trash out there.

11:36It's true. Okay. So let's talk about mortgage spreads. So at what point do you say I was too

11:42conservative? Because of course we would all love it if mortgage spreads got even smaller and that

11:47meant mortgage rates went down. So how, why do you, you know, how much room is there?

11:52So I look at it as mortgage spreads were 2.54% on average for 2024. So if I assume the 10 year yield

12:01and the Fed is still dovish, the spreads with volatility compressing should naturally come down.

12:08Now we had a brief period where Godzilla tariffs changed that for a little bit. The spreads got worse,

12:13but only about 20 to 25 basis points worse, but it did get worse, but now it's down. And I was

12:19looking for 27 to 41 basis points of improvement. We're at 39. So it looks about right to me. If you

12:25go back to every single economic cycle post 1971, where how the spreads operate with volatility,

12:32compressing and all this. And I say this because there wasn't a lot of us that said mortgage spreads

12:37would improve in 2024 and 2025. Cause a lot of people say that it's a federal reserve is not

12:42buying mortgage backed securities. It's never going to get better, but it could get severely worse.

12:47That's not how it works for many, many decades. Now I personally think these people are lying

12:53because who the hell knows about mortgage backed securities or mortgage spreads, right?

12:57It was like normal people wouldn't know this. So they say the Fed is manipulating everything.

13:02The spreads, here we are. Right. And it looks normal. This is why I always joke about what everyone,

13:07I said, Oh my God, look, the federal reserve was selling, you know, all its mortgage backed

13:12securities from 1971 to 1979 where rates went up. And then all of a sudden they started buying from

13:171981. No, they didn't. They didn't do anything like that. So a good improvement. And again,

13:24the 10 year yield never got to the lows that we saw last year. Right. Right. A 362 intraday. We got

13:30overnight Sunday trading at 387 after Godzilla tariffs. But if the spreads hadn't improved this

13:37year, like I thought they would, we would never have gotten near 6%. And we don't know how the data

13:43would have looked like. So to me, the 2025 housing hero and not all hero wears capes because I know a

13:50mortgage spread does not wear a cape, right? Not even for Halloween, but it made a difference this year.

13:56And as long as volatility compresses, you know, you can get the 10 year yield a little bit lower.

14:01We still have about 35 basis points to get to somewhat back to normal. And then 55 basis points

14:09to get to the best levels of a normal, recent normal spreads. And you're sub 6% mortgage rates easy.

14:15And now we see what sub 6% mortgage rates does that housing, but even just near 6%. And that's the

14:23beauty of supply and demand equilibrium economics. And it's so beautiful with the slope of the curve

14:27and the tracker we all, and those that read the tracker knew it while everyone was sitting there.

14:33And I can't wait to watch the Case-Shiller price index and see how many people are still stuck in

14:38backward data. But there is a material change in multiple data line sets. The pending home sales

14:43finally caught up to what we've been talking about. And we still haven't had 12 to 14 weeks of positive

14:49purchase application data yet. That could still take us, of course, by the end of course,

14:55or near Halloween could be the first out there. So very exciting. You know, it isn't like the V-shape

15:01recovery in COVID, which was very easy to read. This is a little bit different. This is the nitty

15:06gritty. So again, whoever you listen to, if you're getting duped by people, they don't respect you as a

15:13human being. They just basically say, we can say whatever you want, and you'll believe anything we'll say

15:17because you're a sucker. Right? And who wants to be a sucker? Right? Who wants to look at it and

15:22says, this person just is constantly looking at me. And trust me, they're all laughing at you anyway.

15:27Right? Look at me. We've been wrong for like three, four, five years, and people are still

15:30living with us. What a bunch of jackasses. So like Obi-Wan Kenobi says, who's the bigger fool? The fool

15:37or the fool who follows him? Ben was right. It's the fool that follows him. That's the bigger fool.

15:42Okay. So let's talk about what could, anytime we have some outside variables, those can affect

15:50the spread. So let's talk about a government shutdown. In a normal period of time, a government

15:56shutdown can be kind of a big deal. We've had so many of them over the last couple of years. I think

16:01it maybe depends on number one, if it happens, and number two, how long it stays for. What is your

16:07opinion on how that could affect mortgage spreads? Well, it appears that they've locked up Wilbur Ross

16:13so he can't make another crazy statement about a bridge loan to shut, you know, to save the

16:18government shutdown. You know, it's always a toss up to duration. You know, I know some people said,

16:23well, what if they lay off a hundred thousand federal workers and will rates go down because

16:29they have, so guys, there's 160, there's over 162 million people working, man. You know, so,

16:35you know, that, that is too small. It's like the foreclosure data that people. Yeah.

16:42So just by itself, the shutdown doesn't have that kind of power to.

16:45It doesn't have the scale. What the government shutdown does is over time, every single week,

16:50like, can you get an FHA condo approval or there's stuff like we won't get the jobs data.

16:56Like y'all, y'all pick the worst week to do a government shutdown. Wait, wait another week.

17:01So we get the jobs data, but you know, jobs data goes away and, you know, things over time,

17:08they just don't start working right, you know, out there and people get frustrated. So

17:12we've only had one prolonged government shutdown and then Wilbur Ross, the hero we all deserved,

17:20came out and told everybody that, you know, we all needed a bridge loan. And after that,

17:24it was just like, that was it, you know, they had to restart it. So we'll see, we'll see how this

17:28works. I mean, again, this is, this is like, it's, it's like child summer camp play between

17:33Republicans and Democrats. This is absurd, but we're all used to it now, the debt ceiling and

17:38all this stuff. But we'll, we'll take it one day at a time and see, you know, if it does happen,

17:44how long it lasts, because it's something that you could change like this. And the market knows that,

17:49right. If we really wanted to, we could fix it like this, or we could extend it or punch it away

17:53or do whatever. And then, you know, you know, that's why we're, we're, we're not prone. I remember

17:58the first debt ceiling, God, back in like, I don't know, 2010, 11 out there. And nobody knew what

18:05this would meant. People thought, are we crazy? Are we going to like not pay our, you know, and people

18:11thought the 10 year yields were going to skyrocket and the U S economy was going to crash. And

18:15hey, really not too much happened. So I can understand the fear of the first one,

18:21but now I think we've all, we've all gotten used to this and they always end up fixing it. So

18:25it is what it is. This is just part of the world we live in.

18:28It is. And I hope we get the jobs data this week. But even if we do, you don't expect that to

18:34make much of a difference in, in rates, correct?

18:37My, my take is that GDP is held up good. Some of the consumption data is just holding up good.

18:44There, there's some business investments in similar to the first trade war tap dance. Business

18:48investment is, is kind of iffy on that. Again, we are a consumption-based economy. As long as

18:55people are spending, buying goods and services, this, this can roll. And why, why is this? I mean,

19:01literally we, if it wasn't for COVID, we'd still have the longest economic and job expansion.

19:06Why? Because household balance sheets changed in the United States of America. If any analyst is

19:13listening to me, I urge you to verse yourself in the 2005 bankruptcy reform laws and the 2010

19:19qualified mortgage laws, and look back how credit used to look decades and decades. And it's the most

19:26impactful changes in the United States of America. It gave us the longest economic and job expansions

19:32in history. And even with, you know, the Fed funds rate and mortgage rates holding up, consumption

19:38still had because the, the bulk of the loans are out there. You know, we just got the FHFA data

19:43in the article that I, that, that I wrote, I'm showing you how much nested equity and how,

19:49how many, how much of the country, 70% of the country still has rates, you know, 5% or under

19:55households are still, you know, holding it together. So I think that that's the big difference

20:00because so many people are like stuck in the pre 2008 credit markets as always. And they just

20:07quite haven't versed themselves on the changes out there. And we've had many recessions post

20:11World War II. But again, we only had one foreclosure crisis, right? And the backdrop is just not only

20:17not similar, it's the complete opposite, but some people can't get on going. We always say that

20:23it would be really good for hospitals to have like a therapy room, the 2008 men that are stuck in 2008

20:30economics or reading zero hedge or how I call it zero brain dead, you know, and get therapy and

20:36help yourself, you know, and, and you, you only live once. And a lot of you guys, you guys gotten

20:42older. It's not that much time left. You really want to be stuck in a period like that. You know,

20:48do you really want zero brain dead to manipulate you guys and still, no, I mean, come on, live,

20:55live, enjoy your families and friends and football and everything. And all that Niners Jackson.

21:00But, you know, don't let go of the past. Stop dancing with a ghost.

21:06I love it. Well, I think that's a good place to end. Thank you so much, Logan. We will be talking

21:10to you later this week. See if the government shuts down on Tuesday night at midnight, or if they

21:16come up with something and what that means for the economy. So thank you so much.

21:21Pleasure as always, Wheeler.

21:30We will be talking to you later.

21:34We will be discipled and we will be listening—

21:37bearingENCE dum辛 All right.

21:38We will have some good skills to do with respect for our journey to life.

Category

Transcript

Be the first to comment

Recommended