How the shutdown could impact housing

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the government shutdown, the ADP jobs report, the latest in the Lisa Cook case and more.   To learn more about Trust & Will, visit https://trustandwill.com/⁠⁠⁠   Related to this episode:   ⁠Fannie and Freddie waive some loan requirements amid shutdown | HousingWire ⁠  https://www.housingwire.com/wp-admin/Fannie%20and%20Freddie%20waive%20some%20loan%20requirements%20amid%20shutdown  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠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.

Transcript

00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the government

00:11shutdown, the ADP jobs report, the latest in the Lisa Cook case, and even more. First,

00:17I want to thank our sponsor, Tristan Will, for making this episode possible. Logan,

00:21welcome back to the podcast. What a day. Man, a lot has happened. It's Wednesday morning.

00:28Usually it's just purchase apps and, you know, what the bond market is doing, but the government

00:33shut down, right? Where I was up having popcorn with my screen buddies getting on the phone and

00:40saying, what's up? You know, and it happened. So here we are. We have a lot to talk about today.

00:47We have a lot to talk about today. So we, you and I weren't even going to have a podcast today

00:51because I already had one with the California Mortgage Bankers Association, which lovely

00:57interview, which I had done earlier. So I was like, no, no, this is great. And then overnight,

01:02of course, government shut down, but also that jobs report. So we're going to, we're also going

01:07to talk about Lisa Cook. We have so much to talk about. Let's start with the jobs report because

01:12that was pretty bad. So the ADP had another negative print. The revisions weren't great.

01:18And Trump can't fire the ADP person. By the way, Trump withdrew the person that was going to run for

01:25the BLS. So I think everyone on X was like, okay, that's good. Cause that guy should not have been

01:31like at all, even in contention. So that that's a good thing that whoever it's not going to be him

01:37running the BLS next. However, the ADP reports private and it's basically the same story.

01:42It's the same story. Things really started to slow down at the start of the year. And if that one

01:48jobs report a few months ago, didn't have a blowout federal government or state government

01:55hiring, we wouldn't have wasted one month of just dealing with that. But now it's a trend,

02:03right? And it's October, right? It's October. Yeah. So it's not like, okay, you could have one.

02:11There's always at least two to three reports a year that misestimates. Okay. This is not it. This is a,

02:16this is a trend. And then we, we always like to take the aggregate data. What's happening?

02:20Manufacturing drops, being lost, residential construction, jobs, being lost, especially

02:24contract trades or jobs being lost. So it's, it's not shocking, but this puts the fed in another

02:30bind. If you believe they cared about the labor market getting soft as this, which I don't,

02:35we talked about that last time that the labor market is getting softer and they don't care

02:39until it breaks. GDP is still above 3%. Consumption is still good. They're just going to let it

02:46ride until jobless claims break because they can't hide. They can't, they can't hide behind

02:51jobless claims spreading up higher. So for now, bond yields fell just a little bit, a few, few basis

02:56points, mortgage pricey flat, slightly lower, not too much action on that side, but it's just the

03:03same continuing trend. And I just don't think the fed cares really that much. I know you do. Okay.

03:10So the ADP report, this is the one that you normally don't pay that much attention to because

03:15we have all those other ones. Why do you think that, is it just because it confirms the trend

03:20of what we've already seen that you're paying attention to this one?

03:23Well, we have no more reports this week unless the government comes back.

03:27Good point.

03:28There's number one, like I always say the job, the ADP report is, you know, is the least important,

03:33but it just continues a trend, right? So, you know, there was a good, there was a good question

03:41I got asked that the tenure yield is still above 4%, but the jobs data is noticeably worse,

03:49right? You know, job growth is noticeably worse from last year. So if you track the BLS and the ADP,

03:55the private sector of jobs are really declining on a net basis now together. But last year,

04:05boy, the tenure yield, tenure yield really thought we were going into recession, which wasn't the

04:10case. There were still enough jobs being created and GDP was still fine, but it overreacted to the

04:16downside. The whole door line was broken. Sarah, they broke the whole door line and what do they

04:20think was going to happen? So we reverse back up here, but now the bond market's a little bit more

04:25disciplined this year than last year and they're keeping things at bay. I think it looks, it looks

04:31very normal to me if you believe labor overinflation and that the Fed is modestly restricted. Now we've

04:38had seven presidents talk about this. We're modestly restricted, modestly restricted, modest. They are so

04:44predictable. It is a beautiful thing to watch them when they make their speeches. So when you saw the

04:50jobs report this morning, were you like expecting the tenure yield and the mortgage rates to

04:55go down lower than they did? Or is it about right for you?

04:57No, I mean, it's just about right. I personally believe this. Jerome Powell set the gauntlet down

05:04when he came on TV and he said zero job growth would be acceptable, right? Zero to 50,000. When you say

05:12that, you're telling bond traders, I don't care. If we have one job growth every month for the rest of

05:19life, it doesn't matter. Get, you know, get your trades in line. So naturally we're down here because

05:26the labor market's softening. But if this had happened last year, well, we're touching the

05:33Gandalf line. We're bringing you shall not pass again. So I think the bond market is a little bit

05:38in line with what the Fed and also the Federal Reserve raised inflation expectations this year. So

05:44the growth rate of inflation is still not on target. So it looks about right, right? If we broke 380

05:52and jobless claim is rising, I'm going to come out here and say, we don't belong here because the Fed

05:58is telling us we want to be modestly restrictive. So it really hasn't been the best for Powell

06:05after he had that little arrogant little Fed thing two meetings ago where he was dismissing

06:12everyone. Team Waller, by the way, Team Waller out here who's got to say, homies, the private sector

06:17job growth isn't looking good and the revisions are all coming negative. And the reason he says that

06:22is when you start to get negative revisions, it's typically toward the end of a cycle, like a very

06:26aggressively. So things, something's going to have to turn to change it. So Christopher Waller was

06:32right. Jerome Powell got Beth Hammock. I wonder what Beth Hammock, Beth Hammock is probably coming out

06:37there this morning going, it's just one report. I don't know why everybody's getting it. It's just

06:41one report. It's one. Why? Unemployment rates low. It's one report. So it is what it is. This is

06:48right up how I thought the Fed would act and it's just on cue. So it's confusing to a lot of people

06:53because they think rates should go lower than 10 years. Like if you believe 65 to 75 percent of this

06:58is Fed policy, then it looks right. It looks right. So interesting. Like you said, this is the only

07:05jobs report we're going to have because we won't have the jobs Friday report unless now if somehow

07:11they, they, um, reopen the government, they come to an agreement over the next couple of days,

07:16does that give them enough time? Or do you think they would, um, they would kick that report out

07:20till next week? Um, they're probably want to release it as soon as possible. Okay. Right. So,

07:28but again, you know, you got to get everybody back to work. You know, there's just,

07:32it's not looking good for jobs week. Okay. So, you know, at least we got, at least we got two

07:39reports in and both reports just confirmed the same trend. You know, uh, again, the Federal Reserve

07:45in 2024 said that we track jobless claims and they're still low. That's the cue that that's that

07:51line in the sand. Right. And, uh, and they're, then they're going to say, Logan was right about us.

07:57We really need to see the labor market break before, you know, we want to get really dovish. So

08:01everything looks about right in that, in that, in that context with, with where,

08:06where we are in the company, because the economy is still growing 3%, you know, we're still consuming

08:10goods and services. Housing demand is picking up a little bit more. So it isn't like a free fall,

08:15you know, uh, of consumption credit spreads or, you know, there's all these things that are normal

08:21with an expansion still, but the jobs number are just like, oh, so another point about the government

08:27shutdown. So we have several, I think we have three or four stories right now on housingwire.com

08:32about how does the government shutdown affect people buying houses, right? Like what is,

08:37what does that look like? It's not a huge effect, but it, it is about 1500, uh, real estate,

08:43real estate transactions a day. They feel like we'll be, um, we'll be affected because it's not just

08:48the government shutdown. It's also the expiration of the national flood insurance program,

08:52um, which happened to come on the exact same day as this, which is pretty unusual. I mean,

08:59the, the national flood insurance, uh, program has been, you know, expired different times over

09:04the years. It just hasn't ever come at the same time as a, as a government shutdown. So they,

09:08they do think there's going to be some, you know, short-term things, but it's not great if you're

09:12trying to close, uh, if you're trying to close alone this week, not great. Well, I mean,

09:17I might be wrong here, but if you're trying to get a 4506T confirmation from the IRS about someone's

09:25income, that shouldn't be working right now. So I don't know if you just set that aside and go,

09:32we'll get that after the fact, but, uh, there's a whole process, right? Uh, um, and, uh, maybe I'm

09:40wrong, but maybe they found a way to work around that. But if you can't get that, uh, uh, verification

09:46of income from the IRS, things just don't work normal. So hopefully this is just, you know,

09:52a few days and then whatever, they can just move on. But, uh, you know, it was just a lot of drama.

09:59It's a lot of drama. And at some point, this kind of drama, I mean, a shutdown always filters down to

10:06like consumer sentiment because they can feel like things are out of control. What's going on,

10:10no matter which party they blame there's, you know, um, it depends on which headline you read,

10:14right? Like, um, and interestingly on the HUD website right now, you pull up the HUD website

10:19and there's a political message about how the shutdown is, is, uh, the Republicans fault and

10:24stuff like that. I've heard from several people who are like, are you guys going to cover this?

10:28And it's like, it's, it's a tough one to cover because it's like, yeah, that's totally not normal

10:32for a government agency like HUD to have a political message. We're in a pretty not normal

10:37environment. So did they say it's the Republicans? Yeah. Not the Democrats.

10:42I'm sorry. Democrats, not Republicans. I was going to go, wait a second.

10:47Yeah. Yeah. You're like, somebody snuck in there. I was like, Oh, it's like the guy from

10:54airplane. He took the cord out and he's like, pardon me. Yes. No, it says Democrats are to

11:02flame. And, um, so I've heard from a lot of people like, Hey, I was just trying to check,

11:05you know, check on stuff. And I get this political message from HUD, what's going on.

11:09And that sounds like HUD, you know, right now under Republican, uh, uh, rule. So it is,

11:16it is what it is guys. This is, what do I say about politics, Sarah?

11:20Oh yeah. Many, many parasites. Right. And it's just like, I gave up on that stuff like 10 years

11:28ago. I guess my life is great. Y'all just worry about this stuff. Although I, I'm just looking at

11:32my point though, is that like a government shutdown, um, when people say, you know, uh,

11:39right now consumers are very focused on the jobs reports. Cause that's kind of filtered

11:43down to them. And then the government shut down. So I don't know. I mean, on the other

11:46hand, if, if those things, uh, affected mortgage rates going down enough that everyone would

11:51be really happy about that in housing. So just a lot of stuff happening right now.

11:55Yeah. It was a lot of stuff. So, and then of course, uh, we got Lisa Cook news today.

12:00Lisa Cook. Yes, we did.

12:01We're Trump's going to have to wait, uh, until January till they hear her, uh, arguments. And

12:08then, um, at that point, they'll, they'll deal with it via the Supreme court. So, uh, you know,

12:15she isn't that important in the big scheme of themes because Trump wants lower rates and she would

12:21have been one of the more dovish person people out there. It's Beth hammock who, you know,

12:26if Beth hammock and Lisa Cook switch spots, you know, in terms of voting, uh, it would have been

12:31different story, but, uh, Lisa Cook would have been dovish. She's actually one of the few people

12:35that think productivity can actually grow, uh, with AI. So it's, it's not like a huge thing for him.

12:42They could wait until January, but Trump's just Trump's going to try to get as many of his people in

12:48there. And if short-term rates go down again, the arm spreads year over year are starting to gap out.

12:54So you can get sub 6% rates with arms. We wrote about that. We talked about that in the podcast

12:59where, you know, uh, arm lending might grow just because, you know, rates are going to be in the

13:04fives. Uh, there already are in the fives that you can even get, you know, a high fours, low fives,

13:09uh, eventually. So, uh, Lisa Cook story, it's, it's something popcorn watch we'll get,

13:15but we could put that aside until, uh, January where the Supreme court will hear it.

13:20Yep. So, uh, Trump had asked them to fast track it. And I mean, that is fast for the Supreme court.

13:25They could have done it. Um, you know, they could have made a ruling, but they wanted to

13:29hear her side, I guess. So that is interesting. So that's all like the political news. We also had,

13:34we did have purchase applications again, another private survey that, that came out. So that's nice

13:39that we still got that from MBA. What did that show? Uh, purchase application data. Now it's

13:44nine weeks that we've had sub 6.64% down 1% week to week up 16% year over year. So now that we take

13:53the aggregate data, um, seven positives, two negatives, nine straight weeks, a double digit

14:00year over year growth. It's funny because Mike Simonson was asking me about this on, on X today.

14:05He said, he said, why do you always use the 12 to 14 weeks? And I say that this purchase

14:11application data is a tricky, tricky trend survey. How many, how many years have you and

14:16I've been doing this? Five years. And I'm all I tell you is that this is a tricky trend survey

14:21to track. And at one point we were in the mid 1990s with purchase application data, which

14:28means no doubt was the best new band out there. Gangster Paradise was number one song, you

14:32know, and the thing just blew up higher and we're in 2014, uh, uh, levels, but that doesn't

14:40mean that existing home sales are at 4.75 million. Um, the times that we have seen growth in existing

14:48home sales, we get at least 12 to 14 weeks, week to week positive, right? This is the first

14:55year, which would be really interesting. We, if we could get just five more weeks of positive

15:00week to week data within some type of timeframe, even if it's 18 weeks or 19 weeks, then we got

15:06positive 12 weeks and then positive year over year. I really want to see how the, how the

15:11sales data work because we have sellers that fill out an application that are sitting there

15:16and waiting for somebody to buy their house so they could buy another house and the transaction

15:19model goes. Um, but in this case, uh, it's been the best nine weeks of the year. Uh, uh, and we

15:29haven't quite had the reversal in rates like we did last year. I think, I think last year

15:34from October 1st to October 9th, something like that, mortgage rates went from 620 to 670.

15:40That's a very strong reversal. Well, the spreads are better this year. Uh, uh, and when yields

15:46go up, the spreads actually improve. And now the 10 year yield is what, I think 411, 412. Last time

15:53I saw, uh, we've had the fed rate cut and we just had a very mild move up higher. So the bond market

15:59again is, is, is much more behaved this year than last year. Uh, uh, and the labor data softer, right?

16:06If the labor data wasn't softer and the spreads didn't get better, we're at 7% mortgage rates right

16:11now. Right. So, uh, the late, thankfully the bond market, everyone hug a spread, hug a bond market

16:17trader. They took the labor over inflation. And by the way, it is October 1st, Sarah Wheeler. Do you

16:23know what it means? It's October 1st. So to the gentleman that said, nobody will buy the 10 year

16:29yield at 5% cause we're broke. It'll never trade under 5% ever. Foreigners are leaving. The U S is,

16:36it's done. It's finished. What? Excuse me? Literally from the point at that statement,

16:48the 10 year yield never went above 5%. It has been literally under 5%. And y'all had everything this

16:54year. You had inflation, you had tariffs, you had a $10 trillion of debt that has to be refinanced.

17:00And there's no way we could do it without a recession. Y'all threw everything out there.

17:04And we're sitting here at 412. Just saying, because y'all got lippy out there and y'all

17:12talking, I'm just saying y'all got lippy and you talking and y'all think you can get away

17:16with this. It ain't happening that way. Uh-uh. Everyone light them all up. I'm like, that's

17:23not just saying you're just like ranting. I guess it was not just saying. So anyway, well,

17:28we are glad that you're the one, uh, giving us this information, Logan, as always. And thanks

17:33for jumping on, uh, for sort of a special edition, because I mean, just, we had too much

17:37stuff happening today. It's crazy out there. We'll, we'll keep you on a speed dial. So thank

17:42you, Logan. Thank you all. And always remember all American barrels have failed for a reason,

17:48right? Economic cycles come and go. We can model this stuff. We can do this,

17:53but they have failed for a reason. And that graveyard is deep. We're here to help everyone

17:58out. So ask as many questions and mortgage banking summit, October 7th, Dallas, Texas.

18:05And for all of you, uh, Altos research, we're having a free webinar to try to talk about how

18:10to read data properly. Come join that register is free. Learn, educate yourself. Education is a great

18:17thing. Reading is a great thing. It's amazing thing. We are going to have such a good time at the

18:22mortgage banking summit. Can't wait to see people there. Uh, I met people at the, uh, rocket pro

18:27event that we're going to be joining us. We met people at the ACUMA. We met people at, um, uh,

18:33American Pacific mortgage. Like we, we know a ton of people are coming. We're really excited about it.

18:37And, and, you know, everyone likes the shiny shirts I wear. And just want to tell you something.

18:41I got a brand new shiny shirt for Dallas. Okay. We should, we should have like a poll on what,

18:48what, uh, this has got a little bit of a Halloween theme to it. So, you know, it's going to be fun.

18:54It's going to be fun, October. It is going to be fun, October. Okay. Talk to you soon, Logan. Thanks.

18:58Thanks.

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