Trump’s housing plan, plus inventory and mortgage rates

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about Trump’s housing plan, inventory and mortgage rates.   To learn more about Trust & Will, visit https://trustandwill.com/   Related to this episode:   ⁠Today's Mortgage Rates⁠  https://www.housingwire.com/mortgage-rates/  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠   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 Trump's housing

00:05plan, mortgage rates, and inventory. First, before we jump in, I want to say thank you

00:09to our sponsor, Trust & Will, for making this episode possible.

00:20Logan, welcome back to the podcast. And we are once again in person, this time at the

00:25Mortgage Banking Summit. So that's pretty exciting.

00:28Yes, it's always good to be face to face. And you can't boss me around when I'm right next to you.

00:33That's not true. I can totally boss you around when you're right next to me. I have no problem

00:37with that. Lots of interesting things. Of course, you're going to be giving your keynote here in

00:42just a little bit. But I did want to bring up mortgage rates, especially why mortgage rates

00:48haven't gone higher after some of the drama we had. So of course, last year at this time,

00:54the Federal Reserve cut rates. The 10-year yield went from $3.62, eventually went all the way up

01:01to $4.79. But September and October, you saw a very aggressive move. Mortgage spreads weren't

01:08as good last year as it is this year. So you didn't get enough protection on the upside with yields.

01:14And this week, this calendar week, mortgage rates went up 0.5% in just a few days.

01:22That's not happening, right?

01:23You're talking about last year it went up.

01:24Yeah, last year it went up. And this year, I'm sitting here, it's Tuesday, 10-year yields at 4.12%.

01:31Another report just came out from the Carlisle Group saying that job creation was really only

01:37$17,000 or something to that nature. Didn't read the full report. But labor over inflation,

01:44right? We are sitting here again. We were told that because of inflation, because of deficit

01:51spending, because we had $10 trillion of loans that we had to refinance, there's no way bond

01:56yields could go down. They came down, but now they're acting differently. Why? We have one and a quarter

02:02rate cuts into the system. Jerome Powell and his arrogance was taught a good lesson in manners that

02:08you follow aggregate labor data and not make up stuff at Fed meetings. So the labor market is

02:13softening, but not breaking. And that alone has kept yields from increasing like they did. Now,

02:19if the economic data started to get better, since Jerome Powell said zero job growth is acceptable,

02:25so you get just 20, 30, 40, 50,000 job growth, then you can have yields pick up, but we just don't have

02:32that sharp reversal. And a lot of that is still Fed policy and labor data. It's not inflation data,

02:38it's not deficit spending, or it's not the treasury supply. It's just basically a growth scare and a

02:45labor scare and money went to bond markets because there are no bond vigilantes out there. Bond traders

02:51are here to make money. And boy, they just went ahead and went with buying bonds as they always do

02:56when there is a fear of the labor market. That's very good news for everybody in our industry,

03:02because the last thing that we need is to see that go back up in a quick fashion. I also think,

03:09you know, what are your thoughts on the fact that we have a government shutdown right now,

03:12and that could influence some of the, you know, the fact that people's sentiment or just like,

03:18maybe everyone's just kind of in a holding pattern. I know what you're going to say. Okay,

03:23just say it. Go ahead.

03:24Nobody cares. Okay, I'm telling you, nobody cares. Not until, you know, people start having higher

03:32bills or maybe in healthcare or something. But for right now, there is not enough pressure out there.

03:38And of course, we all want to see the data out there, but the bond market has not really cared.

03:43You know, 10-year yield hit that 4% level, key level technical it held, bounced up reversal 418.

03:50We're just back and forth right now. That looks pretty normal, actually. Now, if we get 30 or 40

03:56days and, you know, all of a sudden, you know, premiums go up, you know, yeah, that starts to matter.

04:02But for right now, markets don't care, right? And because of that, there's no real pressure yet

04:09on either party to do something. Is one thing that I was thinking about when you think about the

04:15spreads is if the government shutdown goes on for too long, does that affect the spreads? Because

04:23is that one of those shocks? No. Okay. No, that's good news. Again, I want the answer to be no.

04:29I would tell you this. What is the one thing that impacted the spreads? Mortgage spreads were getting

04:34better in 2023. Then the Silicon Valley banking crisis happened. And that, through the spreads,

04:39not only stopped the downward move, it pushed it up to pre-cycle high. So the 2023 villain was

04:46actually mortgage spreads, where the 2025 hero was mortgage spreads out there. So I think you need

04:53to have like some type of, I would tell you this, if the Federal Reserve came out and said,

04:58we're hiking rates, we are hiking rates, we want rates to go higher, something to that nature,

05:03where rates shoot up because of Fed policy, Fed forward guidance, that can make maybe the spreads

05:10get a little bit worse. But what's happening with mortgage spreads this year is actually pretty

05:15normal. If you go back to the early 70s, 80s, and 90s, the compression of volatility has brought

05:21and spreads down, and it behaves a little bit better when yields go up. So the Godzilla tariffs made

05:28the spreads worse, but only by 20 to 25 basis points, and then they retract and went back down lower.

05:33So it takes a lot to affect the mortgage spreads.

05:35Well, it's, you know, when you're working from very low level, mortgage spreads started to get

05:40worse after February of 2022. That's when the Fed said, hey, listen, we're changing policy very

05:45aggressively. We're going to hike rates. Every time when rates shoot up like that, or there's some

05:50market event, you can make the spreads worse. In the late 1990s, you know, there was a lot of world

05:56economic drama back then. The spreads were elevated for a long time, too, to a degree. So

06:01we're okay on that front for now.

06:03And the Silicon Valley banking crisis, that made spreads worse.

06:07So Silicon Valley banking crisis made worse. But, you know, for all the commercial lending and

06:12multifamily, all this stuff, the banks are going to go under. If the Federal Reserve wanted to,

06:17they can do this. They can merge a lot of banks. This is why, you know, the market isn't too scared.

06:22If you actually look at financial conditions, they're getting easier now. This is why our benefit

06:27it still is having a Federal Reserve, you know, a lender of last resorts that could clean up some

06:32messes. It could have gotten really bad, especially in Northern California, if the Silicon Valley

06:37banking spread. And then, you know, you have liquidations and banking's not work. The Federal

06:43Reserve has kind of the cheat code if they wanted to. They could use a cheat code anytime they want.

06:47But for now, you know, they're just going to wait till the labor market breaks.

06:50Wait till the labor market breaks. Okay. The other topic that I wanted to talk about was inventory.

06:55But first, I'm going to talk about the Trump social post where he was talking. It was specifically

07:04about inventory where he was calling on Fannie and Freddie to boost home building or home builders.

07:09It wasn't super clear from the post exactly what he wanted Fannie and Freddie to do. But he was like,

07:15now there can be financing. And he wanted the builders to move on the lots. He said they have

07:202 million lots they're not building on. So I know you have big, big thoughts about the builders.

07:27They're not the March of Dimes. And there's going to be no single family boom construction.

07:31As we wrote in June of 2021. And, you know, I said once rates rise, demand falls, you're this is toast.

07:38Right. And what happened is when new home sales started to crash in 2022, building permits actually

07:47peaked. And that was it. The housing construction ended. This isn't a thing, right? There's 2 million

07:53lots. There's not going to be any construction boom. You can maybe get multifamily construction,

08:00maybe going, make it the cost effective to the rents. But the builders completed units of sale is up here.

08:07When it's up here, if you go back six decades, they don't build homes. Why? Because if they keep on

08:12building more and more homes, right, and there's more supply, that's deflationary. And deflation

08:19is never good for an economy. Inflation, actually, you know, as long as it's steady and low and stable,

08:26that's when, you know, builders can build homes, make money, because all the things that go into

08:30their cost, their profit margins have been falling and falling and falling. So I don't care if there's

08:3640 million lots. They don't operate that way. Now, what I wrote in 2021, if the government wanted to go

08:42in there and say, hey, we'll pay you the full amount, we'll take the loss on the books, build

08:48as many homes as you want. Go ahead, see if we can get that done. But I mean, even then, why would

08:53they do that? Because that puts them out for 10 years, they don't. Well, I mean, the thing is that

08:57construction productivity is terrible here as well. You know, we still build homes with hammers and

09:04nails. So until I actually see what this is, I would not put much stock into the 2 million lots

09:10that are available. The completed units of sale has always been the key supply line for the builders.

09:15And it was very, it was low for 14 years. It's just this year, right, when we wrote that article

09:21in December of 2024, that now the supply story is catching up to the builders, where they couldn't,

09:27they've gotten away with it for so many years. And now housing permits are at COVID-19 recession

09:32levels and heading lower. So I'm waiting to see that. But I don't think that's a single family thing.

09:38Maybe it's a multifamily kind of a product out there, but-

09:41Or manufactured homes.

09:43Manufactured homes, something that, you know, manufactured homes, I mean, people just don't

09:46buy manufactured homes. I'm just like, you know, the resale value is never good. People,

09:51we're Americans. Americans like big single family homes, you know, build as many apartments

09:56as you want, right? The people who make money still buy single family homes. This is what I'm

09:59trying to convince people for 20, 30 years. We don't buy small, right? Because by the time you're

10:07an adult and you get married and you have kids, you buy a house, you need a house big enough for

10:12your family. That's what we do. So there's limits on what you can do. But again, if you really wanted

10:20to help the builders, I don't know, tariffs, regulations, whatever, the cost has to be lower,

10:25corporate, they need demand, right? New home sales have been back and forth from 2018 levels in a

10:31range. They're not exceedingly higher. They're not going much lower than the lows of 2022, of course.

10:37But this was a supply and demand story. And it's not shocking that housing permits are at recession

10:42level. So we've wrote about this. We've talked about this. They are not the marcher dimes for a

10:47reason. In business to make money, right? To make money. Well, I want to talk about the supply

10:52because, so I write a newsletter for our subscribers. It's called Subscriber Digest three

10:58times a week. And yesterday, on Monday, I sent out one about this very topic, right? And anytime I

11:04write about like, listen, we, you know, supply, housing supply is pretty good right now. I mean,

11:10we're not in a low supply environment. I get a lot of feedback. People in our industry definitely feel

11:16like we are underbuilt and there's millions of things missing. I know that's not your take, so tell me.

11:22If you're underbuilt, then homes should be flying off faster.

11:25Okay. So that's the, that's what you're looking at to see where it should be.

11:28It's a, it's a, it's a false, you know, it's a false theory. A lot of people. Now, of course,

11:33I'm not a low inventory person in the last decade. I used to make fun of people say,

11:37there's no homes to buy. I go, whoa, whoa, whoa, whoa, whoa. There are homes to buy. When there are no

11:41homes to buy, it looks like COVID, right? Where homes are just flying off the shelves. Prices are going out

11:48of control. That was the time where I had to adjust to go, okay, we have an inventory issue now. But

11:53now do I, do I see like a supply problem? The builders? No. Permits are at recessionary levels.

12:00Inventory is up. Price growth is cooling down. Home sales are record lows. No,

12:04it doesn't work that way. That's what supply and demand economics is. If you had a supply problem,

12:11homes would be selling off the roofs. But this is where I think the conversation for a lot of people

12:16starts to get complicated. In the last decade, as long as we have 1.52 to 1.93 million, it's an

12:22okay market. Normal inventory is 2 to 2.5 million. But if there was a supply problem, the product that

12:28we have right now is expensive. So home sales aren't growing. But I've heard this argument for,

12:35you didn't know me in the last decade, but I used to go after the low inventory people a lot in the

12:40last decade. I said, really? So how come there's, you know, 2 million active inventory? There are

12:46homes to buy. Most sellers are home buyers. What's happened in the last 14 years, we sell homes faster,

12:52right? It doesn't take that long to sell a house. So the inventory channels look a little bit

12:56different. But as long as we're over 1.52 million, days on markets are back to normal. The builders

13:04aren't going to build homes because it's in a business to make money. And that's the supply and demand

13:10equal in for decades. Decades, Wheeler. This is just on, this is how it's worked since the

13:14Peloponnesian War. And people are still saying, there's no homes to buy. No inventory is too low.

13:19And I go, come on. Well, I, to your point, you adjusted in COVID. So 2022, right? In the aftermath

13:26of COVID, the very lowest level of inventory ever, 242,000, right? For our data line, we got 240,000 in

13:34March. But COVID was terrible in a sense. I remember going back to one of my tweets on May 18th,

13:39like, oh, my God, prices are already up 8%. And inventory broke in 2020. And it had no

13:46seasonal increase. It was like the worst possible nightmare was happening. Inventory broke to all

13:52time lows, no seasonal increase, and rates were low. And here comes the millennials. And here's

13:56the biggest housing demographic patch. I'm like, oh, boy, this is why we're team higher rates

13:59early 2021. You got these scrub buckets running around. You said, forbearance. Remember the

14:05forbearance crash bros, by the way, pour a drink for them. Those guys were just awesome.

14:11They didn't let it go either. I still have people tell me, forbearance. I'm like, dude,

14:15homie, it's like 0.05%, man. What are you talking about? Give it up. Give it up. So yeah,

14:21active inventory is back to a healthy level. Price growth is at a healthy level. This is as good as

14:26we could. And remember, mortgage rates aren't coming down to 3% or 4% anytime soon. So the supply

14:31and demand equal in works. But don't think that the builders are here to, we're going to put our

14:36heads down and build supply and, oh, wait, completed units of sale. We have that chart. We put it in

14:41the articles for a reason. Look at it. Five decades it's been telling us this story. Five decades the

14:47builders are doing. We're not the Marsha Dimes. Logan was right. We're here to make money.

14:51I also think, you know, if you just need to look at the market, that is what the market's telling you.

14:56If the builders thought they could sell more, they would be building more, right?

14:59Yeah. And I think that goes into a whole different subject. Like, you know,

15:05builders know their demand curve, right? When their forward-looking demand confidence index

15:12starts to rise, they start to get excited. When does that happen? When rates fall. It's happened

15:16a few times in the last few years, only when mortgage rates get down to 6%. So they feel a

15:22little bit more confidence because they've got to take a contract, they've got to build a house,

15:24and that buyer has to be available right there. So when rates are lower and stable, they feel more

15:28confident. Then they could start issuing permits. That's what happened late 2022. Rates went down

15:33to 6%. Builders started paying down, or rates went lower than sub-6%. They're building, permits were

15:38rising, and then rates went up again. So economic cycles. All you have to do is look back in the

15:43builders, and they've acted the same way in every cycle post-1960.

15:48They're very predictable.

15:48Yeah, they're very predictable. So nothing abnormal. So I'm questioning about the 2 million

15:53lots thing, and I question about people who are still saying inventory is too low. If it was,

15:58the housing data would look a lot different.

16:00There's also a question about what Fannie and Freddie themselves could do about this situation.

16:03That's a question.

16:04We'll have to see what the plans are for that, but I wonder if that's more of a multifamily construction

16:10or some type of discount to the builders or something of that nature where the cost of

16:15building for them is less, so they can feel a little bit more comfort. Margins, guys. Think of

16:21margins, right? Not the march of dimes. March of dimes does not have to worry about margins,

16:25but home builders in America do.

16:27Okay, so you track inventory every week in the housing market tracker. That's how we know that in

16:312022, it got down as low as $240,000. And that's why we know this last week. It's like,

16:37now we're up at $860,000 something. $63,000, yeah. $863,000 homes that are available right now.

16:43But we do see inventory growth slowing down, so kind of explain that.

16:47So Nick Tumaris of The Wall Street Journal tweeted something yesterday. He said,

16:51prices accelerated a little bit higher. Is this a one-off? And we're like, I'm like retweeting that.

16:58I'm putting John McLean out there. Welcome to the party, pal. This thing started in mid-June,

17:03right? And this is why we created the tracker. Again, three years now. Every single time we see

17:08the forward-looking demand curve get better, it takes months for everybody to join us. So

17:12inventory growth slowed. We wrote that in the tracker article. We thought new listings data

17:17peaked in May. By the way, we had another ARM person that said, do you know why are the most

17:24untalented men in America housing doobers? What is about this group? That guy was saying that 2019

17:30and 2020 ARMS were going to crash the markets in 2020. It's October, homie. Get your Halloween

17:36costume out, man. There's not enough time. So new listings data peaked May 23rd. There's your first

17:42clue. There were some delistings going on. Mortgage rates started to creep lower. Inventory growth

17:47started to shift mid-June. Stayed that way July. August was down, right? I'm still fighting for my,

17:54you know, call to get inventory back to the yearly highs. I'm only off by a couple thousand. It won't

17:59get there yet. And I'm running out of time. You know, I got a few weeks before the seasonal

18:03curve goes lower. And because of that, the supply and demand equilibrium, that's the key to economics.

18:09You've got to learn how the supply and demand equilibrium is. If you want to look at old stale

18:13data, regurgitate charts, right? Pile up a bunch of charts, wait three months. But we want to get it

18:18fresh, live, and get into you right away. So it shouldn't shock everyone that the markets change.

18:23Is this now the monthly data? Pending home sales were up. Existing home sales were up. New home sales

18:28are up. Purchase application data is up. What's that equilibrium? 6.64 down to six. But even a

18:35little bit above 6.64, the market dynamics were shifting, right? So new listings data is the key

18:40to everything out there. And I think that's it peaking on May 23rd was really an interesting

18:46variable in 2025. Amazing. Okay. Well, I don't want to end this without saying congratulations to us.

18:53We reached a million downloads this year, faster than we've ever done that. We are an award winning

19:02podcast. Yes. I have to call out our producer, Alyssa Branch, because she does such an amazing

19:09job. And let me just tell you, you think, you know, I have to do a lot with Logan. Alyssa has to do this

19:15with both of us. Okay. Like every day we're, we're usually in a different place. We're in different

19:20hotel rooms. We have all sorts of variables. And we are noticeably late all the time. Okay.

19:25Let's not say we in that one. Let's say you are noticeably late every time. So I love you, Alyssa.

19:31Thank you so much. But really, I want to say thank you to all you guys who listen. We meet so many

19:35people who are like, you're part of my daily routine. I, when I go to the gym, when I'm biking,

19:39when I'm doing this, um, they, you guys are the reason and we so appreciate it. We love our fans.

19:45The odd couple works, right? Yes. There we go. Yes. Uh, so thank you guys. And Logan, thank you.

19:52Pleasure. It has been a lot of fun. Uh, it's five years now, you know, uh, we've been doing this and,

19:58uh, uh, just going to get better over time. Totally agree.

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