Sub-6% mortgage rates for 2026?

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how we get sub-6% mortgage rates in 2026. The two also discuss inventory.  To learn more about Trust & Will, click ⁠⁠⁠⁠⁠⁠⁠⁠here.⁠⁠⁠⁠⁠⁠⁠⁠  Related to this episode:  ⁠Mortgage Rates⁠ https://www.housingwire.com/mortgage-rates/ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠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 inventory

00:11and how we get sub 6% mortgage rates in 2026. First, I want to thank our sponsor,

00:17Trust & Will, for making this episode possible. Logan, welcome back to the podcast.

00:22It is great to be here. You are in what, Minneapolis?

00:25I am in Minneapolis at the NIRMLA, the Reverse Mortgage Lenders Convention, and you are in D.C.?

00:32I'm in Washington. It has been a while since I've been in D.C., so I got to go to the Capitol,

00:37the Monument and stuff, so it's good. Next time I'm here, I'm going to be able to get into the White

00:44House, so good times. Good times. That's amazing. Yeah, you're there during the shutdown. So what

00:50we want to talk about today is mortgage rates under 6%, which when you were like, hey,

00:55let's talk about that, I was like, okay, you know I want to talk about that all day long.

00:59How do you see mortgage rates getting under 6%? What's the timeframe there?

01:03So this is not a 30-year fixed call. Obviously, with how I forecast mortgage rates in the 10-year

01:11yield, it's very hard to get mortgage rates below 5.75% with Fed policy and the spreads where they

01:18are. If spreads were normal today, you would have sub 6% rates. But to get kind of below there,

01:24you need a more dovish Fed, normal spread. So this is not going to be a 30-year fixed call.

01:34But what's happening now is now that short-term rates are coming down, the ARM loans are sub-6%.

01:43So technically speaking, if you do get two rate cuts in the next two meetings for the Fed,

01:54you will have the ability, even now, to have sub-6% mortgage rates for all of 2026.

02:04Wow.

02:04Now, for me, it's a little bit different. You remember the time I talked about banning

02:11all ARM loans?

02:12Yes.

02:13Yes. So obviously, back then, when you're part of team higher rates, you need inventory to

02:19grow. One of the things that I was concerned about is that 4% to 5% mortgage rates were not

02:26doing the damage that I thought it would do. So to me, that was a little bit concerning.

02:31Now that we're in October of 2025, think about if mortgage rates never went above 5% and how

02:37it would have been so much more difficult to get inventory up to a level where you have a

02:43healthier marketplace. So back then, when rates were at 6% and they were creeping back down to 5%,

02:48it's like, we need to just ban all ARM loans and make sure that 30-year fixed can stay elevated

02:55enough to get inventory up. 6% to 8% mortgage rates, really, since 2022. That range has gotten

03:02inventory. We're not back to normal, but we're in a healthier marketplace. And we'll talk about

03:07inventory a little bit later. But here, because housing data looks so much better with sub-6%

03:14rates. I mean, the builders, new home sales still at 2019 levels. New home sales just hit a three-year

03:21high on a monthly period, which will probably get revised lower. But for the first time, it's like,

03:26okay, this actually might be a thing because we're already seeing more ARM loans being picked up

03:34already. And the ARM loans now are so much different than what they were from 1996 to 2005. And I never

03:44thought they have the ability to grow because the qualifications are different. You have to qualify

03:49for the recast payment. By the time the loan recast, wages have already gone up for you quite a bit. So

03:55it's a much safer product, but it's much harder to get and you don't really gain the massive benefits.

04:02But here, in this unique situation with this cycle and that sub-6% mortgage rates work,

04:12this can be a thing for the rest of this year, but also all of 2026, especially as the Fed cut rates.

04:20And we talked about that a few months ago, how Trump wants to attack the Fed can actually boost

04:28ARM lending. But I'm starting to see a little bit, and the MBA, the Mortgage Banking Association,

04:32has talked about this a bit too, that ARM loans are starting to pick up. Now,

04:39because they're harder to qualify for, they're not going to have the very high velocity of the

04:45credit boom that we saw from 2002 to 2005. But this can be a story now going out for the rest of this

04:52year, but all of 2026. When I always say that ARM lending can't grow like it did back then because

05:00it's much harder to qualify. These are like, you couldn't have two different type of ARM loan

05:07lending than 2002 to 2005 than from what we see from 2010 all the way to 2025. And this is why the

05:15percentage of ARM loans are historically low. They do tend to pick up a little bit when rates go up.

05:20But now we're just in a very unique situation to where you have a mass amount of people that seems

05:29to like the sub 6% mortgage rate. And the builders can show you this by what we talk about is

05:37having 2019 home sales equates to 1 to 1.2 million more existing home sales. Now, I don't like to do it

05:47apples to apples because the new home sales market is a little bit different. But the fact that the

05:53builders are still up here, and the existing home sales are still up here, and the existing home sales

05:58tend to get better when rates just get down towards 6%. This is the first time in this cycle that you can

06:03have a period of time because short term rates have gone down that the ARM lending can pick up. But again,

06:10there's limits because you've got to qualify for it differently. And you've got to qualify for the recast

06:14payment out there. And so it'll be interesting to see because I never thought this would be a thing

06:21ever. Right? You know, we wouldn't get in this unique situation where people go, hey, listen, I,

06:27I just really like the sub 6% rate. I'm going to go in there. And we've seen people do that with the

06:34builders. But it'll be a fascinating experience. And because I'm seeing some of that happen already,

06:42it is something that has the potential to grow because we're working from such low levels. Again, whenever

06:48you're working from very low levels, the percentage increase can can can go up higher. But it'll be an

06:54interesting aspect for 2026. Who is a good candidate for an ARM loan versus another loan? So to your point, like

07:03there's this recast rate. Is it someone who's younger who's just starting their career? Like, what does it look

07:09like? I don't think anyone is better qualified or not qualified, because I think housing is the cost

07:17of shelter. Like when people ask me, should I buy a home? And when I say no, because you're asking me,

07:25because you're asking me, you're not emotionally and financially ready to ever own a house. And again,

07:30I'm at the point of saying you should not even own a coffee maker. At this point.

07:35You're so brutal about it. People are just asking. Listen, listen, Sarah, it's like if I came to you

07:43and say, stairweeler, hi, you don't know who I am, but should I be a writer? And you know,

07:50and you don't know anything about me. And you know, and our job in economics is to talk about the housing

07:56market and the natural ecosystem. But to me, if you're a grown grown adult, and you have to ask

08:03somebody if you should buy a house, you're so not ready. You know, you're just you're just so not

08:08ready. And there's millions of people that buy homes every year, they're ready. But you're not. And the

08:13day you don't ask someone, like if you lived it with your parents, or you're at a dorm, you know,

08:19got roommates, you know, mission is to stay there. You're not ready. But to answer your question,

08:26I always think that it's just the, the, the higher, the middle and higher income brackets are

08:33buying the homes, right? That's just kind of what we see in the data. But for those people that are

08:39looking that are getting arms, you look at the new home sales sector, you know, the typically new home

08:44sales sector are wealthier, higher income brackets that are older. So in this context, I don't think

08:52there is a category of a person, nor do I believe there should ever be a category of person. It's a

08:58person that looks there and says, okay, I have X payment. Let's say I will never be able to refinance

09:06this loan ever again in the history of America. And this is my recast payment. And that'll be

09:11completely fine. So I, you should always buy a house thinking you will never, ever, ever have a lower

09:21rate than what you have currently, but your wages rise, right? And that's the, that's the housing

09:28discussion that never gets discussion discussed about you buy your house X, but your wages typically

09:35rise. Now, of course, there's some people whose wages fluctuate like crazy, but don't look at it as

09:43who's the right person. The person themselves has to look at, Hey, this is the payment. This is the

09:49recast payment for 25 years. I don't know if I'm going to sell this house in 10 years. I don't know

09:54if I'm going to be here for the next 30 years, but the only person that should even think about this

09:58is somebody that says, okay, I'm good with this payment. And then I'll be good with the recast

10:03payment. And I'm good all around. That's why I don't like categories because I don't want certain

10:08people to buy homes. I don't, I, there's a lot of men in this country who should not own a coffee

10:14maker. Have you seen these people online? They are so fraggle rock, fragile people, man. I mean,

10:21they're just panicking all the time. And these, these guys keep like, I always say, I understand

10:26when, yeah, when, when, when, when the ladies say there's no good men out there and I'll go

10:32this, this group, these are not homeowners, home buyers, man, they panic out. They see the dollar

10:38go down a little bit and God, we're about to go class. Those are not homeowners. So again,

10:43to answer your question, there is no category. The person goes there, looks at the payment

10:48and says, I will never be able to refinance for the rest of my life. I'm okay with that recast

10:54payment. You're good. Wages rising. You have so much to do with in your life. Your mortgage payment

11:01should not be something you ever worry about. So the person that says, Hey, listen, the recast payment

11:07will be fine five, seven years from now, but now, you know, get a low rate. That's who I think

11:13should get it. Are those the people that will get it? Not all of them, but, uh, that's what I always

11:21thought about housing. That's why I love the 30 year fix. I'm a 30 year fix guy always, right? I'm

11:25only having this conversation because the data shows that this is starting to pick up and short

11:30term rates are coming down. And the gap between the arm loans in the 30 year is getting wider and wider

11:36out there. Uh, and when, when I always say this is the lowest home sales ever recorded in history,

11:42I'm talking about the existing home sales market and I adjusted to the population out there. Uh,

11:47and, uh, of course, new home sales are still elevated, but when we look at total home sales,

11:53it's still near 5 million. And the total home sale peak in the last decade was near 6 million. So

12:00you're missing like a million mortgage buyers roughly from what the peak was in the last decade

12:06out there. So I, I see that this is something that could potentially grow sales just because for some

12:14reason, the sub 6% mortgage market seems to be, uh, uh, uh, the, the winner out there and the builders

12:21have, the builders have taken advantage of that as, as, as much as they possibly can with their, uh,

12:26profit margins. So I want to, uh, dig in a little bit here because, you know, when you started out

12:31talking, you were like, you were team higher rates because we needed higher rates than four

12:36or five coming off of COVID to get prices back in control. And I think that it's easy in our

12:42industry to think, Oh, lower rates are always better. Or, you know, everyone's business would

12:46be better with lower rates, but it's not a better business. If you don't have a healthy enough market,

12:51if you have 25 people competing for a home, that's a lot of people wasting their time, effort,

12:58energy to try to get those people, you know, in, uh, a good application to get them pre-qualified,

13:03to get them through the process that are never going to get a home. So it's interesting to me

13:08that you're like, you know, inventory is a really important part too. So to this point, um, I think

13:14people forget this aspect in the last decade, we had mortgage rates between three and a quarter

13:20and 5% for like 10 years. We didn't have a housing problem, right? We, it never existed,

13:27even with mortgage rates in the sub 4% mortgage market. Why? Because total active inventory was

13:32higher. And I don't believe in a housing sales boom. I don't believe we, because of qualified

13:39mortgage, we cannot have a credit sales boom like we saw back then. Um, but in this context,

13:46when inventory got to such a low level, it just was such a unhealthy housing market and nobody,

13:55nobody understands that, that shortages are the worst of everything because you're basically

14:00bidding, you know, for prices, uh, uh, on something that should not have had it. And, and just getting

14:07back up to here, this is why I like 2025 housing, uh, more than any other years of the past. It's,

14:12it looks like a very normal supply and demand equilibrium buyers versus sellers. Buyers are

14:18now part of the game. Now that's what you needed to see. And that's the healing process of it. Now,

14:24if active inventory was back down to those levels that were unhealthy, I'd be telling you ban all arm

14:31loans. Arm loans are for giving you sub 6%. I would sit here and say the same thing, but now that we're

14:38here, we have a cushion, right? We have a cushion out here and, um, much healthier housing market

14:46because houses are going to be here for decades and decades and decades and decades. What we saw

14:50from 2020 to 2022 was savagely unhealthy, but you know, we had prices escalate out of control from

14:581943 to 1947. We had prices escalate out of control from 74 to 79. When I tell people home prices grew

15:04faster from 77 to 79 versus 2020 to 2022 and rates went from eight to 13% back then. And here rates

15:14were, you know, sub 4% during that period. Um, this was a supply story. This was just a simple supply

15:21story. The supply and demand equilibrium broke. And because a lot of people don't look at economics

15:26as a supply and demand equilibrium, they didn't realize how bad housing was in 2020, all of 2021 and

15:32early 2020, but that's no longer the case. And this is why we can have this discussion here today.

15:38We are not, it's no longer savagely unhealthy. It's not even maybe unhealthy. What, what would

15:45you call it? Healthy, stabilized? Oh no, this is the healthiest market post 2020. Absolutely. Absolutely.

15:51No doubt. Days on market are up. Price growth is, is very low. Um, I might not get my price forecast

15:58this year, but it's still, you know, uh, home prices be negative adjusting to inflation, depending

16:04on how you track inflation positives because every year that that happens, housing gets a little bit

16:10more affordable because of wages and households. And that's what you needed. You couldn't do this.

16:14Like 2023 is a really good example. 2023 was terrible because prices went up 6%. Uh, new listings data was

16:21trending at the lowest levels ever and home sales were low, right? If prices were just basically

16:28flat that year, I would consider that a healthier marketplace, but here you've got a little bit

16:33of everything. Um, just to give everyone an example, Moody's has this home price valuation and, uh, they

16:40said, you know, a few years ago, home prices or home, home values were 29% overvalued compared to

16:47historical norms. Well, now that's down to like seven, 8%. It's because price growth has cooled down,

16:52right? And wages growth. So it's an equilibrium that nobody really wants to talk about because

16:58it talks about wages and households and rates and payments and everything. But, uh, we really needed

17:04that to happen for this to work for the next 20, 30, 40 years. And, and it worked in that, of course,

17:11you needed the three, you know, you need the biggest crash in home sales ever. You need three years of the

17:16lowest home sales ever in history. And that's what it took to get back to the low level of 2019 inventory,

17:23the low level, you know? Um, and, uh, uh, it, it's the best you could hope for in this, uh, situation.

17:31So you just need a catchy catchphrase for it. Some, something snappy because savagely unhealthy caught on

17:36everybody. You were on TV a lot talking about it. We talked about it. Um, but when you're like,

17:42oh yeah, this is the healthiest, it's like, I don't know. We, we need something snappy there,

17:45Logan. There'll be a catchphrase when I, when I, when I get what I want, I really, really want

17:51active inventory to start a year at 1.52 and just range between 1.52 to 1.93. That was my goal all

18:00the way back in 2022. I didn't get that this year. I got to the low end, but there's a catchphrase for

18:06that once I get what I want, um, out there. So I'm just, I'm just mindful of it because again,

18:12after 2010, the whole supply and demand equilibrium for housing economics have changed just like the

18:17whole structure of the U S economy changed with qualified mortgage and the bankruptcy reform laws.

18:2370 to 80% of home sellers are buyers. 20 to 30% of inventory gets left behind. If mortgage buyers

18:31grow, especially from first time home buyers or those that don't provide house inventory has the

18:36ability to stay flat or go lower. We just need a little bit of room up to create a buffer out

18:41there. And since we're not going to get three, 4% mortgage rates or anything like that, I don't

18:46have to worry about, you know, inventory just collapsing down again. I want, what I want is the,

18:51the chef kiss of everything, rising inventory, rising sales, you know, eighties, nineties, 2000.

18:59Uh, we saw a little bit of that last year, which I was like, Oh, I got giddy. I got giddy even more

19:07giddy than the 49er Ram game, but it was just like, that is what housing looks like. And, uh, I'm hoping

19:13we can have some form of that, especially in, in, in 2026. Amazing. Well, we are out of time. Logan,

19:21thank you so much for being on from DC, uh, and Minneapolis. Thanks for being on. Thanks for walking us

19:27through. My pleasure.

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