The next Fed chair

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the next Fed chair, inflation and purchase apps.  To learn more about Trust & Will, click ⁠⁠⁠⁠⁠⁠⁠⁠⁠here.⁠⁠⁠⁠⁠⁠⁠⁠⁠  Related to this episode:  ⁠The battle over rates: Trump vs. Fed Chair Jerome Powell | HousingWire⁠ https://www.housingwire.com/articles/the-battle-over-rates-trump-vs-fed-chair-jerome-powell/ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠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 the

00:10next Fed chair, inflation and purchase apps. First, I want to thank our sponsor,

00:15Trust in Will, for making this episode possible. Logan, welcome back to the podcast.

00:19It is wonderful to be here. Friday, DC about to leave to go back home and very fitting because

00:29today we're going to talk about the next Fed chairman because now that we're in October,

00:34November timeframe, this is the time where I thought the announcement will be made.

00:39So it can happen anytime. I don't know if we'll, by the time this comes out on Monday,

00:45it'll be the case, but we should anticipate a new Fed chairman to be out anytime in the next few

00:54weeks. Okay. So who are the potential front runners in your opinion?

00:59So Secretary, Treasury, Besant said it's now down to five, right? So I think maybe 16 was the highest

01:08at one point. Of course, my pick who I would like to see is Chris Waller. He's actually the DC Fed

01:19chair. Michelle Bowman. Both those two are team Logan, labor over inflation. And then there's Kevin

01:28Warsh, hashtag never Kevin Warsh. That's the person we don't want. And Kevin Hassett, who is the head of

01:37the economic council and also Rick Reader, who's a bond fund. I don't know how he got in there, but

01:43he probably talked to a few people to get on the list. But in any case, the last five people are

01:52actually very dovish, right? So it will be the end. As soon as they pick someone, then Jerome Powell's

02:00value starts to diminish over time because whoever the Fed chairman is, whatever language he says will

02:07be kind of the ringleader of the next Fed chair going out in the future.

02:13So you're saying no matter who they pick, they're all dovish?

02:15They're all going to be more dovish than Powell. Now, part of me says, you know, Christopher Waller

02:21would be the great pick. But knowing Trump, you know, Kevin Hassett, just because Hassett works for him,

02:32knowing that this could have all been like a charade, you know, just a pony show. He could have always

02:43picked Kevin Hassett. He always wanted somebody in, but he wanted to make the process look good.

02:49Uh, so I would, uh, I would say, you know, Waller or Kevin Hassett, uh, uh, but, uh, knowing how Trump

03:00operates, he'd probably want Kevin Hassett in there. Interesting. Okay. So from your perspective,

03:06if one of them starts, what happens to Powell on that day? I mean, he's still, he's still head.

03:11I think it's, it's not so much what happens to Powell. I just think that whenever you name a new

03:17Fed chair, uh, a little bit early, um, and we're in a very unique situation with monetary policy,

03:24of course, of all this stuff that's been going on, you know, it, it, it, it's going to be forward

03:30guidance on kind of what to, what to talk about, but also the Fed chair has to get everyone on board,

03:36right? This is why I like a Christopher Waller more than a Kevin Hassett. And, uh, Kevin Hassett is,

03:42you know, going to be Trump's yes person out there. And, uh, um, uh, that'll be a whole

03:48interesting dynamic, but, um, you're going to start to see forward guidance be talked about in

03:54a, in a much different light. So it's not like, um, I, I believe, uh, Fed chair Powell's term goes

04:01to May, 2026. So it's not just like, Oh, you know, January 1st, we get a new one.

04:05No, I think it's May 26 actually in 2026, but, uh, you know, it's just a few, few more months. So

04:13forward guidance is really a big thing for the federal reserve, how to talk to markets,

04:19like what we've always talked about, whenever mortgage rates get down to 6%, the Fed freaks

04:24out, right? It's not by accident. They literally went on TV in 2023 and said, how are we supposed

04:31to balance an economy with 6% mortgage rates, housing demand picked up a little bit and they

04:36freaked out. And whenever the 10 year yield gets down low enough to get to 6%, they start coming

04:41out and go, Oh, you know, you know, so it's not by accident. That's their forward guidance to try to

04:48get the, you know, bond market. Hey, listen, listen, don't do this. What are you doing out there?

04:53I think the, the irony is having Jerome Powell tell the American public, the labor market was solid,

04:59the labor market's solid, the labor market solids on a, and then just absolutely just get wiped out,

05:05uh, with revisions at very low numbers. And the Dallas fed came out with their break-even number.

05:12You know, I, it's, it's fun for me because break-evens are, it's a, it's a big thing for me,

05:16but they said that 30,000 were in 2025 or 2023, excuse me, the break-even for job creation to keep

05:24the unemployment rate low was 250,000. Now it's down to 30,000. But one of the things I'll always

05:30remember about this cycle is Jerome Powell went on TV and basically said zero job growth is acceptable,

05:37right? That zero to 50 K level. I never thought in my life, I would actually see a fed chairman

05:44actually use the zero number, uh, out there. And, uh, um, that's all going to, it's, it's going to

05:51change. Uh, um, so it really depends on, can whoever the next fed chairman get enough of the

05:57more hawkish people on board to maybe change the direction, uh, uh, of fed policy, depending on what

06:04the, uh, economic data comes up with. Okay. So interesting week to not have any, you know,

06:10government data again, let's talk about inflation data, which we would normally be getting when.

06:15So this podcast is on Monday morning, this would be inflation week, but we have a very,

06:21very interesting thing happen. Um, there was a headline that, uh, uh, they require the BLS people

06:28to come back. I don't know if it's true or not. I assume it is true because a lot of people, uh,

06:33brought it out that they want the CPI inflation data to come out. And I was thinking about this,

06:41that what if they know the report is good, meaning that the growth rate of inflation wasn't as hot

06:47and, you know, the fed fed meeting is, is, is going to come up and they just wanted to get that

06:52out there. Uh, so, uh, uh, the 10 year yield is I, last time I checked was four 11, uh, ticked down

06:59just a little bit, but, uh, that'll be interesting to see if we do get the CPI report. I don't know if

07:05they, you know, they value the PPI inflation as much as the CPI, but, uh, we might get inflation

07:11data. Um, uh, uh, uh, if that's the case, even though the government is shut down. Okay. So what

07:17would they, you know, what do they expect? What would be good inflation data from their perspective?

07:22It's just the growth rate of inflation, not hitting estimates or slowing down on a month to

07:27month basis. What the federal reserve wanted to see is the month to month data being at 0.2%.

07:34Right. And, uh, um, it's interesting because some people thought that, you know, because they saw

07:43COVID inflation and they saw inflation skyrocket, that's pandemic inflation, right? And without,

07:50without a global pandemic, you don't get inflation data like that. It goes straight vertical and just

07:56shoot right down just shortages, right? The supply chains weren't working or anything. So it wasn't

08:01because the fed raised rates and the growth rate of inflation fell down because of it.

08:05As soon as you get supply working natural, what do we always say, Sarah, the best thing,

08:11the best way to deal with inflation is supply. So when you get supply chains working and you've

08:15got a very elevated level of, uh, inflation, the growth rate peak was around 9%. Naturally,

08:22it will come down, right? So the fed didn't need to really, uh, hike rates to five and a half

08:27percent to, to make that happen. Um, but, uh, uh, uh, you know, the fed was just targeting 3% inflation.

08:35If you go back all the way to 1910, like the average inflation rate is like 3.3%. So, uh,

08:43I'm assuming that if this is the case that the growth rate of inflation on a month to month basis,

08:48uh, uh, is, is, is slow enough to where they would warrant getting some people out to, uh, uh, give the

08:57report out because we're getting to the, you get the last two fed meetings and two rate cuts in, and then

09:02you get maybe an announcement of your new fed chairman. And then you say, Hey, listen, this is where the

09:09growth rate of inflation and monetary policy is too tight. You know, uh, we're not building homes

09:15because monetary, but you know, you can get all this in a very short amount of time. This is why

09:19I'm always thinking about it's October. It's November timeframe. The fed chairman, the growth

09:24rate of inflation falling, you know, hit Powell one more time, you know, uh, uh, before the next

09:30fed meeting. So we'll, we'll, we'll see if that's the case, but a lot of people were speculating that

09:35the, uh, the inflation report was positive, meaning that the growth rate wasn't as fast as people

09:40thought. And with the CPI inflation, it's because so much of it is rent, you could really get some

09:47movement, uh, uh, on that because you know, that, that index has the potential to have like a month

09:54or two where it really brings the whole, uh, report down. So, you know, if you're sitting out there

09:59going, what does that mean for mortgage rates? It feels like that could mean mortgage rates could

10:03tick down a little bit with all this info. It could take down, but again, we're already at levels to

10:09where so much is already priced in. Um, so I wonder if this is more or less just get a, you know,

10:15you know, punch, uh, Powell in the, in the ribs one more time before the next fed meeting,

10:20you know, out there. And, uh, uh, again, it's not the growth rate of inflation that brought rates down.

10:27It's the labor market. We had inflation go from 9% down to 2%. We didn't have rates go down with that,

10:33right? Because monetary policy, 65 to 75% of where the 10 year old and 30 year

10:3930 year mortgage can range its monetary policy. Then you add the spreads to it. So, uh, it'll be

10:45interesting to see because we have the fed chairman that can be announced anytime soon. And then the

10:50fed meeting and everything. And Stephen Meyer, Meyer, Meyer is also now part of the fed board out

10:56there. And, uh, uh, boy, it's get the popcorn out, man. You know, it's the last few months of the

11:02year is going to be crazy. And then my God, 2026, Lord have mercy. Woo. That is, that's going to be a

11:10show. What is your, what is your thing? You always used to say the last half of 2025 is going to be

11:15lit. Yes. Yes. From July 1st, we always said the last six months of, you know, or the last second

11:22half of 2025 is going to be lit with popcorn because of the fed and everything and tariffs and all this

11:28stuff. And we still have to hear the court cases of the tariffs are gone. So it's not boring, you

11:34know, it's not boring. It's not, uh, it's not like a sleepy Joe out there. It's there's something out

11:39there happening every day. Well, and I think, you know, the Supreme court pushing the date that

11:44they're going to rule on the whole Lisa cook thing to January, Ellie, it gives a little calm period in

11:49here between here and there to just be like, okay, nothing's going to happen on that front. At least I

11:54think in some ways that could be good. Right. The Lisa cook thing is to me, it's not as

12:01important as people think it is because she was dovish. See if Beth hammock was in the same role

12:10of Lisa cook, that's like, that's something material. Cause Beth hammock is the most hawkish

12:16person. She literally, this is the Cleveland fed president who literally said there was no issue

12:21with a jobs report. The jobs number was, I can't believe this was robust, robust. And then in 10

12:29days, she was like, it seems there's some fragility. We went for robust. Like you can't have, you can't

12:37have people in that position, man. You can't say the market is robust and literally job growth is

12:43basically zero with three subsectors losing jobs. And then all of a sudden, you know, so, uh, that would

12:49have been a bigger deal getting rid of her, you know, uh, rather than, uh, Lisa cook who would have

12:55been more dovish. So, uh, if, if she was a voting member and Trump got one of his person in there and

13:01took her out, right. Then that's something, because I still think Colger was taken out by Trump. There

13:07was some information. She just resigned early. So Trump plays New York bully ball. This is like mob

13:13stuff out there. You know, you go after him that way. So in this context, um, Lisa cook story isn't

13:19as big and the market, you know, doesn't, I know a lot of people say, well, fed independence, you know,

13:25people say, well, the Argentina people say that you need fed to be independent. I don't think

13:30Argentina is the right example to use for the U S right. U S is we're, we're a whole different ball

13:37game out here. Um, but, uh, that story, you know, there's a lull period of course, until then, but

13:43again, 2026 is going to be a brand new ball game because we're going to get a new fed chairman and

13:48we'll know that about the tariffs and how everything goes. But to me, the bar is so low for labor data

13:55to beat that, you know, so much is already priced in and the 10 year yield never went down to 362 like

14:02it did last year, even though the jobs data was materially worse this year than it was last year.

14:09Uh, the bond traders are a little bit better. And this is why we haven't had that reversal. Like

14:13it's Friday last year at this time, mortgage rates went up 50 basis points in one week or something,

14:20something like October 2nd to the 9th here. It's just nothing. There's not much going on. Of course,

14:27uh, rates are a little bit, a little bit elevated from the, uh, low, low lowest levels of the year,

14:32but, uh, much different, uh, mortgage market, much different, uh, 10 year yield, much different

14:36economic landscape out here. And now the fed chairman's going to be, uh, replaced with someone

14:42soon. Let's talk about purchase apps. Where are we on purchase apps? So purchase application data,

14:47if you take the last 10 weeks, seven of the seven of the weeks on a week to week basis is positive.

14:54Three of them were slightly negative, uh, 10 straight weeks of double digit year over year growth. But again,

15:01the double digit year over your growth, it's really, it's really one of those, uh, uh, awkward years.

15:07And I, we've always talked about this. It's a tricky survey. And this was one of those things

15:13where purchase application data was at levels to where, like we always say, no doubt was a number

15:18one band gangster paradise was number one song when you're working from that very low level,

15:23just the new listings data growing to a point to where it's the low level of the previous decade can

15:29push apps on a year over year basis. And, you know, this is why we try to talk about this on

15:34the year over year data. Cause if you looked at the year of your data, like 34 straight weeks of

15:38year over year growth, you would see in your mind that home sales would be rising, but the week to

15:43week data was the critical one. And the last 10 weeks on a week to week basis has been the best of

15:49the year, a little bit more consistently than what we saw earlier in the year where it was very choppy.

15:53You'd be like one week up one week down when, you know, we w we wouldn't get much rhythm out there,

15:58a little bit more rhythm as mortgage rates are below 6.64%.

16:02But unfortunately not 10 weeks of state. Cause you're looking for 12 to 14 weeks, right?

16:07I don't need 12 to 14 straight weeks of positive weekly data. I need about 12 to 14 weeks spread out

16:15that are positive on a week to week basis. Like for example, last year out of an 18 week period,

16:21we had 12 positive, five negatives, one flat on a week to week basis. Once that's in, I said, okay,

16:27we're good. The problem with last year is that the year over year data was mostly negative until October.

16:32And so people thought home sales were falling. I was like, no, no, no, it's, it's, it's gone.

16:36Our forward looking data got better. Our weekly pending sales data got better.

16:41We broke through that. We got a couple hundred thousand home sales working from a low bar.

16:47And that I think shocked people because they thought they naturally think the year over year data is a

16:51trigger. Here's the opposite case. The year over year data looks really good, but the, you know,

16:56the week to week wasn't, but recently, you know, pending home sales are up, existing home sales are

17:00up, new home sales, everything kind of flowed with that. And, uh, hopefully we did a good enough job

17:06to try to get that to make sense because it, the last two years have been very confusing with purchase

17:10apps. They really have. Well, and, and to see, okay, 30 to 60 to 90 days out from that,

17:15what is it going to look like? You have to know what they, what they're doing.

17:18Yeah. So, so always the, the reason I always say purchase apps looks out 30 to 90 days is because

17:24when you fill out an application, that doesn't mean you go buy a house right away and you start

17:28that whatever 12 to 15 business days to close a transaction. It might take you even five months.

17:35You might have to go out and fill another application again, because your credit data is too old, you know?

17:40So usually going back in history, if you look at purchase apps and existing home sales, they

17:45typically trend together. Very good. It's a, it's a very good model, but it's usually 30 to 90 days

17:52out. Uh, and, uh, uh, this year was very unique. We went from the 1990s back to 2014 levels in a very

17:59short amount of time. So it confused a lot of people, but, uh, we try to keep everyone at bay.

18:03That's why the tracker is very useful in terms of looking at multiple, uh, demand sets out there.

18:08You know, what's great about the tracker is you're looking at data. That's not government

18:12data. It's not government data. No, it's live, fresh, weekly data. And, uh, uh, again, this is

18:19the, this is the third year now, late 2022, the forward-looking data got better. And we're like,

18:25we're making videos and say, listen, it's going to take six months for everyone to realize home

18:28prices are going to be down 20%. Last year, the forward-looking data got better. And we're like,

18:33people are still thinking home prices are going to be down five to 10% this year. Cause they,

18:37they don't have a working model. And this year, you know, because inventory, the percentage was

18:41higher. Everybody went into the complete doom porn, right? Uh, rants. And then all of a sudden

18:49we talked about this mid June, like something's changing here. Let's keep an eye on it. June,

18:55then July, something's changing here. And then August, oh boy, everyone's going to be back. And now

19:00that we're, you know, uh, uh, in, uh, October, there's more people that are, Hey, wait a second,

19:06something happened. So you always want to test your model with live data, but you want to show people.

19:12And then what it does is it effectively takes away the doomers because they have no working models.

19:17They're just like throwing stuff up in the air and everything. But like, I'm going to die with this

19:22period, like from 2020 and the 2022 to 2025, because a lot of people say prices follow volume. Yeah.

19:29The biggest crash in home sales ever nominal home prices are going to decline 20 to 30%. It might take

19:35two decades to get back to all time highs, whatever it is. And we tested it in death in death. They will

19:41never be able to take this away. We got them all. And in the afterlife, like we've always said,

19:47this group, no eyes, no tongue, no ears, or walk into the abyss, screaming about the feds balance

19:53sheet until whatever eternity they go into. But we did it, right? We did it. And we showed everyone,

19:59it wasn't just a COVID-19 recovery model on April 7th, 2020. We took this hectic time and we showed how

20:05a live working model work. This is why you get name, face, five years, price, forecast,

20:10working model, explain life. So people could visually see they can't do it. They can't do it.

20:16That's why we have you because you can do it. And you've been right so often, uh,

20:20Logan, thank you so much for being with me. I wonder, you know, anytime we do this on a Friday,

20:24I'm like, what is going to happen between here and Monday? We have no idea. I mean,

20:29anything could happen, but if it does, we'll write something up. So, uh, we'll, we'll get it that way.

20:34Thank you so much.

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