How is the government shutdown impacting housing?

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about mortgage rates and the impact of the government shutdown on housing.   Related to this episode:   ⁠The longer the shutdown continues, the greater the impact on housing⁠  https://www.housingwire.com/articles/nar-warns-government-shutdown-impact-housing-market-programs/  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠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 mortgage rates and

00:11the impact of the government shutdown on housing. Before we start, I want to thank our sponsor,

00:16Trust in Will, for making this episode possible. Logan, welcome back to the podcast.

00:20It is wonderful to be here. I am in lovely Bergen County, New Jersey,

00:24and oh, I had an Italian dinner last night. I mean, because I train year round and I don't eat a

00:33lot of food, if I can ever have a good Italian dinner, it's just like I am in chart heaven 24-7.

00:41Listen, everyone loves a good Italian dinner. That's awesome. Yeah. Funny, because I'm headed

00:46to Nashville today for AIM. And are you headed home today after your-

00:51Yes. As soon as I speak, I head on back. But it is interesting because we are in

00:57New Jersey and because of the political race, the mayor race in New York, one of the questions they

01:05have is, you know, how do we know if people leave, you know, New York to come and Bergen County is

01:11right on the edge and, you know, that would be a place to go. And, you know, really the new listings

01:17data in New York, if you ever wanted to see something, then you would have a deviation

01:23from a natural curve in the new listings data in New York, and it will pop out if you saw something

01:30like this. And I kind of said, you know, we're out toward the end of the year and, you know,

01:34this is where new listings data starts to decline. So, you know, it would really stick out. But

01:38usually people don't just like, okay, the mayor race is over, we're leaving, you know, so it's

01:42something that you have to progressively check on a weekly basis. But if people in New Jersey

01:49are wondering if you can see if people are leaving New York and trying to get that New

01:55York money into real estate in Bergen County or anywhere in New Jersey, there are ways to

02:00track this with the Altos data in terms of looking at certain neighborhoods and certain

02:05zip codes where the new listings data starts to deviate. And, you know, that would be the first

02:11place you would see it. Well, and our newsroom is on the lookout. Of course, Tracy Velt's

02:16been thinking about this for a couple of months since it was first discussed when Donnie pulled

02:24ahead. But as you've said, you know, a lot of people say that, but do they put their money

02:28where their mouth is? So we'll look, we're going to be... Yeah, remember all those people

02:31leaving in Canada? They're like, we're going to leave to go to Canada and everything, like

02:35one person, you know, so that person probably came back, you know, so it's, you know, there's

02:44migration always. And, you know, a lot of people talked about Illinois, you know, that Illinois' taxes

02:52and everything is so crazy. Inventory is going to skyrocket in the state because everyone's leaving

02:57and you look at Illinois' inventory, it's not. So if you want to create a theory, you need a kind

03:04of a model and then you'll see it in the data. That's the best way to look. But it's New York.

03:09You're going to get more drama in about a few weeks, but that should be an interesting thing

03:16to watch. Okay. We're in like the third week of the shutdown. Are we seeing any economic impact

03:21from that yet? So a lot of people are saying, well, housing has to be impacted because the

03:27government is, you know, so, so big within the natural housing ecosystem of lending.

03:33I would say this, we get these numbers every day. You know, people will throw these numbers,

03:39you know, 1400 transactions a day are not happening because of this. And what you, what you really want

03:46to see is maybe it doesn't fall in today's existing home sales is going to come out, but

03:50the pending home sales report going for next month from the NAR, that is something where you could

03:56maybe pick up something where things just get delayed and they closed later. Right. So you have

04:03to average it out. You remember Trid? Oh yes. Yes. Oh, did that create drama? So Trid, nobody knew

04:11that first month on how to really do it. And that was just like a nightmare at the end. But what it did

04:19is it created one of the biggest crash in sales, you know, in history for that month, just because

04:26things closed, uh, like I think an average of seven to 11 days longer than what was normal.

04:33And then sales just shot right back up the next month, uh, out there. So, uh, you know, maybe the

04:42next pending home sales, next existing home sales report, you'll see something like that. And then

04:47it'll just kind of make itself, uh, back. Um, somebody came to me, uh, uh, uh, yesterday and

04:54they saw the purchase application data and they saw a 5% decline week to week. And they said, well,

04:59look, the government shutdown is impacting this. And I go, well, was, was there a government shutdown

05:05last year? Like, no. So why are apps up 20% year over year? And then there's the, you know,

05:13well, you know, there's a lot of uncertainty. Sarah was COVID uncertain. Was there a lot

05:20of uncertainty in COVID early on? Yeah. Yes. Okay. So when everybody stopped hoarding toilet

05:27paper, what happened? Oh my God. It was the sharpest, fastest recovery in, in home sales

05:33in history. Uh, uh, so uncertainty can maybe prevent maybe some people, but if you really

05:41believed in it, you really see a negative trend on the week to weeks and year over years and stuff

05:47out there. But I think the close, the closing times is a valid premise. Uh, but I quite haven't

05:54seen anything yet, uh, to make it a really big, big, uh, big variable. So, uh, closing times, yes,

06:00but outside of that up for housing, nothing too much. I know the flood insurance and, you know,

06:05all these other things, but they're trying to mitigate that damage as much as possible.

06:08So, and, and your opinion, uh, once the government came back, uh, you know, like once the, it stopped

06:14being shut down, then we just see a spike and all those things that were kind of nailed back.

06:18Things just, you know, uh, work faster and all that. So, so we, well, we'll see what the NAR's

06:23pending home sale data. I mean, I haven't seen anything, you know, our, our pending weekly sales

06:28dipped a little bit, but we also had a holiday week. So there's ways to track this. Uh, uh, uh,

06:33but if this is the case, it just reverts itself back and we just go back to normal.

06:37Uh, on another note of the government, uh, uh, Bill Pulte, the head of FHFA, uh, tweeted

06:43out that, um, he's going to try to find a way, uh, with, uh, help from Barry Habib on

06:50maybe helping pricing on the LLPAs. You know, I know, um, a lot of people have asked about

06:56that as soon as Trump became president, I kind of said, you know, if they're going to go

07:02public, maybe they don't pull any levers on that, uh, out there. But, uh, I, I think

07:08in, in this case, uh, you can see maybe something in the works that maybe might help a little

07:14bit on, on, on, on the margin side. So that's another government thing that, uh, could be

07:19in the works now.

07:20No, it was nice to see, uh, Barry Habib get a shout out. I know for people in mortgages,

07:24it's like, Hey, we know that guy. That's awesome.

07:26Well, he's, he's part of the, he's part of the board now. So, uh, um, so it's good. And

07:31also Bill Pulte, uh, uh, tweeted out that, you know, he's going to have maybe a very constructive

07:37discussion with the home builders. Uh, uh, I think there was a, there was a lot of maybe

07:42initial pushback on, you know, you can't really bully ball the builders when their completed

07:47units of sales are this high and their profit margins are falling down. You know, uh, you know,

07:52the government might run a business that way, but, uh, you know, uh, the, the, the private

07:57sector can't, you know, they have to, they have to be careful of margins and stuff like

08:01that. So, so a lot of stuff between the New York race, the government shut down Bill Pulte

08:07suites, uh, on the government side. So, uh, uh, an interesting week on that front.

08:12It'll be interesting to see if they can figure out a way to incentivize the builders. Cause as

08:16we've talked about, that's gotta be a long-term incentive, like whatever they do now, it's, it's

08:20affecting them going forward. They build a house. That house is now part of the inventory

08:25that is their competition. Right. So it's not just like a little, Hey, we'll throw you a

08:29bone and you can build more houses. I mean, typically you get a contract, right? You buy

08:36the land or you get an option for the land and get a contract. That contract is demand.

08:41That's where, you know, this is, you know, with the builder six month outlook for small

08:45builders, you know, having the spike it did that's cause of rates out there. So, uh, it's

08:52not like you can incentivize them to just build homes and then nobody buys it, you know, and

08:57you know, uh, out there you need that. It's, it's a complicated business out there. So we,

09:02we talked about this in June, June of 2021, you know, everybody was so amped up. We're going

09:08to have a massive construction boom in America. It's like, it's never going to happen because

09:12for six decades, they have never done this and they never will. And I just, so I think

09:18people are when, once rates go up, I think people are going to be shocked that housing

09:22permits were, and guess what happened? Rates went up. Housing permits are at COVID-19

09:26recession levels. Housing starts. So it isn't shocking.

09:29Well, I am going to, um, our builders events called focus on excellence. It's in Denver,

09:34uh, the builders daily, which of course, um, housing wire acquired this summer has this,

09:38uh, builders event. So I will be meeting with, uh, big builders in person.

09:43And, uh, it's going to be interesting. So I'll, I'll report back exactly, uh, what they have to

09:47say on this. It'll be really interesting. Yes. Yes. And I like, like everything, uh, so much,

09:52so much for me and my work, you know, revolves around the 10 year yield, right? The housing market

09:58revolves around the 10 year yield. It's I, I never even address it with mortgage rates first. I always

10:03move up the 10 year yield. And, and this week, I think the last time I checked, you know, this

10:07early Thursday morning, um, you know, the 10 year yield is at 3.99%. Again, when I get down toward

10:15my bottom end range, I've got to defend, defend the line, you know, and when I'm at the high end

10:21range, you know, I go, okay, there's a lot of downside to it. So at the start of the year,

10:26when the 10 year yield was around 470, and I was like, okay, this is my peak there. You know,

10:30the economy better be booming for this to stay up here and go higher. And, you know, you've seen,

10:36if you guys could look at a one year chart of the 10 year yield, it's so beautiful.

10:40Oh, that little downtrend. You take the Godzilla tariffs out of the equation, that drama mess.

10:44And it's just, it's, it's looked considering where the labor data is. Cause it's not inflation,

10:49right? It's not like the growth rate of inflation is below 2%. Uh, um, it's not because the treasury

10:55supply and the deficit, or, you know, you know, even though we, we had a monthly surplus, this,

11:00this thing has been in the works because the labor data was getting softer and softer for a very long

11:05time. And it got to the point where not even Jerome Powell and his arrogance could defend his,

11:12oh, it's a great labor market. It's a solid labor market.

11:15So from your perspective, are we about where we're going to be for the rest of the year on when it

11:19comes to, uh, the 10 year old and mortgage rates? I, I, the only way for me to go below 380,

11:25uh, um, is that three things, three key things. If you think mortgage rates are even going to go

11:31lower than that's, uh, uh, number one, uh, the labor data gets worse, uh, uh, and jobless claims

11:39start to break when jobless claims breaks, it's, it's the whole thing's over, right? Because you can't

11:45hide that, uh, um, we had a really good discussion and I've always tried to teach people this one and

11:50a half to 2 million people lose their jobs every month. That's very normal. That's a no, no, nobody's

11:57perfect. And it has nothing to do with the economic cycle, right? Every, it happens every month. People

12:00are not perfect at their jobs. Companies have the right size, whatever it is, they get fired. When

12:05growth slows down and consumption slows down, the hiring rate slows. So if you have to,

12:12then all of a sudden see a broad economy that's consuming less, then guess what happens? You lay

12:18off more people. So when jobless claims breaks, you know, that means that you, Hey, you can go lower,

12:25right? Because all we're talking about is a, is fed policy getting to neutral. We've never,

12:30ever discussed about the fed policy ever get into an economist stance, but the 10 year yield can go

12:35there. So obviously that hasn't happened yet. Uh, number two, there's always this stock market money

12:41can flow into the bond market. Kind of like last year, last year was a good example. Hodor got

12:45broke. Hodor, right? Am I saying it right? Nobody's bothering me about it anymore. So, um,

12:51I think that means you're saying it right. Yeah. Okay. So that broke. And I was like, okay, uh,

12:56I don't think we should be here, but you know, the markets can run, run you over at times. And then

13:02we shot right back up. So the stock market could be one, you know, third, the fed gets dovish,

13:07right? Jerome Powell's is coming toward an end. Uh, whoever the next fed chairman is and other fed

13:14governors say, we would like to have a, you know, we'd like to get to neutral, stay in neutral,

13:18and then maybe think about being in an economist stance. Those things can, you know, maybe get you

13:24under three 80, but we've priced in a lot. Right. And this is, this is why we, we brought Hodor out at

13:31the end of 2023, we had the Gandalf line. We always say these levels boy, cause 65 to 75% is fed policy.

13:38So, uh, you, you need things to happen. And if mortgage spreads were back to normal, then, you

13:44know, you're, you're at 5.75 already today, or even lower than that. But I'm almost at the end of

13:51my mortgage spread improvement forecast. You know, it's already got to the peak, uh, I think 0.2 basis

13:57points away from the peak level of improvement. So everything kind of already has been priced in

14:03for my work. So I need to see other things to happen to get the 10 year yield below three 80

14:08to see if mortgage rates go below 5.75, but we're, we're, we're just here. And considering what the

14:15labor data was doing, it kind of makes sense. Of course, we don't have the big jobs report,

14:20uh, this Friday. And, uh, but we do have apparently the CPI report. Um, apparently the Trump

14:26administration has said, Hey, yeah, let's go ahead and, and release that. Not sure how that

14:30happens. Does that, could that change, um, the game here? I mean, it trajectory wise, no, but you

14:37know, I, I, I really want to see how the market reacts to this report after this big move, right?

14:43If the 10 year yield is at four 50, it's different, but since I'm at the low point of the, of the level,

14:48uh, I'd like to see how the, how the trading goes off of that because, you know, oil prices are down,

14:55um, labor data is getting softer. These aren't things that usually you see in a

15:00booming economy that we know inflation is taken off because demand is, you know, going crazy. You

15:06know, the U S the U S has the most awesome consumer base in history, but, uh, goods inflation is picking

15:13up. We see that in some of the goods pricing service inflation is, is slowing down to a degree. So I,

15:19I really want to see the, I mean, but what do you think about the CPI report with who knows who's

15:25working, you know? So it's just, it's just, it's, it's a conflicting time because the quality of the

15:31data and what's going on, you just, you just, you just don't know. So we'll see. It is interesting

15:36that they made sure that this report comes up because the fed meets next week. Right. And that's,

15:43you know, there's only two more fed meetings left for the year and the market is really priced in

15:48to rate cuts for the thing. So again, so much is already priced in already. Right. This is like,

15:54kind of like it's good as it gets, but you need other things to, to take it to the next level.

15:58I think we always come back to this though. Um, like with the inflation report, like you said,

16:03well, if they want, if they want that to come out, then it's reasonable to think that they think it's

16:08going to be a good report, but a good report might not be good for mortgage rates.

16:12No, no. A good report is good for mortgage rates. Okay. So when you, yeah, when I say it's a good

16:17report, that means the growth rate of inflation, isn't going to meet estimates. So that's a bad

16:24report is that inflation is higher than, than what they expected. So that's when I, when I mean a good

16:30inflation reports, the growth rate is slowing down, not, not picking up, uh, out there. So, uh, it's,

16:37it's interesting in that stuff. And then of course, uh, we're going to have existing home sales at about

16:41like 90 minutes and sticking with the theme that we brought back about four or five months ago.

16:49We said, if home sales just stay flat around 4 million, that we're should see growth year over

16:58year from the reports that happened in June to October, that will be reported in July and November.

17:04So for the most part that's happened, it's because we're working literally from the lowest bar ever in

17:09history. So you got to take that year over year growth with a kind of grain of salt. That's our

17:14data is showing slight growth year over year on the weekly pending. So that finally filtered itself

17:19into the recent existing home sales report. So if you're get around that 4 million level,

17:24just remember, you see the year over year growth, just remember last year was historically bad

17:28in terms of total, uh, existing home sales before looking data with purchase apps.

17:34The first half of 2024 was one of the most negative weekly curves I've seen, even though home sales

17:40weren't crashing or anything, we weren't going anywhere. And it created a sub 4 million, uh,

17:46trend. It wasn't, it wasn't very big underneath 4 million, but it was enough that it doesn't take

17:51much to move the needle. So the year over year growth we see is in thinking with a little bit of

17:55grain of salt and, uh, uh, we'll just, uh, move on forward. Once the government shutdown ends and they,

18:01we balance everything out and everything can close on time and we'll take it from there.

18:05Yeah. Never a boring day, Logan, by the time we get off of this, something else could happen.

18:10We always say that, but it's true, especially in this administration, like things change fast.

18:14This is why you need me five days a week, you know, you know, when it comes to the end, Sarah,

18:21I'll be on seven days a week, probably be twice a day. You know, uh, you know, we slowly work.

18:26It's funny because I talk to people say, yeah, you used to be on once a week. Yeah. And I was like,

18:30yeah, two, three, four, eventually five, seven, twice a day. And then, uh, that, that, that'll be

18:37a lot of fun. It's just going to be the Truman show. Only the Logan show. We're just going to follow

18:41you around constantly. It's kind of like that already with social media. So, uh, yeah, only you'll know it.

18:47Well, Logan, thanks for being on. Appreciate you, especially when I know you're speaking today.

18:50Thanks for making the time. Pleasure.

18:56Thanks for having me.

Category

Transcript

Be the first to comment

Recommended