Logan Mohtashami on the state of the economy

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the state of the U.S. economy and how that is impacting mortgage rates and housing.   Related to this episode:   ⁠Mortgage spreads hit lowest level in years, keeping rates near 6%⁠  https://www.housingwire.com/articles/mortgage-spreads-hit-lowest-level-in-years-keeping-rates-near-6/  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  To learn more about Trust & Will, click ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠here.⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠   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.

Transcript

00:00Welcome, everyone. My guest today is lead analyst Logan Modershami to talk about the state of the

00:11economy as we wind down 2025. First, I want to say thank you to our sponsor, Trust in Will,

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

00:22It is wonderful to be here. Happy Friday. Thanksgiving's not that far off. It's great

00:27to be an American today. It is, even though we don't have jobs data, which I know hurts your

00:33heart not to have the official jobs data. You know, it's interesting because, you know,

00:38normally I'd be sitting here today and we'd go over the jobs report and jobs week. But one thing

00:43I found interesting about this week is that there really is enough other data lines on the labor

00:50market with Revlio and other private sector to kind of get a good idea of what's going on. So

00:57the Federal Reserve is not totally in the dark. There's all the, of course, you know, we don't

01:03have housing permits, new home sales, there's retail sales, there's stuff that's very important

01:08to the economic cycle. But on the labor data, it's good enough, right? That's the one thing I'll take

01:16out of this week, that there's enough private sector data out there to give you a rough idea

01:22of where things are at. So Logan, here we are in November officially. What is the state of the

01:28economy right now? You know, it's very interesting now that we've gone through this jobs week. We do

01:35have enough labor data to get an idea there. But let's just take the facts right now. Now, if I took

01:41the Atlanta Fed GDP tracker data, which, you know, things are going to be a little bit suspect this

01:46quarter anyway, 3.94% GDP growth. We have a lot of CapEx spending in AI. We have a lot of data centers

01:55being built. When I saw the ISM service sector new orders, new orders popped. Okay, that's a very

02:03positive data line. You don't ever see that ever happen in a recession in history. We don't have

02:11retail sales data, but the consumption data is holding up. However, you know, we look at some

02:16earnings like Chipotle and some companies, fast casual dinings, they're all missing earnings out

02:22there. I'm pretty sure the Fed probably likes that because they think that if that happens, then those

02:27companies won't be able to raise prices. But that's a different conversation. But in any case,

02:31we're seeing, again, an economy where you can see credit stress, consumption stress

02:37on the lower income side. You know, Chipotle, you know, or they're talking about, oh, student loan

02:44debt has come back, you know, and delinquencies. There's an entire lower shift of spending that's

02:53getting hit. And the Federal Reserve has acknowledged that to a degree. Then you see stocks being elevated,

02:59homeowners doing good. So in that context, you can see why the labor data is getting slower.

03:08Because if you have manufacturing declining in jobs, if you have residential construction

03:13declining in jobs, if you have housing permits in recession, those aren't real. You don't see that

03:20in an expansionary. But the consumption of goods and services and other things are still keeping

03:25things at bay. And again, for the new home sales sector, when rates move down towards 6%, new home sales

03:33had a three-year high, that number is going to get revised down a little bit. How the builder's

03:39confidence data, because we don't have permits, their six-month outlook has really improved. So

03:44there are some benefits in there. But the jobs data is the interesting one, because whenever we start a

03:52year out, I always give an estimate of where I thought jobs growth would be. And I'm usually typically

03:57lower than a lot of people just because I adjust things to population. I don't think the U.S.

04:01could have these really big job prints anymore. Last year in 2024, I was always under all the reports.

04:10And then after the revisions, right on target, basically on the top end of the forecast.

04:16But early this year, noticeably weaker, like no equivocation whatsoever. This was not a good year

04:25in the labor market right off the bat. The jobs data was noticeably getting softer. So

04:29whenever people want to say this is all population growth, this is it. The U.S. will never have a big

04:35job market ever again because it doesn't have the labor force growth anymore.

04:38I question that theory. But in any case, some people are using that.

04:45Job openings, if you look at Indeed's job openings, it's been getting softer.

04:49If I look at the Revlon jobs data, it went negative. If I look at ADP three-month average,

04:56it's below $10,000 a month. So there's things there that could show you there's some stress,

05:01but we're not completely breaking on the consumption side yet.

05:05When you look at the kind of jobs, can you class them into certain categories? You know how in the

05:11past we've had like, okay, here's the tech companies are getting hit, or you've talked

05:16about manufacturing and construction jobs. Is it across the board? Is it concentrated in certain

05:22areas?

05:23Right now, manufacturing jobs have been losing since the end of 2022. And literally no one wants to talk

05:29about that. But recently we have specialty contract construction jobs, losing jobs. We have

05:35residential construction, losing jobs. Of course, the federal government, which helped the total jobs

05:42number last year, that growth has slowed down a lot. So healthcare services has been performing well.

05:51In a service-based economy, people that, you know, the service sector jobs are holding up. But it's one of these

05:59things where we're kind of stuck here. And part of the thing is, I remember 2018 and 19, and business

06:07investment, like if we didn't have the AI CapEx boom, oh man, things would be different. Because business

06:15investment back in the first trade war tap dance basically went to zero, even with the tax cuts and

06:22everything, like companies didn't know what to do. Now we have a situation to where are the tariffs even

06:29going to be allowed to stay? So we just went through this whole entire year. And very soon we might be

06:36having to give it all back. Which, which makes it very interesting that going out in the future,

06:45you know, they passed the tax cuts because they were using the revenue from the tariffs, you know?

06:50So if the tariff money goes back, companies are going to get back money. You still have the tax cuts.

06:56And if goods inflation doesn't pick up,

06:59that's not a bad looking 2026, right? In that format, if you're telling me goods

07:06pricing that's have been picking up, you know, if those things start to fade, you got the tax cuts

07:13in place and rates stay lower and energy stays lower, you know, and the dollar stays lower,

07:19you, you might, you, you, you got something workable there that could be a positive, but

07:23that assumes that the Supreme court shuts down the tariffs. They give all their money back and they

07:29don't try to do anything because what we've seen is goods inflation has picked up. You cannot say it.

07:35It hasn't. And now you're collecting more and more revenue and all the supply that was brought in

07:42where, you know, companies weren't, you know, passing it down because they didn't need to yet.

07:46It's a little bit different going into 2026. So I think it's, it's a really interesting backdrop.

07:51I mean, it's weird to say this, but the Supreme court can really change how I might look at,

07:57you know, the economy going out in the future. And, you know, even today,

08:02uh, the, the Senate was talking about, Hey, listen, we really need to get this government

08:06open again. You know, it's now, now we're threatening airlines, you know, less travel

08:12out there. It's going to be the holiday. So, uh, we have a lot of noise right now with the economy

08:18as well, right? We have a, you know, labor force growth is a big, we have the government shut down,

08:23we have the tariff situation. And for those that track data in 2018 and 19, there's a lot of

08:29similarities into there, but then we fall back to household balance sheets. Consumption is holding

08:34up. Homeowners are doing well. They do the big chunk of consuming. So it is, it is one of these

08:40very, very unique economic cycles, but we might get a lot of clarity going out in the next, uh,

08:4830 days. I mean, we might have the government shutdown. We might have the tariffs gone, you know,

08:53the tax cuts in place. If rates stay lower, energy prices stay lower, that could keep consumption

08:59going, uh, into 2026. So it is a little confusing to me though, because I know you're always like

09:04labor over inflation, but if inflation is going up, you said inflation is rising. How does that,

09:10how does that lead to lower rates? It did. Okay. Well tell me labor over inflation,

09:18the labor market got weaker, you know, you know, it is, it is, it is, it is an interesting year in

09:24that normally you don't see the fed cut rates when inflation is this high. That's, that's not,

09:32that's not a normal occurrence, but the, but our thing has been the labor market is going to override

09:37everything. You know, again, multiple reasons for rates could not go down treasury supply. We're

09:43going to have big bond auctions coming up, uh, uh, uh, this week as well. Uh, deficit spending,

09:48people always go deficits are rising rates have to go high. That's not a thing. The bond market is

09:54over always weighted economic data and labor data slowing down as their primary driver of rates going

10:01down. They did it in 2023. They did it in 2024 and they did it in 2025, except 2025 was the first year

10:09that authentic labor data was slowing down. Let's be mindful here. It wasn't that long ago that Jerome

10:15Powell went on TV and said the labor market's fine. It wasn't that long ago where Beth hammock says the

10:21labor market's robust. You really want people in charge that literally missed this. So labor markets

10:28slowing, not breaking, breaking jobless claims, rising growth slows down, industrial production slows

10:36down retail sales. So we're not at that stage yet, but I would say that you're, you're more prone to

10:41any kind of shock, really tilting things worse. Uh, so it's something to think about, but then we might

10:49get a lot of things changed in the next few weeks. We might not have tariffs anymore. We've got the

10:54government open. The fed has already cut rates. Energy prices are lower. That's, you know, the history of,

11:02uh, uh, uh, politics and inflation, man, no politician survives inflation bursts, right?

11:09That's just the history. Like everyone thinks they can do it, but it isn't. So there's a, there's a lot

11:14of, a lot of stuff out there that can might, can get cleared up in the next 30 to 60 days getting ready

11:20for 2026. But again, rates going lower, the 10 year yield going lower, the fed funds going lower are all

11:28positives. Right. So let's talk about, let's talk about housing, housing. You put housing in a

11:33recession in 2022. It's been there ever since. So, you know, what kind of low rates are we talking

11:40about that could get housing out or on the other side, like is, is the economy doing worse or better

11:48going to like, what's the, what's the impact of all of this? If I'm a housing professional.

11:52Okay. So if you can get rates to just 6% and just hold it down there, the builders have multiple

12:00times told you they can, they can work with this. This is why I've, you know, when we channel these

12:06rates out, we go, okay, it's really 6.64 down towards six. If you could just hold it here.

12:12Right. And then we, we see it again. Now we see it again. It's, it's interesting where

12:16the wall street journal has some very questionable headlines on housing data. They're like, oh my

12:22God, we're bringing the arm loans back that were popping. Like, you know, these arm loans were the

12:27same arm loans. No, they weren't. If you're a, if you're an educated person who did any reading on

12:31the 2008, these are not the arm loans back then. Shame on the wall street journal for posting that

12:37clickbait out there. And, uh, uh, uh, the, my, somebody should have came out there and I'm surprised

12:44John Burns real estate didn't slap that down right away because these are not the arm loans back

12:48then. But what they also say is that the builders aren't able to sell their homes. Well, remember

12:54the transaction models of builders, they're not very high velocity, but if they can get their

12:59confidence going six month outlooks going, we saw this in the end of 2022 going into 2023, right?

13:05There was a similar backdrop back then in 2023, residential construction workers were losing their

13:10jobs for a few months. Then rates went down to six and oh, permits started to rise again.

13:15You know, those are things that will be beneficial right now. And the lower the fed funds rate goes,

13:21the lower short-term interest rate cost goes, you could get some, you know, maybe apartment

13:26construction making sense again with the collection of rent. Can they, can they, can they do this to

13:30make money? So, uh, we can get there. The question I've always said is that it's really hard for me

13:37with the federal reserve doing moderate restrictive policy to get mortgage rates

13:42below 5.75, right? I, if that's 5.75, a lot, a lot of things change, but under this regime,

13:50it's just difficult, right? To go there. So this is why we, we always, we always say when it gets

13:55down to 6%, the fed freaks out, comes on the back and says, Oh, what are you guys doing? Go back,

13:59go back higher, go back higher. But it's a little bit different this year because the bond market said,

14:03Hey, we're going to stay near down 4% until the labor market gets better. Right? So it was,

14:09it was a really good, interesting rebuke that the bond market did to the fed last year. You know,

14:15the bond market was pricing a recession, the growth rate of inflation was falling. And the fed said,

14:19Hey, listen, we're, we're, why are we doing this? And then the bond market had to quickly reverse

14:24course. Now didn't do that really. We're not, you know, mortgage rates aren't back up to over 7%

14:31like the word last year. So it's a very tight needle right here with a lot of these economic

14:36data reports. But if you try to connect the dots and everything, there could be a shift in the next

14:4230 to 60 days on the outlook of what things can happen. But clearly you can see like the consumer

14:48confidence index. I mean, I just generally hate surveys anyway, but that thing is like, I like the

14:55lowest levels in recent history, right? So obviously we're not, unemployment rate isn't

15:00above 10% or, you know, we're not having negative growth and jobs being laid off, but the survey data

15:07isn't very positive in that light. So I think it's an interesting backdrop for 2026 because of what can

15:16change in the next 30 to 60 days. But the key is keep oil prices lower, keep rates lower.

15:24And if the dollar stays at this level, you can work with this. This was a Trinity impact or the

15:30Trinity call for the White House. They needed these three things to kind of make things work

15:34because we're still a consumption-based economy. But boy, it's just going to get interesting.

15:39It really is with the Supreme Court. And if they take the tariffs off, but they already passed the tax

15:47cuts on it, they're not going to rescind that. And all of a sudden money is going to go back to

15:51companies. And then if goods inflation starts to decelerate a little bit, and then the Fed says

15:57we can go a little bit lower, just saying Wheeler, there's a, there's a threading of the needle.

16:03It's like fourth and 10 game on the line. You got one wide receiver going down the middle. You got

16:09double coverage, but if you get it right in there, there's something to work with in the future,

16:13but we'll see what happens.

16:14What you're saying is we need a Patrick Mahomes to step up and do it in the fourth quarter.

16:20Patrick Mahomes would be running around, scrambling and throwing stuff up in the air.

16:23We need someone like Mac Jones, because Mac Jones could throw those bullets down the middle. But

16:29yeah, it was a fascinating week because we saw the bond market just completely react to one

16:3680. Who would have thought this three years ago? ADP report, 42,000. The bond yields just shoot up

16:42because, oh my God, the labor data, it's good. I'm like, you know, but we have, that's a, that's a

16:47bad sign. Yeah. We, you have such a low bar in the data. That's why I always tell people when we

16:53were down under 4% said, guys, we really need to be like, the jobs data needs to be like really

16:58negative, you know, because, uh, the, the Fed just put the lowest bar in history. Like, okay, if we're

17:04not losing jobs, we're okay. You know? So it is what it is. It is a confusing, uh, year in that side

17:12there's so many cross numbers out here, but then on one hand, you have ISM new orders really blow

17:17out. You have 4% GDP forecast. Uh, Kevin Hassett, the white house, the economic, uh, council head

17:24came on TV and said, you know what? Uh, the, the shutdown is really hurting our economy. We're

17:29going to have a very bad fourth quarter. We should cut rates more. You know, I can't believe the Fed

17:34didn't cut rates more. Trump demanded more rate cuts. Kevin Hassett might be the next Fed chairman.

17:39That's a, that's a whole other conversation, right? If the, if the, if the next Fed chairman

17:47is basically saying the president of the United States wants more rate cuts.

17:53And that's how, and that's what the Fed needs to do, right?

17:56I mean, it's just, you, you gotta be somewhat in the middle. This is why Christopher Waller should

18:00be the next Fed chair. He should have announced it already, but. Okay. Interesting.

18:05Last, last question. And of course we're doing this on a Friday. So anything could happen between

18:09here and Monday when this is, but, um, you know, I saw a headline that, um, Trump is cleared

18:15if he wanted to, to declare war on Venezuela. Of course, none of us know if that's going to

18:20happen. Wars are generally inflationary, correct? What kind of war would have to trigger something

18:25like that? Uh, you know, world war one and world war two were inflationary because they had

18:32price controls. Uh, so any of the regional wars, you know, aren't inflationary like they

18:39used to be. In fact, it was one of the things that happened recently, whenever Israel was

18:44attacking Iran, oil prices didn't really shoot up or, you know, in a, in a big fashion and

18:49stay there and bond yields didn't act like it did. So, um, no, I, I, that, that war against

18:57Venezuela is just not even on my radar, uh, in that. And it, you know, if, if someone

19:03is trying to make it inflationary, it's just basically the, the shortage of oil going out,

19:08something like that, you know, something like that, because part of the Trinity game plan

19:14was oil prices had to go lower. This, this Trump could not do what he wants to do. If oil prices

19:19were at 80, 85, 90 to a hundred, right. Because, you know, people pay gas. Oh my God. People hate

19:25it when they have to pay more for gas. Cause it's something they see every day. That's

19:28why gas prices and confidence data, you know, to, to a degree is, is, is kind of matching,

19:33but outside of that, we, we're not going to have price controls because of a war with,

19:37uh, Venezuela. If you look at the history of inflation going back to 1870, yes, I've got

19:42charts like that. World war one and world war two were very inflationary. A lot of domestic

19:48production and price controls and, you know, rationing stuff like that, uh, because of world

19:53war. So that's, that's a whole different process. Venezuela. I think we're just shooting a few

19:57boats down, whatever target. This is, looks like more of a side project for the white house

20:04than anything else. All right, Logan, thank you so much for walking through all of that

20:08on a very interesting week. That's just going to get more interesting. Yes, it is. All right.

20:14Thanks. We'll talk again soon.

20:23I'll be close again soon.

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