- 9 months ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the positive economic stories of 2025 and how they have set up housing conditions for 2026.
Related to this episode:
Despite economic uncertainty, weekly housing demand up double digits over 2024
https://www.housingwire.com/articles/despite-economic-uncertainty-weekly-housing-demand-up-double-digits-over-2024/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will, click here.
https://trustandwill.com/
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.
Related to this episode:
Despite economic uncertainty, weekly housing demand up double digits over 2024
https://www.housingwire.com/articles/despite-economic-uncertainty-weekly-housing-demand-up-double-digits-over-2024/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will, click here.
https://trustandwill.com/
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.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the
00:10economic stories of 2025 that he's thankful for. Before we get started, I want to thank
00:16our sponsor, Trust in Will, for making this episode possible. Logan, welcome back to the
00:21podcast. It is wonderful to be here. It is Thanksgiving week. Wow, did this year move
00:27fast? A lot happened. Oh, my gosh. I can't even believe it. It feels like five years. Yes,
00:33five years. And, you know, the theme of because it's Thanksgiving week, we're like, what do we
00:38want to give thanks for? And of course, I have my structural bias about the housing market being
00:44part of team higher rates in 2021 and 2022. But because of those actions, there are certain things
00:51that we all should be grateful for in 2025. And that's going to be the topic theme of the day.
01:00I love it. Okay. I love a positive story here, especially about housing, especially as we head
01:05into a season that's maybe less busy. So let's talk about what are the positives for the 2025
01:10housing market the way you see it? So number one, the number one positive thing is everyone hug,
01:17give a mortgage spread a kiss, give it an extra piece of turkey, yams, mashed potatoes,
01:24any wonderful, delicious things that you could cook for Thanksgiving. But mortgage spreads this year
01:31was such a beneficial story. Of course, my thing is that I'm trying to teach people mortgage spreads
01:36across the country. And let me tell you, so there is a lot that needed to be learned.
01:40But the fact that mortgage spreads improved to the peak level of the forecast for 2025 meant that we
01:47actually had some time under 6.64%. And the last four months of existing home sales have been positive
01:56year over year. New home sales hit a three-year high. Of course, that number is going to get adjusted
02:00lower a little bit. But without mortgage spreads doing what it should have done this year, we would
02:07add a much different story about the housing market. So I think that's hopefully one thing
02:11with the articles and the charts and everything and teaching about the 10-year yield, 30-year
02:17mortgage, the slow dance. But then the next variable is the spreads.
02:20I think the thing that surprised me about spreads this year is that they are vulnerable to outside
02:26influences, right? Like shocks in the system or just things that happen. I'm like, we had a lot of
02:31things this year that could have, in another circumstance, made the spreads wider. And that
02:38did not happen. I mean, if you think about the last time we saw a big shock was when the Silicon
02:43Valley Bank collapsed, right? So of course, we have not had something like that. But we've had a lot of
02:48things.
02:49You know, it is interesting. In 2023, when the Silicon Valley banking crisis happened, we also have to
02:56remember that the Fed wasn't done hiking rates. I mean, they still hiked rates, even with the
03:01Silicon Valley banking crisis in play. That's crazy.
03:04Yeah. But because of that, now, what does the history of US economics tell us that whenever the
03:11Fed tells the market they are done hiking rates, there's usually a big, huge bond rally and mortgage
03:17rates go lower. That's exactly what happened. But it went all the way down to the borderline and it
03:23bounced off of that in, I think, December 28th of 2023. That was a really big rally we had. But
03:31mortgage rates got up to 8% because the spreads were really bad in 2023. We would not have had 8%
03:37mortgage rates at all if the spreads were anywhere near normal. But 2024, they got better. And I think
03:43a lot of people, again, the confusion is people are told that the spreads could never get better
03:47unless the Federal Reserve buys mortgage-backed securities. There is no history that shows that to
03:52be the case for those people who read. We always say reading is a good thing. And in 2024, the spreads
03:58got better. We got, at one point, 29 basis points away from normal spreads. That made such a huge
04:06difference this year. And then toward the end of next year, we should be somewhat back to normal again
04:11if everything moves correctly. And that's the history of US economics. But mortgage spreads
04:17would be the number one thing everybody should be thankful for.
04:20Huge difference. Every weekend on the tracker, you talk about, here's what normal spreads are.
04:25Here's where we would be on mortgage rates if we had the worst spreads. Here's where we would be if
04:29we had normal spreads. And all your, we've been getting closer and closer and closer to what a normal
04:34spread would be. How close are we right now?
04:36I mean, we're roughly like 30 basis points away from normal spreads. And that's, that's so much
04:44better than, you know, I always give examples like, you know, I'll say if mortgage spreads were as bad
04:48as they were in 2023, mortgage rates today would be, you know, seven and a half percent as of this
04:55morning. But that's not the case anymore. But if mortgage spreads were back to almost normal,
05:00we're at 6% mortgage rates, you know, so, or, or even 5.8%. So there's still some room for
05:10improvement. Again, you don't need the 10 year yield to get down to, you know, the Gandalf line
05:15at 3.37 to get sub 6% mortgage rates, but spreads improving to me, not only, not only got better as
05:22they should have, but also it helped housing demand, especially toward the end of the year.
05:26Okay. What else are you thankful for? What else is a positive story for 2025?
05:32Inventory, right? Active inventory. And for those who follow me on social media, you know how much
05:38social media inventory charts I put up. I always have my little infamous NAR inventory data that
05:44goes back to the early 1980s. We have our Altos data, which is very unique and prolific, I believe,
05:50in tracking inventory. But the whole concept of team hire rates in February, 2021 was that
05:56we got to a level that for the first time in my life, I actually said, oh, we actually have
06:02low inventory. Like we actually authentically have a shortage. And of course, the goal that I had with
06:10the team hire rates model is that inventory just gets back to 1.52 to 1.93 million. When that happens,
06:16and we're over four months of supply, the low inventory talk goes away, just like it did in the last
06:23decade. But it has to get back to those levels. And when we wrote that article in February of 2021,
06:29we need higher rates because this is not like the housing bubble where you're going to get like
06:33vertical inventory happening very soon or the inventory channels are going to get us back to
06:38normal. The only way to do it is higher rates, days on markets grow, softness in mortgage demand,
06:44inventory can grow up, grow higher. And we got there. We got, I think, the peak for 2025 will be
06:531.55 million. Now, normal inventory is 2 to 2.5 million. Going back decades, the housing bubble
07:00crisis in 2007, it got up to 4 million. But just getting back up to 1.55 as a peak, getting four
07:07months of supply, buyers get back into the game, right? This is not one of these savagely unhealthy,
07:13seller markets anymore. I was looking for balance. It took a little bit longer than I thought, but
07:20we're finally there. Then that's how you get affordability better. It can't just be, well,
07:26let's get mortgage rates down to 3%. That model isn't going to work in this current environment.
07:31So higher inventory, more concessions. We see that by the builders, of course. Sellers are no longer
07:38in total control. And that is a positive for the housing market that lived a very unhealthy period
07:48of time from mid-2020 to early 2022 when active inventory just got to levels that the supply and
07:54demand equilibrium broke in a very bad way. Absolutely. And everybody in our industry knows
07:59it. Whether they were trying to get a buyer to be one of the 20 offers accepted, whether they were
08:06on the mortgage side working as fast as they could, it was crazy. It was crazy. So I also wanted to
08:13point out that our inventory is a little bit different than other inventory. We don't have
08:18condos in the mix. So it really is like for the Altos housing market data, it's single family homes
08:23that are available to buy, correct? Yes. I mean, we track the condo market, but for the tracker,
08:29we only show single family housing. Well, I mean, we could track single family condos in any zip code
08:36in America, but for the tracker, it's single family homes that are available for sale, not in contract.
08:42And this is why our data is much lower than everyone else's. Everyone has like a pending contract into
08:48them, but we just want to get the raw inventory data out for everyone to see. This is exactly what is
08:54available to buy today. And then again, you know, like, like, you know, what I say at events, we believe
09:01we're the most prolific housing trackers and we'll take the last three years, you know, when late 2022
09:06came and the supply and demand equilibrium was changing. And we say, as soon as we get to 4 million
09:12home sales, that that whole thing should, should, should stop. It worked then in 2024, the forward
09:18looking data started to get better. And remember with the trackers incorporating economics into it,
09:23bond markets, mortgage rates, 10 year yield spreads. I don't know how many people in America do this.
09:28Like, I don't know anybody else that does it like how we do it, because that's taking out a lot of stuff.
09:33You got to be versed in a lot of things. And then all of a sudden the housing market shifted mid-June.
09:38The inventory data started to stabilize. The demand data started to pick up. And we still have people today
09:44who just don't have access to that data. And they're still living off of thinking what was happening
09:49six months ago is still the case. So, um, healthy year, uh, price growth cooling down. It's, you know,
09:57I think I'm going to get right to where my forecast will be in 2025 where last year, uh, I was a little
10:03bit too low and it just, it's just a much healthier housing market when there's more choices out there.
10:09Right. And it isn't a terrible seller market. Cause what happened after the mid part of 2020 and all
10:16of 2021 and 20 early part of 2020 was extremely unhealthy. Like even though sales were up and
10:22everything, we just simply had too many people chasing too few homes. And now that's not the
10:27case anymore. Monthly supplies over four months, active inventories back to the kind of the low
10:32levels of pre COVID all, all positive in my book. And I, and I know I'm structurally biased when I say
10:38that because that is something that I wanted to see since February of 2021.
10:42It's also, um, uh, counter counter narrative to the whole idea that like, Oh, things are crashing.
10:49People are like putting their, you know, there's going to be a ton of inventory because people are
10:52selling and all this stuff. We're like, we've been waiting for that for years. Like, please put some
10:56more inventory on the market. That would be good for everybody.
10:59I, what I think this is, if I have to give one critique to the public, the public always thinks of
11:07supply as a vertical case with no demand. And naturally that's what they, you know, they're
11:13not, they're not data analysts. They wouldn't, they wouldn't put the equilibrium together.
11:17There has never been a vertical supply period in recent U S history, going back to the 1980s,
11:24except for 2005 to eight. And that's, that's not a healthy situation. This is why we always say our
11:31new listings data. If something is breaking, the new listings data will go vertical. And then what
11:37happens is a lot of people say, don't buy a house. Why are you so stupid? Why are you buying a house?
11:41Home prices are going to crash. Did the deflationary collapse model that I would, I would argue that a
11:46lot of these people are just doomers who are trying to get attention, but we had one period in time in
11:51history where you did see vertical inventory. You saw distress sales. You saw our new listings data,
11:56which was running at 250 to 400,000 per week, per week, for years. The last five years is like 30 to 90 K.
12:05So there will be a time where inventory is so high and that it would be distress sales. And people just
12:11go, I don't want to buy it. That's the deflationary aspect of a bad economy that nobody wants to take
12:17up. That's never happened, right? We've pretty much been at 4 million existing home sales for years now,
12:24while the inventory data was picking up, right? There wasn't no collapse in demand off of that.
12:29Late 2022. After that happened, home sales never collapsed anymore than that. And we're just
12:35working off of a better supply and demand equilibrium. So I understand the theory that
12:39some people say that if you have a deflationary collapse, no American should ever buy a house
12:44because let the inventory, let prices crash. That only happened one time in over 80 years.
12:50And none of the data lines that we track over 80 years were showing that in the last 14. And this
12:57is why we can explain what happened in the last decade, what happened during COVID and what also
13:03happened in the last three years, especially at the end of 2022. This is why we structurally believe,
13:09believe in people who have economic models, look at their models, look at their forecasts,
13:14see if they know what they're talking about. I am at a 100% clip that these people don't know what
13:19they're talking about, but it's good for attention. It is. Okay. What's next?
13:24Well, number three is, this is my personal thing as well. I'm glad that I saw people push back on a
13:3550-year mortgage. I'm glad because for me, it's... Again, Sarah, you didn't know me in the last
13:44decade, but in the last decade, I had this like running crusade against people that say,
13:49we need to ease lending standards. I go, no, we don't. Lending standards are very liberal. Just
13:53go look at the FHA guidelines. That's not the problem. A lot of people just think that, well,
13:59there's no more low FICO score homebuyers anymore. And they're never going to be. It's
14:03never going to happen again because people that struggle with credit card debt and misinstallment
14:09payments don't have a lot of reserves and their cash flows. They're traditionally not going to be
14:13homebuyers. But this is what happened this year. You have to think about it in this light.
14:19Political economic theory, which I don't like, is really showing itself in housing.
14:24So why are all these government intervention ideas coming into the housing market? Why?
14:32Because they favor baby boomers, right? Let's say a board wants to get rid of property taxes. Why?
14:37They have a lot of baby boomers who are mad. Homeowners are voters, right? The cost of housing is a lot
14:41to them. One million capital gains. Let's take it from $500,000 to one million. Who does that help
14:48out? Baby boomers. And you know the Republicans are hearing it from their side because one million
14:55capital gains is New York and California. Those are blue states. And for Republicans who push that,
15:01you know that they're hearing it on that side. A little bit of pushback on that. But the 50-year
15:06mortgage was like, I mean, I'm going in Congress and testifying against a 40-year mortgage. So the
15:1350-year mortgage is just not a viable. Your idea can't be to subsidize a marketplace whenever things
15:20get bad. You have to let the marketplace work itself out. Now, inventory has grown. Price growth has
15:26cooled down. The market is working itself. So it's doing its thing. But to always go back into some
15:32form of subsidization and added one already to a sector that's very subsidized, it was good to see
15:38that unanimously everyone. Like oddly enough, in this crazy year, the 50-year mortgage united everyone
15:46in America together. It did. That is a really terrible idea. And let's not do this. So I'm giving
15:52things that people finally figured it out. You just can't, you just can't keep on pushing the
15:57amortization out all the time. Now, really interesting, especially because you pointed out
16:03some of those earlier things or other things were aimed at baby boomers, which the 50-year mortgage was
16:08really aimed at first-time homebuyers, young homebuyers, right? It is. It's just, you know,
16:13you know, like, you know, the portable mortgage, it sounds interesting, but we don't have a, we don't
16:18have portable mortgages in America and you can't like write them back into the contracts. You know,
16:22those mortgages are securitized, they're already investments. So that, if you want to talk about
16:26something down the line or something, but affordability is an issue for a lot of things.
16:34And I understand why they're doing a lot of things, because if you get rid of property taxes,
16:39your housing cost goes down, right? Affordability. If you take a million capital gains, right,
16:46off the table, baby boomers will be able to sell their house and keep more of their money.
16:50Life becomes more affordable when you're paying less in taxes, because you have more cash. So
16:56that, the 50-year mortgage, of course, is just like throwing an idea out there. I know Austin
17:01Goolsby, the Chicago Fed, he said, well, if you, if there's a 50-year mortgage, monetary policy
17:08might not need to ease. It's just like, shut up, man. No, we're not doing this. We're not doing a 50-year
17:12mortgage. We're not, you know, so it is good. I just, I just, I, you always wonder if,
17:18if the public will just see this as a really good idea and try to jump on board and, you know,
17:23then you've got to go out there and be the, you know, you know, the grumpy chart daddy
17:29Grinch, you know, and just kind of say, this is not really a good idea. You have to let it
17:34take its course. So I, it was, it was good to see. I give thanks for that because I think the
17:39American public, you're, no. No, it's good. It's good to see some rationality out there. Okay.
17:46Anything else? Just the final thing is as, as crazy as everything has been, right? All this
17:55economic nuts case from COVID. We go from COVID all the way down to where we are in 2025. We had
18:05the sharpest increase in the Fed funds rate in recent history. Mortgage rates went from three
18:09to 7%. You know, we have all this tariffs and, and trade wars and everything. For the most part,
18:19the economy is still intact, you know, and I always fall back to my number one thing that if I had to,
18:25if I had to talk to any analyst in America, any young kid that wants to learn about economics,
18:30you have to verse yourself with the 2005 bankruptcy reform laws and the 2010 qualified
18:35mortgage laws. To me, that was the most prolific laws that were passed. And it isn't shocking
18:41that if it wasn't for COVID, we'd still be in the longest economic and job expansion ever recorded in
18:48history. Why? Because we do have for, for a mature and wealthy economy, we do have good demographics.
18:54Household balance sheets still looks, you know, excellent. Of course there's stress in the lower
18:58income and renter side of the equation, but as a total, we've took in a lot of shocks, right?
19:05Some of them are self-inflicted. Some of them are just a by-product of what's happening around the
19:09world. And we are still intact, right? You know, economic cycles come and go. We have recession
19:15models for ourselves, but you know, it is, it is a testament to our people, right? No matter all this
19:23noise, all these recession calls since 2010, everything, all this stuff thrown at us,
19:29America still, you know, held its ground and we're still outperforming a lot of economies out there.
19:35And I always fall back to, in a service-based consumption-based economy, household balance
19:41sheets matter. And those laws really prevented leverage from happening on the credit side. We,
19:47we, I just put up some charts on Instagram to show household debt leverage. It's so low now,
19:52like on a historical basis. And I think we, we, you never hear enough credit on that because those
19:59are two government rules that came into play, but it really set the groundwork. And now that we're
20:04coming into 2025, of course, we have a lot, job growth is slowing down. Everybody's worried about
20:09if there's a recession, but regardless, the last 15 years, we held our ground, right? And we got out
20:17of COVID very, very fast. And the whole concept of the COVID-19 recovery model written on April 7th,
20:222020, when the St. Louis financial stress index went lower and the 10-year yield was above 62%. And
20:28I said, game's on, we're running it now. The core belief was still household balance sheets.
20:34We're in a good spot, you know? So I think I, that's, that's what I, not only give thanks for
20:38this year, but for the last 15 years, uh, again, if it wasn't for COVID, we'd still be having the
20:43longest economic and job expansion in history. I love it. Love the positivity and really the
20:48pointing out, you know, the things that, that we can be thankful for, even as people in housing,
20:52because sometimes we're, uh, you know, we're on the brunt end of that, especially for the,
20:56for the recession. We'd love to remind everybody or, or let everybody know we did a special unplugged
21:02session of the podcast that will be going live on Black Friday. It's going to be, uh, it's a fun
21:07listen. It was fun to record. So you guys listen to that, check out the tracker, Logan, as always,
21:13thank you so much for being on. And thank you for tolerating me for another year and, uh, uh,
21:202026. Woo. Nellie, we got the housing economic summit with a, with a lot of great people. A lot
21:25of friends of mine are going to be there talking and oh, the, the nerd tour, the chart daddy nerd
21:30tour is going to take it to another stage next year. So we can't wait. And, uh, let's, uh, end the
21:35year off strong. Sounds amazing. Happy Thanksgiving. If I don't talk to you before then. You too, Sarah.
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