- 2 days ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about housing demand and jobs data and how low mortgage rates could go when the labor data breaks.
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00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about housing demand and
00:12jobs data and how low we could see mortgage rates go if the labor data breaks. First,
00:17I want to thank our sponsor, Trust & Will, for making this episode possible.
00:21Logan, welcome back to the podcast.
00:23It is wonderful to be here. And I'm telling you, I am in Indiana,
00:27in Indianapolis, downtown, and it is cold. I lasted like half a second. I tried to go out
00:34of the hotel just to touch snow because I rarely get to touch snow. And I just ran my back right
00:40inside, got myself a coffee and just said, man, I am not leaving this hotel.
00:46You are not built for the cold, man. You do not do well in the cold. Understandably,
00:51you're a Southern California person.
00:52Yes, yes. My high school basketball coach once said,
00:57Logan, if there is a nice age, you'll be the first person to die, but you'll have the best
01:00looking corpse. So.
01:03That's ridiculous. So funny. Oh my gosh. Okay. So it's been a couple of days and we have a lot
01:10of data to talk about. So let's start off with purchase apps, which I know is one of your favorite
01:14data lines. And also we're seeing some pretty interesting things there.
01:18Yeah. Year to date high. Again, we've had now 17 weeks with mortgage rates under 6.64%.
01:26And so we have a positive curve. That means the, out of the, out of the period in time where we have
01:33rates under 6.64 heading towards six majority of the data line is positive. Every single week has
01:40had positive year over year growth. We have more positive week to week growth. The last two weeks
01:46have been best prints of the year because we have positive weeklies and we have harder comps on the
01:52year over year data. And we still pulled off 17% year over year growth with more difficult comps there.
01:57So that's, that's the thing that's surprising me, but I need to see positive weekly data.
02:02And now we have 11. So hypothetically speaking, let's just assume the next existing home sales report
02:09is at 4.17 million. That would mean basically a 270,000 push higher than I'd say the lowest
02:21monthly sales of the year. We're almost at that 12 weeks. Whenever we get this going to there,
02:29we get a couple hundred thousand home sales. So just taking the low point of the existing home sales
02:34report this year, it can be about 270,000 more. These are monthly, seasonally adjusted. So
02:39positive and this purchase apps look out 30 to 90 days still. So we've had a Ford, the last 17 weeks
02:48have been the best. We're getting better sales data out here. And unlike last year, rates have not
02:55shot up. The 10 year yield is lower. The spreads are lower. The curve of the mortgage rate is lower
03:02for a longer period of times. That's a positive going into 2026. That is a positive. And like you said,
03:09the fact that we're now in worse comps from this time last year, I mean, it's not easy to beat those
03:16numbers. So I think this has been one of the more exciting storylines the last couple months, which is
03:23kind of funny.
03:24We said the housing market shifted mid-June. We always said that our model says 6.64 and under, data gets
03:32better. This is the third time this has happened now. I mean, just to give you guys a hypothetical,
03:36when we had 5.99% rates in early 2023, that existing home sales print amounted to almost
03:44half a million home sales on a month to month. Now, I think all of the data fell in to that month
03:49and rates had already jumped up higher. So that was going to be old data. But just imagine a little
03:54bit lower and staying down here, right? Not going above 7% like we've had to deal with in the last few
04:01years. That's a difference. And again, the reason we're here is labor data.
04:07Yeah, I was going to say, we're going to get to mortgage rates here in just a minute for the Fed
04:10thing. Let's talk a little bit more about the economic data that we've gotten this week. Jobs,
04:16to me, was one of the big things that we got. If you look at the ADP numbers, what did those numbers
04:20mean to you?
04:20Okay. So we have a complete divergence in a few of the data lines. The ADP report, negative.
04:28The Revlio's monthly data that people have been using until the BLS gets back on par, negative.
04:34Challenger, consumer, there's all these other data lines. They're all like, not good.
04:39Okay.
04:40But the mother of them all, jobless claims data, initial claims under 200,000. It's really rare in
04:49the history of America to get jobless claims under 200,000. But again, when the economy breaks and the
04:56labor market breaks, jobless claims 323. So the initial claims down, the continuing claims, which
05:02means people have filed for unemployment rates after 10 days, still elevated three or five. So we have
05:09a softer labor market, but not breaking. If we were breaking, if jobless claims today were at
05:16291,000, not 191,000. Tenure yield is under 4%. Mortgage rates are lower today.
05:26That's what we need. Okay. So when will we get the next jobs report, the BLS jobs report?
05:30So that's going to come out on the 16th, if everything stands true. Again, we just have to
05:36get everything back up to speed. And then we could run with the data. But so far, there's enough data
05:43out there to keep the same premise, softing labor market, not breaking. Now there's a view that you
05:51don't want to wait until jobless claims break, then go. So this is why it's the interesting discussion is
05:58why not be at neutral already? Right. And then there's the debate about, you know, these jobs,
06:03these low job numbers are here because population growth is slowing down labor for a while.
06:08We're having negative prints on some of these things. Hiring small business, not great. You know,
06:15manufacturing jobs are still being lost. The specialty contractor jobs are being lost. The one
06:20positive about lower rates is that the residential construction workers broke there. If it sticks,
06:27right, we always get these revisions and the revisions can change everything. But if it sticks,
06:30we got a little bit of bounce back there. So same, same story, softening, but not breaking. But to me,
06:37we've always been consistent with this. The labor market needs to break for the Fed, you know, to kind
06:43of really pivot to maybe say, okay, we're at neutral, but we like to think about where we're going to do
06:48with an accommodative stance. We have never once discussed a federal policy being accommodated.
06:54We're just talking about when to get to neutral policy. This is why it's been a slog. And
07:00the other news along that is Kevin Hassett is getting a lot of attention this week because of
07:07what happened.
07:08Okay. But let me, let me talk about jobs just for another minute, because, you know, you've talked
07:14about like when we see manufacturing jobs lost, when we see construction jobs lost, what do people make?
07:20What do economists make? What does the Fed make when they see those small businesses losing jobs?
07:25What does that say to them?
07:26The Fed doesn't care until jobless claims break. They have said this on live TV three different times.
07:33Jerome Powell's exact words, which is not going to be the case anymore. Jerome Powell's exact words is,
07:38we track jobless claims and they're really low. I think he accidentally said that because it was so
07:45nonchalant, but again, I've said, we do not want to go into the recession talk until jobless claims go to
07:50323,000. The Federal Reserve themselves wrote a paper about this. They said, well, if jobless claims are at
07:56400,000, that means the labor markets. No, really McFly? Come on. It's the rate of change. And again, it's never
08:05a good thing when manufacturing jobs are being lost and construction jobs are being lost. That's not good. But again, we
08:10have a lot of deficit spending. We have AI boom. We have a lot of construction workers building data centers. So it's a
08:16little bit different in this cycle out there. But boy, Sarah is going to be so interested in 2026. Like I am so happy and
08:26geared up for this, you know, because obviously what won this year? Labor over inflation. Because we were told many, many,
08:35many, many, many things why rates have to go higher. Inflation, deficit spending, total debt to GDP,
08:43treasury supply, my favorite, all these things. And yet we are here near the lows of the, I think last time
08:50I checked, we're four, 10%. But so it makes it an interesting concept for 2026 that some people could have a
08:59bullish economic stance and some people could have a negative economic stance, but then the Federal
09:05Reserve comes into play.
09:07Then the Federal Reserve comes into play. And let's note, they pushed that BLS jobs reporting to after
09:14when the Fed meets, right? And from your perspective, we talked about it, I think yesterday, I was like,
09:20you know, do any of these job numbers, does that spur the Fed to do more of a cut? And you were like,
09:26no, they do not, they did not want to cut it all this year. If it was up to them, you know,
09:33getting to neutral, they wanted to get to neutral as slow as possible. We picked up this at late 2022
09:40or early 2023. So they were basically forced to cut because, you know, Jerome Powell came on TV,
09:49said the labor market is good. Beth Hammock came on, said it was robust. And then right in front of
09:57their faces, you've had some of the most negative forward-looking data in some of the jobs prints.
10:02And it was Team Waller, Team Logan, Team Bowman that kept on early onset labor or inflation day,
10:09the history of economic cycles. This is not the time to say the jobs data is great. And we had
10:16wasted one month this year with that government print that bailed out that one jobs report.
10:21If that didn't happen, we would have had this discussion earlier. And here we are. This is
10:26just where we're at. We are slowing down. There are sectors of the economy that are getting hit.
10:31Remember, not all sectors go into recession, but the ones that are tied to, you know, capital spending
10:37and rates and all this stuff. It is what it is. It's just that the Fed has flawlessly made my point
10:45that they are just going to wait till the very, very last minute. And when jobless claims break,
10:50they're going to go, I'm so shocked. I can't believe it. We missed it again. You know, but it's just
10:55that data line has not gone negative for them. If it did, if jobless claims were 291,000 today,
11:0210-year yield is below 4%. And, you know, we're having different discussions, but it's just,
11:08that's something they rely on. And there's a lot of data lines, labor data lines are getting
11:16weaker in terms of negative prints, not just slowing down. So they have enough they need to
11:22just cut, but I expect them to be super hawkish again as a statement.
11:28Okay. Let's talk about Hassett, right? So last time we talked, I feel like three things have
11:35happened on him and, you know, back and forth, back and forth. What's the latest on, is he going
11:39to be the next Fed president? So we picked up on this, that Trump and a lot of people were mad at
11:44Powell after the last Fed meeting to the point that I, I even said, you know what, he's probably
11:50going to pick Hassett. We talked about that just because I don't think he's going to trust any Fed
11:54member. Like Christopher Waller would be a great pick, but he's a Fed person. He needs a yes man.
12:01Trump likes loyalty. So there are bond traders that are warning, you know, Trump, you know,
12:06investors are telling Trump, Hey, we don't like Hassett. You know, we think he's just going to be a
12:11yes man. And that's what he is. It's going to be a yes man. And so far the bond market has not done
12:18anything, but, uh, uh, the second thing we talked about at last podcast is that I'm looking for Trump
12:25to go after other presidents, you know, and later on the next day, they're talking about making sure
12:33that, you know, uh, Fed presidents live in their district, which is targeting hawkish Fed presidents
12:39who don't live in their districts, which means, you know, that might be the next thing in 2026 to get
12:45enough people out and put his people in to have the votes. Cause he needs the votes.
12:50Waller would be better in getting the votes in together and the markets trust him.
12:55Hassett. I mean, you can just imagine that, you know, working for an institution and this guy
13:00is your Fed chair, you know, it's just like, you know, if I have, you know, some of the worst
13:06housing price crash tumors and they tell me, okay, this is going to be your co-analyst,
13:11this person, you know, so I, I can't imagine that the, the, the Fed presidents are happy
13:18that Kevin Hassett now is in the, is, is, is in the running, but, uh, uh, it makes some of their
13:24regional presidents, uh, targets next year, I believe.
13:28So it's interesting. We talked about this, um, you know, the fact that they're going after those
13:32regional presidents because the, the focus of the mortgage fraud allegations are like, well,
13:38you have more than one house, which is super common if you work in DC, but you have a district,
13:43whether you're in Congress or, you know, a lot of people in DC have that dual thing.
13:48So it's interesting to me that they've pivoted away from it's mortgage fraud to, well, you just,
13:53you have to live in your district.
13:55You know, the Lisa Cook thing is she was a dovish person. So it doesn't really, that, that never,
14:00I just think they, you know, they're going after people. Uh, and remember, this is,
14:05this is how the framework works. They're going to make sure they have everything and then,
14:08you know, uh, force force block, but this is the tactic of forcing people to live in their districts
14:15is a, is a creative one, uh, uh, out there. So I just imagine if Kevin Hassett is named,
14:22uh, that, uh, the next thing we'll be focusing on very, very bearish people. Uh, Austin Goolsby will
14:29be number one on the list with Beth Hammock, uh, Lori Logan from the Dallas Fed. I, uh, Schmidt from
14:35Kansas city. Uh, I think these people will be targeted by Trump in the next, next year as it
14:41goes in. If Waller's in your Waller has a better grip on trying to get a little bit more votes
14:47because he was correct. Right. Uh, uh, it was, it was Powell. It was Logan. It was a hammock. It was
14:54all these people who said the labor market's robust and great. And we don't, and all of a sudden they
14:58had to all turn on a dime out there. So he doesn't get rewarded for that, but it's just,
15:03I can't imagine the morale of the fed is good to think Kevin Hassett, which is better than Kevin
15:09Warsh, which again, Kevin, both the Kevin's not good, but in this case, this is the world we live
15:17in. We just have to model it out and try to make sense of it. Okay. So let's talk about that. How low
15:25could mortgage rates go given you get Hassett in there or whoever Trump picks that, that,
15:30and then he starts going after different fed presidents. Like what, how low can it actually
15:35go? I still don't believe they can really move the needle too much. Um, because the market
15:42to, to me, Trump, Kevin Hassett, Waller, the labor data is more important because if jobless
15:51claims were breaking, it didn't matter if Powell said I wanted to hike rates, uh, the market will
15:58dictate to them. So a hypothetical, let's just say the economy outperforms next year and inflation
16:06is a little bit more firmer because the people are spending. And, uh, can the 10 year yield really
16:12go much lower if the labor data gets better? I mean, my whole thing is labor or inflation.
16:17Uh, so I, I think that becomes more of an interesting discussion because so much of the
16:22rate cuts are already priced into the 10 year yield and mortgage rates. It's really hard
16:28for me to forecast below 5.75 with neutral policy. That's, that's why I have that level
16:33there for the last two years, but, uh, uh, it, it makes the arm loans look better and they're
16:39already picking up. Um, we've been seeing the builders start to incorporate arm loans as part
16:44of their business model for 2026, but it, it, it, it, there's going to be so much interesting
16:50things, but above all else above Trump, Powell has it, Waller, the whole fed labor data runs
16:57the show. Okay. Well, what if the labor market break? What if the labor data breaks? What are
17:03we looking at there? If the labor data breaks, you can get to neutral policy to talk about a
17:08commative and that's how you have, you know, mortgage rates with the five handle. Um, uh,
17:14that, that would be easy. That's the, and then spreads could get a little bit better too. I mean,
17:18if spreads were back to normal, we're already, you know, 5.65, 5.75 already in that spreads should
17:26get almost back to normal next year. And, uh, uh, you can have five handles. Why do we always talk
17:31about the five handles? Because for some reason it, how's the data gets better. And I was speaking at a,
17:37and that this morning, I'm going to speak in another one in about 30 minutes. And I tell
17:43people, listen, the builders are at 2019 home sales levels. What do you think they're, they're
17:48better salespeople? No, they are offering lower rates. That's like a 1 million to 1.2 million
17:56existing home sales. Uh, so they are efficient sellers. They have profit margins. Not all the
18:01builders have that kind of, but they can, they can, uh, uh, move product and existing home sales
18:06is still down here, right? Demand gets better when rates get down towards 6%, but these are like
18:12four and a half to 5.875. Just hypothetically speaking with all the data that we have known
18:17now for the last few years, but if mortgage rates are at 5% for 12 months, everyone is doing more
18:23business. Absolutely. That can't happen in the existing home sales, Mark. That's not an efficient,
18:29uh, a seller's market. Like the bill, I would say the builders are efficient sellers. They're not
18:34the margin of dimes and they sell homes as a commodity because they got to sell it. And then
18:38your next one's got to come in and they got to build. So that's different than buyers and sellers
18:43and how much sellers need to sell their house. Well, there's all these variables that here is just
18:48got to make enough money to make, make, uh, make a profit and then move on out there. So I, I,
18:53it does get, it does get interesting because the armed loans are going to be sub 6% for 2020,
18:592026, unless the economy really recovers and the labor data gets really better. And then the whole
19:06labor inflation model turns up to where yields can go up. But because we have so many rate cuts in the
19:11system, we could stay in the lower end range easier than 2023 and 2024. Remember 2023, we were still
19:19hiking rates. All we talked about is back then we're done hiking rates, 2024, begrudgingly cutting
19:26rates. They waited all the way to like September until the labor data really got better. And
19:31Jerome Powell himself said it, we were a little bit late in cutting rates in 2024. This is just how
19:37they operate. So it's going to be so much fun. Sarah, it's going to be so much fun. That backdrop
19:42is going to be a very, you really have to be on the economic game to talk about everything in 2026
19:48because it's there. It's not so cut and dry easy. Which is why people should come to the housing
19:55economic summit. You're going to be headlining Barry Habib, Mike Simonson, Jessica Louts,
20:02Odetta Cushy. We have so many great economists coming. It's going to be in February, February 10th,
20:08which gives us enough time to see what's happening in the year and plan for the rest of the year. I'm
20:14super excited about that. And on that note, the first time home buyer medium age. Okay. So this came
20:21up in the discussion today and the first time home buyer is 40, then they might be dead by the time
20:29they're there, they pay off their house. However, the reason I discounted that, and I try to explain
20:35this, if you take the New York Fed and the AES, which is the government data on this, even Zillow,
20:42their median age buyers is like low thirties, mid thirties. And it's pretty much been stable
20:47in this. The NAR has deviated from everything and their surveys, percentages, responses are
20:56questionable. So I, my first, you know, the reason I didn't like that survey is that the NAR surveys
21:04for first time home buyer percentage was 21%, except their monthly sales reports each month is around 30.
21:11So that survey is not doing good. You know, there's such a divergence that I think there,
21:19there is almost like a unanimous, like once people realize what the data looks like, that survey is
21:24not getting, uh, uh, any credibility right now. And when we have multiple data line sets from other
21:31sources, say one thing and one breaks out and it's a survey with a very low percentage, you know,
21:36and my concern is that if mortgage rates went lower, more first time home buyers came in and
21:41more surveys, that age could drop and that would be incorrect, uh, as well. So, uh, I think that
21:48surveys created a little bit more confusion than, than, than given answers.
21:54Well, we will get all the answers in between here and there, but also at the housing economic summit,
21:58right?
21:59Yes. Boy, when do you have so many, I'm trying to like, I'm trying to like, uh, you know, set you up
22:05for this.
22:06No, I, uh, when, when you have multiple economists and analysts in one area for one day, that is rare.
22:13That is not, that does not happen. Usually you have an event where there's one economist or one
22:17analyst speaking, but when you have multiple people with multiple different views, you get to see the
22:22total picture out there. So you could take whatever you want for a bit, but when, when charts and data
22:28and models collide, you know, uh, uh, it could be interesting, uh, out there. And I think that's,
22:34that's why I love that event more than any others. It's just because I've got all the nerdy people in
22:39and I got people that I know are working with data charts and not just throwing stuff up in the air
22:44and, you know, uh, trying to get attention. So I think, I think that's going to be the most useful
22:49because by the time February comes, uh, we'll have enough data to just kind of see where spring is
22:54going out there. It's going to be amazing. Logan, thank you so much for being on. We'll talk again
23:00soon. Pleasure.
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