Revisiting the mortgage rate lockdown, now with more data

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about new data on the idea of a mortgage rate lockdown and how homebuyers are responding to elevated rates.   Related to this episode:  Logan Mohtashami  https://www.housingwire.com/author/logan-mohtashami/  HousingWire Youtube  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q   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 Motoshami to talk about the

00:11mortgage rate lockdown and new data that he thinks supports his position that there was

00:15never a mortgage rate lockdown. I have a different opinion on that. We'll get into it. Before we dive

00:21in, I want to thank our sponsor, Trust & Will, for making this episode possible.

00:25Logan, welcome back to the podcast on a topic that you and I have had a lot of discussion on,

00:31even a debate on. The dissertation of the mortgage rate lockdown is finally complete. I have three

00:40years worth of data to prove my purpose. Now, Sarah, you did not know me. It's a shame you did

00:46not know me back in the last decade. You probably would have given me an award in 2014 instead of

00:51kicking me out of that competition. But in the last decade, I had two things. I actually had a

00:58lot of things that I was fighting against. But for this conversation, the whole theory that there's

01:05no homes to buy, that the demand curve is weak because there's no homes for people to buy,

01:10that was completely false. I understand why people said that because inventory was slowly moving lower

01:15and lower, except mortgage demand was slowly rising higher and higher. And then all of a sudden,

01:20I can prove my premise with the 100-year theory. We had 2020, 2021, and early 2022. Existing home sales

01:27basically broke out once we got out of that COVID delay, but active inventory was very low. So for

01:34the people that said there's no homes to buy, I have 2 million homes more spot and sold with the lowest

01:40inventory ever. And when I die, none of y'all could take that away from me. Then the second one was the

01:47mortgage rate lockdown, which I think it was the first or second thing I ever wrote for HousingWire

01:52was to debunk the mortgage rate lockdown thing. And now here we are. We have a great example,

02:00right? We had mortgage rates go down to as low as 2.75 or even two and a half for some people. But

02:05people forget that we had three and a quarter to 5% mortgage rates in the last decade. People say that

02:11we have to be in a serious depression to have mortgage rates. No, we weren't. We had the longest

02:15economic and job expansion in the history of America with three and a quarter to 5% mortgage

02:19rates. There was no depression then, right? Fed policy was zero interest rate policy back then.

02:25But for this, the theory of the golden handcuffs, this is a nice little thing, nice little marketing

02:32given. Golden handcuffs, nobody would sell their low mortgage rates to buy another house.

02:37And of course, that's just setting it up for me to go, uh-uh, that's not how it works.

02:43So that will be the conversation of the day. What a way to start the new year.

02:47What a way. Okay. So I will say when we used to talk about this, the thing that I always felt like

02:53you were doing is you were changing the definition of what a mortgage rate lockdown was doing, because

02:58what you were focused on was inventory. And you did it in a way that I was like, but that's not what

03:03I'm saying. But I will say the conversation we're having today is more about what I think most people

03:09think about when they think about the mortgage rate lockdown, which is if you have a, if you have

03:15a lower mortgage rate, you're still willing, a good number of people are still willing to trade that

03:20in for a higher mortgage rate and buy a house. So that's what we're, because in the past you were

03:25like, you were looking at it like you could prove that there wasn't a mortgage rate lockdown because

03:29of wheeler. So what is your middle name? I'm not telling you my, Oh, come on, come on. What

03:35is your middle name? It's Teresa. It's what? Teresa. Sarah, Teresa Wheeler. Oh, now you sound

03:42like my mother. Yes. Yes. What have I taught you about housing economics that you just forgot?

03:49Supply is a function of demand. So in this conversation, you forgot a cardinal rule that we

03:56have always discussed in the past that most sellers are home buyers. So when people said

04:03nobody would list their homes or inventory will never be able to grow. I was talking about, Hey,

04:09listen, since most sellers are home buyers, when they put that house on the market to sell to buy

04:14another one, guess what they're doing? They are relinquishing there. They have those magic Disneyland

04:20keys where you open up the locks and go, Oh my God, the golden handcuffs are off, you know?

04:25So supply is a function of demand. If I really believed in a mortgage rate lockdown or a golden

04:33handcuff, Oh my God, home sales would be so much lower. I mean, we would literally have between 1.78

04:38to like 2.37 million existing. I mean, the silent generation, the baby boomers, Gen X, elder millennials

04:44that have, you know, nobody would, because they all have a handcuff except from Q1, 2022, we just came out

04:52with that, that data just came out. And I said, I'm just going to wait three years. I'm going to make

04:56my point after three years, just like I did with COVID with, you know, no homes to buy every single

05:02quarter. People with sub 3%, 3 to 4%, 4 to 5%, 5 to 6% mortgage rates. The percentage was getting

05:11lower and lower and lower and lower and lower, except the one group, 6% plus that percentage was

05:21increasing higher and higher and higher. So we had a higher percentage of people with 6% plus mortgage,

05:28which looks perfectly normal because most home sellers are buyers. But I think the conversation

05:32goes to, and you know, a lot of people think, well, Americans will act different if they have higher

05:39rates and see rates go lower. No, I don't even believe that's the case. I see housing tenure has

05:45doubled and tripled. People are living in their homes longer and longer, and they don't buy a house

05:51and just decide three months later to kind of move somewhere else. They get it, they stick, they're

05:56there for a very long time. So the rate variable is more of, I mean, it's, you need a bigger home,

06:02you lost a job, you got another job, you have all these things. But for three years now, people were

06:08always selling their house with a lower mortgage rate, buying another one. Of course, everyone

06:13would love to have mortgage rates go much lower. Of course, when rates go lower, but slow dance,

06:19demand picks up. We've been doing this for 15 years. We could show that with every cycle since

06:232010. But the mortgage rate lockdown sounded great. But like a lot of things in housing economics,

06:29it was a marketing gimmick. It's like the pent-up demand was a marketing gimmick. The

06:33no homes to buy was a marketing gimmick. All these things, they sound great because they're

06:39easy to tell to the consumer. But this is a complicated one. But now I've got the data to

06:44prove it. Just like I did with, oh, there's no homes to buy. Look, we have 2 million more homes

06:48here. It is official. I'm going to say it is a positive to think that, like, listen, even with

06:56higher rates, people are, you know, they're not locked in. They are willing to buy a house. And that's

07:01what you're saying. So yay, good news for us in the housing industry. Let's dig in a little bit

07:06on the numbers so everybody understands what you're saying. So you're looking at, you're not

07:10looking at the number of people who don't have a mortgage. You're like, of the people who have a

07:14mortgage, what is the percentage now of people who have a sub-6% mortgage? The people that have

07:21mortgages 6% and above, I think they're now at 21.2%. And the people that have under 3% or under

07:28are 20. And I think that number was in the 30s. But again, we'd like to keep it simple with the

07:34data. The only data lines that were falling as a percentage were the sub-3%, the 3% to 4%,

07:40the 4% to 5%, and the 5% to 6%. But the only percentage that was growing naturally would be

07:45the 6% plus. So it's not all first-time homebuyers, right? That can't be first-time homebuyers

07:52buying it. People had to relinquish their house because, again, I try to keep it as simple as

07:57possible. Supply is a function of demanded housing. Most home sellers are buyers. People

08:02that can afford to do that, I know it might not make sense to a lot of people, but homeowners are

08:07typically well-off, right? They do better than the average. And because of that, their payments,

08:13their buying that house isn't that much of a stress, or else they wouldn't even have attempted

08:17to do that. Why? Because qualified mortgage changed the game forever. I'm just working off of that

08:24principle, which I've done for the last 15 years. A lot of things have changed because of that law.

08:28This is one of them. So now we have the data to show this. And I gave 2022, 2023, 2024, and 2025,

08:36right? So I even gave an extra year on that to wait so you could see this. But if you look at

08:42housing tenure, people staying in their homes, 10, 11, 15, I've stayed in my home for 20 years.

08:47We just don't turn over much. So the demand curve having near 5 million total home sales,

08:52where the peak in the last decade was near 6 million. It all makes sense. But if you believed

08:58in the golden handcuff, boy, I don't know. Okay. Well, let's talk about 2023. So in 2022,

09:07you would say, I'm right, because we had that steep increase. We had all those mortgage rate hikes.

09:14And so we had this home sell-off, drop-off of the biggest in history, you would say, of home sales.

09:22And that's because of mortgage rates. So I guess to me, I'm like, how does that fit in with what

09:27you're saying?

09:29Sarah, Teresa Wheeler, I just explained it to you. I just explained it to you. Even in 2023,

09:39people sold their low mortgage rates and they bought a bigger or they bought a bigger or smaller,

09:44but they acquired a higher rate too.

09:47I understand that, but isn't there a difference between the number of people in 2022 and the number

09:53of people in 2023?

09:54Yeah. And that makes my point even clearer, that even with an accelerated total cost of housing,

10:00people still did it because they sold their sub 3%, 3% to 4%, 4% to 5%, and 5% to 6% to acquire

10:08another home. And that's what the data has shown, even in 2023, even in 2024, even in 2025.

10:14But there was a million less people in 2023.

10:17Yes. And you're making my point for me, Sarah.

10:20No, I'm not.

10:21Even in 2023, the percentage of people that bought homes with 6% grew and the percentage of those

10:28who had sub 3%, sub 4%, sub 5%, sub 6% all fell. Because as supply is a function of demand,

10:37home sales stopped going down after that 2020, right? After November 9th, 2020, we never saw a crash in home

10:44sales after that. It was just a flow of data between rates.

10:46After 2022.

10:47Yes. And then it just basically, it continued. It kept on going lower and lower. People with

10:54lower mortgage rates kept on going lower and lower, Sarah.

10:58Okay. Logan Motors, I'm not going to use your middle name.

11:02I don't have a middle name, so you can't do it with me.

11:04Oh, okay. So I can't do that like 3-3 thing. I guess you'll never be a serial killer. You know,

11:10serial killers, we know them by their three name. Anyway, didn't think you were a serial killer.

11:13Oh, I'm a serial killer, definitely. But that's for American bears, right? My job is to destroy

11:18as many American bears as I can while I'm alive.

11:20Okay. So back to the topic is, I think one of the things that you look at is like, oh,

11:27well, let's see all these people still, still bought homes. And I think if you're a, if you're

11:31looking at like rates absolutely affect home, it's like, how much more would they have been? And

11:36because we're missing a million, to me, I'm like, that million is the mortgage rate lockdown.

11:41There you are. Okay. So what you're talking about is that demand. When rates go higher,

11:48demand tends to fade. When rates go lower, demand tends to pick up. But the curve is very little

11:54in terms of, you know, do rates, when rates went from three to 7%, that was historically abnormally,

12:01but demand crashed. But rates going from seven to 6%, demand picked up a little bit. Rates going from

12:06six to 7% demand declined a little bit. That's the flow of data. But every single quarter,

12:13those people sold their low mortgage rate to buy another home. The coupon data shows it. And now

12:19the FHA just follows it up on it. We got to see it. Now, of course we had a first, first level

12:26advantage of looking at the data at this, but the golden handcuff was that nobody would sell their low

12:32mortgage rates. Okay. So see, here we are. Here we are in definition. I don't think anybody would say

12:38nobody. That's what a handcuff is. That's what a handcuff is. How do you make the marketing give

12:44it to you? No people did that. I think the definition that we don't agree on is I would say

12:48some people are going to have to sell. To your point, they had a baby, they got divorced,

12:54somebody died, they had to sell. But to me, absolutely, if demand goes up with lower rates,

13:01you're making my point. Do you really think people were forced to do anything in the last? I mean,

13:04the new listings data was the lowest in the last three years in history. Nobody was forced to do

13:09anything. They chose to. Free will, Sarah Wheeler. Okay. I just am saying, Logan, you define it in a

13:17different way. But to me, the fact that we had a million less the year after we had that huge rate

13:24spike, people looked at it and were like, I'm not, I'm not going to do it. So some people did.

13:28You are talking about an affordability issue because prices, taxes, and insurance, and the

13:34loan balances, everything went up. That is the bigger denominator than the mortgage rate variable.

13:40So in essence, I disagree with everyone because people are trying to convince me that all these

13:47people can afford to buy a house, but they don't want to give up their low mortgage rate.

13:53They choose not to. They can buy any house they want.

13:56Okay. See, now we're getting to the heart of it.

13:58I know, but that's what I'm saying.

13:59For you to say they can choose to and they're not.

14:02But they don't. They can't afford.

14:04The golden handcuffs is the affordability crisis.

14:08You are assuming that a hypothetical, that if rates went down like 1%, home sales would be X amount

14:13higher to a certain level, that these people are actually all qualified homebuyers today,

14:19but they just don't want to give up the rate. See, the handcuff was the people choosing not to give

14:24up the rate. Total affordability is prices, taxes, insurance, loan balance. It's everything put

14:32together. And we still, even with all, with the second worst affordability, you know, in recent

14:40history, we still have near 5 million total home sales. If we had a mortgage rate lockdown, if

14:44people really didn't, if there was really a golden handcuff rule, boy, home sales would be so much

14:49lower. It was a doomsday theory that I don't think people thought about it too much out there.

14:54But again, when rates come down, as we've always seen, when rates get down to 6 million,

14:57we have a couple hundred thousand more home sales. When rates go back up past 7%, we have a couple

15:02thousand home sales go down. But there was never a handcuff in terms of the rate. The affordability

15:08changes, right? People's wages, incomes, financial assets, those things are all variables in the

15:14housing economics. But making it about one variable, now we have four years of data to show that people

15:21still did it. Life finds a way because those people couldn't qualify for the house. There's a lot of

15:25people that don't. We are going to have to agree to disagree because again, I feel like it's how

15:30you're defining this. Teresa, I don't. Listen, so I think what I can say is the good news is that we

15:42are, we have been below that 6.45% level that you feel like if we can just stay down there, that's

15:49where we see things grow. We'll get a couple hundred thousand more and people's, you know, so we're

15:54starting to come out of that. I think that's the good news for 2026 is that mortgage rate lockdown

16:00or not, we are seeing now that the tide is shifting. You know, one thing about 2025 that

16:07not a lot of people talked about because I didn't think a lot of people picked up on it. When rates

16:13were like in the high sixes and low sevens, housing demand did better than it did in 2024. Like in 2024,

16:20we had hardly any, we didn't have any real negative forward looking demand data, but

16:25every year that goes off wages rise, every year that goes up people's financials typically get a

16:32little bit better. So the demand curve was slightly better with elevated rates. Then when we got below

16:38a couple hundred thousand home sales, nothing big in that slight. But again, even in that light of last

16:46year, even with rates between seven and a quarter and 6.13%, there are people still selling their low

16:54mortgage rates to buy because they can afford it. Now there's a lot of people who can't afford it.

16:58It costs a lot. There's a big change of total cost of housing, but you always have to remember a lot

17:04of people sat, lived in their homes for a very long time. Their home, their total home payments versus

17:10their wages are so low, right? But for them to give that up, they're probably doing really well

17:16financially to even be able to qualify. What? Because that's what qualified mortgage did.

17:21It changed the entire apparatus of housing economics for the rest of the century.

17:26That's why I work a lot of my economic things around that. And we just take it from there.

17:31That's why the 2026 forecast is like a stabilized housing market with potentially a couple hundred

17:38thousand more homes that will be sold this year. That depends on what the rates do. I know a lot

17:43of people are into the rates are going to go lower from this. But again, for my work, I always like to

17:50defend my channels, like on the high end and the low end. We did that in 2023 with Gandalf. We've done

17:57it late 2023 and 2024 with the Hodor line at 380. So I just still believe in the principle that 65 to 75%

18:05of where the 10-year yield and mortgage rates can go is Fed policy. Then what happens with the economy

18:11spreads and everything are the other variables. And we're sitting here like the last time I checked,

18:16we're at 418 on the 10-year yield. 418 with the 10-year yield with the second, or actually not the

18:22second, the lowest job growth in the 21st century with the unemployment rate rising now from 3.4% to 4.6%.

18:29And the Fed was forced, forced to flinch. We got to remember, it was Powell coming on TV saying the

18:37labor market is strong. It was Beth Hammock saying it was robust. And then all of a sudden,

18:42you know, so because of that, because of Fed policy, we're still elevated. I think that was a

18:49good question. Like a lot of people said, wait, the 10-year yield was lower in 2023 and 2024,

18:54and the labor data was better. Yeah, because the bond market was saying, hey, Fed, you're late,

19:00you're late. But it wasn't the case back then. Now, God, it's really good trading between Fed

19:04policy and the bond market. They really are working well together. So we'll see where the

19:09rate situation goes. But at least now, officially, everyone can realize there was never a golden

19:15handcuff. Life finds a way. People who could afford homes sell their low mortgage rates to buy

19:20because some people need to move. Some people want to move. Some people want a bigger house.

19:24Some people want a smaller house. Some people's mortgage payments are even lower, you know,

19:29based on the house they buy because they buy small. I mean, there's all these variables, but

19:33there never was this mythical. I disagree. I disagree. That's your opinion. And you have data that

19:42supports your opinion because of your definition. That's what I'll say. Okay. So for the rest of this

19:48week, new week, we're coming back after the new year, we finally know what day it is.

19:52What sort of numbers do we get this week? You know, what I really want to see is,

19:57does Trump announce a Fed chairman this week or does he do the national housing emergency?

20:04There are some tariff news, you know, on New Year's night. But, you know, I'm waiting to see how

20:13the markets react to the policy changes because that's, in a sense, it was specifically directed

20:20for housing out there. Now, of course, we always, you know, ADP has their weekly data. Jobless claims

20:27are very key. You know, we're going to get worse. We're going to start. We haven't had a new home

20:31sales and housing starts reporting so long, but we're going to start to get a normalized data run

20:37again. God, that whole government shutdown ruined so many things. And then we work off where the

20:4310-year yields. Again, we are, we are, it's not by coincidence that we haven't broken under 380 or

20:49even we were briefly under 4% for a while. So we'll take the data. And again, there's a lot of,

20:55I know a lot of people want to go straight into the recession camp, but people have been going

20:58straight into the recession camp since like 2012, 2010, 2011, right? You know, we were, people were

21:03talking about double-dip recessions even back then in 2012 and 2013, but for right now,

21:10the economy is still intact. The labor market has not broken. We still are growing as an economy.

21:16When we are in a recession, growth slows down, industrial production slows down, business

21:21investment slows down, real wages fall, retail sales falls, housing, construction, labor falls,

21:29you know, but you see all these things and then jobless claims break and unemployment rate goes

21:35up vertically. So, so we, we always do labor over inflation. I mean, that we're, we're down here

21:40with a 10-year yield, but to me, the bond market was recognizing that the Fed was, I mean, it take

21:45tariffs out of the equation. I think Fed governor Waller, who should be the next Fed chairman was

21:50right. PCE inflation is like 2.3 to 2.4%. Like really, if we didn't have COVID, right? If we didn't

21:57have the, you know, the history of global pandemics, very inflationary and the disinflation happens,

22:01it wasn't because the Fed raised rates and the disinflation was going to happen like it does

22:05with all global pandemics. But now it's a little, everything's tricky. Everything is a little bit

22:10more tug of war-ish right now at this stage. And I, you know, that, that last inflation report,

22:16how's that going to work for the, you know, the, the adjustment numbers. And there's, there's a lot

22:21of questions, but we take the data one day at a time and we work off it and we always want to see

22:25how the bond market reacts to it. Amazing. We are set up with you at the helm, looking at all these

22:31things. And also we have our amazing housing economic summit, February 10th, and can't wait

22:36to hear you and all of our other speakers there. So Logan, thanks for being on. Thanks for continuing

22:41to have this debate with me. I'm sure we'll be fighting after, after this podcast, but you know,

22:46it's been like 22 minutes, so we should probably let people get on with their lives, but thank you so

22:50much. Appreciate you. Sarah, Teresa Wheeler. Thank you so much for this conversation.

22:57I'm going to regret telling you my middle name. I can tell that already. I already do.

23:02All right. Talk to you soon.

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