Inflation and new home sales

Name: Inflation and new home sales
Uploaded: 2026-01-13T23:10:48+00:00
Duration: 22 min 47 s
Channel: HousingWire

00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about inflation,

00:12new home sales, existing home sales, and prepayment penalties on mortgages to lower

00:17mortgage rates. As always, I want to thank our sponsor, Trust & Will, for making this episode

00:22possible. Logan, welcome back to the podcast. Sarah, I don't know how to say this, but I think

00:27I got my hair to be bigger than ever. No, I was going to say that. It's like two inches tall.

00:34I had a different person cut my hair, and then this is like the Great Wall of China now, man.

00:41It's up there. Listen, this is first world problems. Everyone would like to have that

00:47problem, but it is really tall. It is. It is. We'll see how long this lasts, but it should be

00:52interesting on stage. Okay, well, let's talk. We have so many things going on. I want to start

00:57with inflation or mortgage spreads. Last Friday, you know, when I talk about mortgage spreads

01:02were very, very wild. It was abnormal trading on Friday. It was kind of a precursor to what we're

01:09seeing this week. And this today, we had the inflation report. It was tamer than estimates.

01:15And then the 10-year yield fell a few basis points. It's just back and forth, nothing really big.

01:20But pricing went up about six basis points, nothing too dramatic, but it went up. The mortgage spreads

01:28are very, very volatile. Over the next few trading days, things should calm down a little bit. But if

01:35you're confused, I understand. But what happened Friday, that was abnormal. That was like double what

01:42a really unbelievable day would be like. And there's just working itself out. So mortgage rates are just

01:50a tad higher on a day that I think a lot of people thought they would be lower. And that's my explanation

01:54for that. And that's why I talk about we get some volatility on spreads and pricing until it calms

01:59itself down and we push forward with it. Also, we don't really know, like on that MBS buying,

02:04we don't know what the timing of that's going to be. And that would affect things, right?

02:08Well, I mean, traders kind of trade in herds. So, you know, you had a lot of people get ahead

02:12of that news. I mean, they were already buying 70 to 80 billion. You know, Freddie and Fannie used

02:18to be big buyers of the MBS market. But in context, remember, we started the year at 2%. We're not

02:26that far from normal. On spreads. Yeah, on spreads. Even if there was no MBS purchases, we would have

02:34gotten basically toward back to that 180 level at some point this year. But to me, that was just a

02:44very violent move and it's confusing some people. So I just wanted to address that first.

02:48So you feel like we're about where we are now is what you can expect for the rest of the week?

02:53Well, yeah, it takes a few trading days. It's just it's confusing to people see the 10-year yield down

02:58and mortgage pricing go up. And then yesterday when 10-year yield rose up a little bit, mortgage pricing

03:03got down, it's the spreads gone wild, right? We're going to do like an old DVD thing like that.

03:08And, you know, mortgage spreads gone wild pricing. You know, that's just how these things happen when

03:13you when you have a titanic announcement and traders weren't ready, you get some dislocation

03:18in the pricing. Okay, let's talk about inflation. So CPI inflation came out. PPI inflation will be out,

03:24I think, this morning as well. The growth rate of inflation is slowing on a year-over-year basis.

03:29Nothing too dramatic, but the breakaway inflation that some people were worried about because of tax

03:36cuts, immigration policy, all that stuff, that hasn't happened. We have some goods inflation,

03:40of course, but it's really hard for CPI inflation to break out when you have, just think about it in

03:47this light. If energy, remember the whole Trinity thing we talked about? Well, if energy prices are

03:53lower and shelter inflation is lower, right? 40% of CPI is shelter inflation. But if you have those

04:04two things slowing down and wage growth slowing down, it's really hard for inflation to break out

04:11in some titanic way. I know a lot of crazy people on the internet like to do these dual access charts

04:17about the 70s. And right now it never, no, no, no. You should literally, forget chart crime. You

04:23should literally go to jail if people are using the 70s. And we're supposed to be at 8%, 9%, 10% CPI

04:31inflation last year. So with those factors in play, wage growth slowing down, shelter inflation slowing

04:37down, and energy prices lower, it's really hard to have breakaway inflation that some people are

04:43talking about. So CPI, a little bit tame. I know a lot of people are questioning all the data lines

04:47lately, but still, 10-year yield fell noticeably right off the bat and then perked up a little bit. We've

04:54basically been in a range since September, but we're on the upper level of that little channel there.

05:01So again, if labor data starts to pick up, right, I think that's the best case for yields to go

05:08a little bit higher. But we've got a lot of rate cuts in the system. Mortgage spreads are

05:13almost back to normal. The backdrop is much more healthier. And just for some context on inflation

05:19data, if you go all the way back to 1910, the year-over-year growth inflation, it's running,

05:25the average would be like 3.3% historically. I think we've been below that average for like

05:3318 and 19 months right now. So just a little bit of context on inflation if people were concerned

05:39about breakaway inflation. It's World War I, World War II, the 1970s, oil shock, labor force growth,

05:45and global pandemic. Those are the only things that really broke inflation out, price control,

05:51supply shortages, labor force growth, oil shock. We don't have any of those here. So hopefully that

05:58explains why we haven't had inflation break out like some people. And remember, the Federal Reserve

06:03only had a 3% target on inflation. They don't see it really accelerating because tariffs are a one-time

06:10price adjustment. So I think that's my question on this is, you know, looking toward the spring,

06:16does this change maybe anything for the Fed as far as like, do they, does this, you know,

06:21and do they feel like, yeah, now we've got to cut rates a little bit? Does it factor in at all?

06:26Paper, rock, scissors. It's really the labor market forced them to cut one more rate cut more than they

06:34want. If it was up to them, they wouldn't really cut anymore. But this is the end of this current

06:43Federal Reserve, wherever the, I do believe that the White House will just throw away the Department

06:48of Justice thing just because it's causing too much confusion right now. But the labor data runs

06:55the show. It's really hard for them to justify raising rates or anything like that if the

07:03unemployment rate is perking up a little bit. So to me, a lot of people say, well, the Fed has to cut.

07:09I know Trump, but everybody's saying they have to cut, cut, cut. The markets don't believe anything

07:16in terms of rate cuts, maybe just two or three this year. My thing is that if the economy does

07:23accelerate and the jobs data really starts to improve, like we got over 100 to 130,000 jobs

07:28created and the unemployment rate falls down and wage growth starts to accelerate higher, that is

07:34the base case for yields to go up. Now, the thing is that whoever is the next Fed chairman is going to

07:42ignore that anyway. So it gets a little bit dicey for the rest of the year if that occurs. But that's

07:48a variable that we always want to put in everything we need to think about out here. But for right now,

07:53the growth rate of inflation is below 3% on a year-over-year basis. Some of the inflation data

07:59and this report will really hit the PCE inflation. That's what the Fed really tracks. But that data

08:04line has always been kind of under 3% for some time. So it's just muddling through at this point

08:10until we get some clarity on the next Fed chairman. I know we're going to get some announcements at

08:15Davos on housing and everything like that. And we just kind of take it one day at a time.

08:19Okay. Interesting that you are really just discounting the whole idea of the DOJ investigating the Fed.

08:24You're like, that's not going to go anywhere. The market doesn't care because I think everyone

08:30is on the same page here. There's too many Republicans that just won't confirm a new Fed

08:36chairman and that'll drive Trump nuts. And I still don't know why they did this. There's no

08:44advantage, disadvantage here, except you're making like Jerome Powell like a hero to the public to

08:50standing up. I mean, I just, whoever thought this, this wasn't a clever move. Okay. You're kind of

08:57toward the end of this hole and all you're doing is, you know, so that's just tactical art of war

09:03kind of thing right now at this stage. We're toward the end of this, kind of just get it through. Don't,

09:10you know, make a big spectacle. And, you know, I know some other Republicans were saying,

09:16there better be some damning evidence here if we're, you know, so hopefully cooler heads will

09:22prevail and we could just push this aside and, you know, they could get their new Fed chairman in and

09:27move on. I also think that, you know, you think about the fact that the Supreme Court is weighing

09:31that Lisa Cook, you know, the fact that Trump wants to be able to fire her as a Fed governor for

09:38cause or not for cause. And like, you got to think the timing on this, like if you left this whole

09:42thing alone, you might not spook the Fed. I mean, the Supreme Court, they're people too.

09:47They might see this as an overreach and be like, oh, well, we need to make sure he doesn't do that.

09:52Lisa Cook is a dove. Her involvement in the whole equation is not relevant. Beth Hammock

10:01would be a target. Now, Beth Hammock is one of our favorite Fed presidents because she's been wrong

10:07about the labor market for some time and she would hike rates, you know, at this point. But I would

10:12not be shocked if there was an avenue to go after a Fed governor. Beth Hammock would be the first person

10:18that Trump would go after out here if there isn't a plan in the works. And like I always said,

10:25if your enemy is already preparing for your demise and you don't see it coming, that's on you.

10:32So this is the world we live in. And Lisa Cook is a dove in terms of the voting things. She doesn't

10:39really matter much. But a Beth Hammock would be a target. She's very adamant about, you know,

10:45policy is at neutral. She would like it to be more restrictive. Everything Trump wants,

10:51she's pretty much against in terms of it's not it's not even power or any of them.

10:56She would be the number one target for Trump. Well, and we'll, we'll know what the outcome is,

11:01if he can even do that. Well, we won't know it goes, the Supreme Court will hear it on January 21.

11:06We don't know when we'll know what they decide. So but that that will be interesting. Okay,

11:12we have so many. Oh, sorry. Did you want to? No, it's just it's just it's Jack Bauer, man. It's just

11:172026. You know, like, we could get off this podcast and something else would pop up, you know,

11:24I love the TV show. I don't want to live the TV show. No, no, 24 was the best. You know,

11:30I actually saw Chloe on stage. Oh, yeah, that's right. Yeah, yeah. And she made a comment about

11:37my hair, too. You know, apparently, there was everyone in there had bad hair, but me and I

11:42just took out. That's typically the case. Oh, my gosh. Okay, well, then we have a number of other

11:48reports. What else are you looking at? We've got existing home sales. Well, new home sales came out

11:53today. And of course, yeah, I mean, it has been ever I felt like the lady in Titanic before we

11:58got a new home sales and housing starts report. So we got it. And we've always phrased it that the

12:04last report before the shutdown was abnormally strong, it should get revised, Laura, because

12:09the new home sales is very, very wild. You always kind of want to work off a three to six month average

12:15and take revision. So we had a three negative month revisions. But the trend sales are on the higher

12:21end of the last few years. And just remember, new home sales is that 2019 levels. If there was the

12:26same thing about the existing home sales market, you're one to 1.2 million higher in existing home

12:32sales. So they're not working from a very low bar. They're working from a very high baseline. So

12:38trending near a three year high out there. And it's been really in a range. If you take the COVID-19

12:45burst up and then the 2022 lows, new home sales have been in range since really 2018-19. So not

12:51too much going on there. The completed units of sale are still elevated above 120,000. That means

12:56they're just going to take everything slow. They need to be able to wind that down a little bit

13:00before they get really aggressive. We wrote that in the article so people could visually see the history

13:05of how the builders have operated because they've never been the March of Dimes since the

13:11palipedian war. And that's why you need to be the detective and not the troll. But in this case,

13:17that was a while ago. That was a few more rates are even lower now. And who knows what the

13:23announcement, I'm sure there's going to be something in the works for the builders to get

13:28construction going again. But yeah, we're still waiting for a lot more headlines to come on the

13:34housing front in a short amount of time.

13:37I know it makes you happy to have your data back.

13:39I know. I was just like, come on. Really? The census? It's just like, it was so boring. It's

13:46just like, you can only look at so many commodity and bond market charts without getting a housing

13:51data. But existing home sales, when this comes out, this podcast, we want to frame it this way.

13:59When did the housing market shift, Sarah Wheeler?

14:02Yep, mid-June.

14:03Mid-June, 2025. What happened during that whole phrase? Because Redfin told everybody it was the

14:08highest seller buyer gap in history. Cancellation rates are all-time highs, delistings and everything.

14:13During that whole entire span, the forward-looking data, slope of the curve. We like it. Forward-looking

14:20data was getting better. The low point in sales in 2025 was 3.9 million. So we always say when mortgage

14:27rates get down toward 6%, you could get a couple of hundred thousand more home sales. Because no matter

14:34what the crazy headlines you see out there, forward-looking demand gets better, sales tend

14:39to rise with it. If we, let's just assume that the NAR gets its 4.23 million estimates for that,

14:47well, that means it's a little bit more than 300,000 more home sales from the bottom portion,

14:52right, out there. And so many people ignore this because they saw the cancellations. They saw the

14:58greatest seller buyer gap. They thought home prices were falling and demand was, and it didn't work.

15:03Now this is three. This is three times since late 2022. Our forward data gets better. Sales get

15:09better. We ignore all the noise. We follow numbers because numbers are the closest thing to the

15:13handwriting of God. And we have a lot of terrible people on YouTube, Twitter, X, and Instagram,

15:18and TikTok. In any case, don't be surprised if that's the case. Whatever it is, the forward-looking

15:25data got better. Pricing firmed up a little bit. The growth rate of inventory went from 33% down to

15:309.99%. We are still in that market because rates are lower. You need duration with a lot of housing

15:37data because housing moves very slowly and we'll see how it is. But it's so far, very interesting

15:43start to the year. We need about eight to 10 more weeks. That's why by the time we have our economic

15:48summit in February 10th, with all the economists out there, we'll have a good idea of what the spring

15:57has kind of looked like and then where rates are. And this could be the first time in many, many years

16:02where we get lower rates for a longer period of time compared to what we saw last year. And a lot of

16:09people thought, well, if the Fed cuts rates, mortgage rates are going to shoot back up to 7%, and none of

16:14that happened. Paper, rock, scissors. Labor overinflation.

16:17Yeah, I love it. That's going to be a great economic conference. Okay, I have some things that are being

16:23thrown on the wall. See what sticks, right? Some trial balloons from Trump. I want to run by you.

16:28So I think we buried the 50-year mortgage, right? Last week, Trump was like, we're pausing on the

16:3450-year mortgage. Okay, so we've killed that. That's done. And then he talked about using 401ks

16:41or 529b funds from those for down payments without any of the penalties that you would normally have.

16:49So that's interesting. And then what do you think about that?

16:53I mean, they're going to throw everything they can. It's a midterms, man. You got to throw it.

16:57Okay, but do you think that's a good idea?

16:58I don't mind that idea. I don't think that's a very high velocity idea out there. I mean,

17:06I don't remember many people using their 401ks or anything as a down payment. If you can do it

17:18without a penalty, I don't see that as a big factor. I'm a 10-year yield guy. So the 10-year

17:26yield to me matters more because the 10-year yield has been the only thing that's really changed the

17:30housing demand curve after a qualified mortgage in 2010. So these things are ideas, but you have to

17:35test them to see because we don't know how many people have access. We don't know how many people

17:40would even want to do this out there. But when any plan is there, you need time to see how it works,

17:49right? Because a lot of things sound good. It's like portable mortgages sounded good when they

17:54brought it out. But I was like, guys, you can't go back and rewrite those contracts, right? So the

18:00portable mortgage is something maybe down the line if you wanted to change the entire U.S. housing

18:05mortgage market. But that sounded good. But you couldn't, it would be kind of useless here. And

18:11also more people have 6% mortgages than 3%. By the way, I want to address one question on that. A lot

18:18of people, you know, they saw that article he wrote and are trying to dismiss that. Let's just keep the

18:23mortgage rate lockdown very simple. From 2010 to 2022, the majority of the profile of homeowners in

18:31America had two and a half to 5% mortgage rates that entire time. When rates moved up, the whole

18:38thing was the golden handcuffs. Nobody was going to sell their homes. Then it was inventory can never

18:44really grow. What occurred every single quarter from 2022 all the way to the third quarter of 2025,

18:52every quarter people sold their homes that had low mortgages that with housing tenure doubling and

18:57you can see why the turnovers are not so much rate related. But they did because if you're a silent

19:04generation, if you are a baby boomer, if you are an elder millennial and you bought a house because

19:11you had one, you had to give up your low rate. There is no, I'm hiding out at a 7% rate. We had 15

19:17years of duration of that rate curve. So if they were, any of those people were buyers, Gen X or any of

19:22them, they had to give up their low rate unless they were cash to cash. So it happened, right?

19:28If we had an authentic mortgage rate lockdown, home sales would be so much lower. I mean, so much

19:33lower. New listings data would be so much lower, but we didn't. So tenure yield goes down, mortgage

19:40rates go down, demand picks up over time. We need affordability to get better. That's price growth

19:44slowing down, wages, household forms. Housing works itself out. But on some of these ideas, let's wait and

19:51see, whatever gets announced, give it some time first before kind of putting anything in a high

19:57velocity and always go with the tenure yield and spreads. So that's the thing that's worked in the

20:02last few years, even with affordability as bad as it is. That's the thing that's worked in the early

20:081980s when affordability was worse back then. Okay. Speaking of portable mortgages, so billionaire

20:15investor Bill Ackman floating a proposal that suggests mortgage rates could be lowered by

20:21limiting borrowers' ability to refinance or prepay mortgages. So he's proposing prepayment

20:27penalties, and then he thinks that that will also help with portable mortgages. What are your first

20:35thoughts there? So portable mortgage is not a thing, nor I don't think it'll be a thing. The prepayment

20:42penalties is something I've talked about in the past as well. But let's be realistic here. Mortgage

20:48spreads were almost back to normal before any of this, right? So normal in recent history is 160 to

20:54180. We were 2% before, we got near 180%. So the prepay penalties can mean maybe in the future,

21:03you get less volatility on the mortgage-backed pricing. But we used to have prepay penalties

21:10for a very long time in the past. And the mortgage spreads were volatile in the 70s, 80s, 90s. We've

21:18had periods of times, especially in the late 1990s as well. So I think the velocity of that idea,

21:26while it has merit, right? There was a reason why the prepay penalties were there. It's to affect

21:32a better mortgage-backed security market. But the spreads got better on its own. Without any of

21:40this, they got from 3.11% all the way down to 2% before even the MBS was announced. That's the

21:48main story. So it could give it a little bit of nudge, but I think something like that might have

21:52had a little bit more play in 2023, not so much in 2026, because we're almost back to normal.

21:59This would have to be a theory that the spreads can get back to maybe 1%, something that many decades

22:07ago, we used to have 1% to 1.2% spreads. That's different. But to me, the story is the bulk of the

22:14move of mortgage spreads has already been made. Just keep them down here. It goes a little bit lower and

22:19just work off the 10-year yield off of that. That's why we do a slow dance, Sarah Wheeler.

22:23That's how it works. Yep. Well, thank you so much. Thanks for going over the data. Also weighing in

22:28on some of these trial ideas. Appreciate you as always, Logan Motoshami. Pleasure, boss. And I'll

22:34let the hair blow out. Oh my gosh, that hair.

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