A shockingly good existing home sales report

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about positive reports for existing home sales and purchase apps.   Related to this episode:   December existing home sales hit three year high  https://www.housingwire.com/articles/december-existing-home-sales-hit-three-year-high/Mortgage applications rise 28.5% after GSE $200B bond directive  https://www.housingwire.com/articles/mba-mortgage-applications-rise/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   To learn more about Trust and Will click here.   The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look be

Transcript

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

00:11existing home sales report we got this week. As always, I want to thank our sponsor,

00:16Trust in Will, for making this episode possible. Logan, welcome back to the podcast and this time

00:21live. Logan, welcome back to the podcast and this time in person.

00:27Yes, one of the rare events. Should we do the paper, rock, scissors thing?

00:31No, because I'll lose again. I always get like, oh, no. This is exciting, though. And what a day

00:37to be here. Existing home sales. Okay, crazy. Just saying, if anybody goes back and look at the bar

00:45chart, existing home sales kind of bottomed out mid-June or just June, about 3.93 million.

00:54And then that's when rates started to break that 6.64 line. The inventory data started to look.

01:02And throughout this entire time, people, we were told it's the greatest seller versus buyer gap in

01:09history. We were told that the cancellation rates are the highest ever. We were told delistings are

01:14going to go home. Home sales can't grow. We got roughly almost near 400,000 more home sales from

01:22that point. So now that we've had the tracker now for three years, the trackers talked about the flow

01:28of data really revolves around the 10-year yield, right? The slow dance. And now the spreads are

01:33better. So you have to adapt everything to the reality as mortgage spreads are much better now.

01:38Labor over inflation. 10-year yield is lower. Rates are under six and a quarter. Oddly enough,

01:44for the 2026 forecast, talked about existing home sales. If rates could just stay below six and a

01:52quarter, you can get an additional 237,000. It's roughly where we are today with today's monthly

02:00sales print. And if it just ran for 12 months, it would be there. We just closed a little bit above

02:064 million again. That 4 million level held for year three now. And just a healthier backdrop going

02:14into 2026 because rates getting above 6.64, especially above 7%, the data starts to get

02:22weaker. And we talk about flows of data. Higher rates, slow down in sales. Lower rates, up sales,

02:27but no real growth, right? And the duration of lower rates, we've never had that. And this is the first

02:34year where we possibly could have that occur throughout the whole 12 months. Okay. So that

02:386.64 has been one of those levels that you've talked about. And then again, that other level,

02:456.25, right? Under 6.25 is where we saw that growth this year. Yeah. And it's just data tends to get

02:51better. But when you go from that level down towards six is when the late 2022, just for everyone to

02:59remember, late 2022, existing home sales had that big crash. And then we had 12 weeks of

03:04data. We had almost half a million home sales. Here we are roughly 400,000. So you could see the

03:10curve of the data gets better. It's just, we've never had near 6%. Last year, we got there for a

03:16little bit and the race just shot up. But here we are starting the year. We got a lot of rate cuts in

03:22the system, right? We're going to have a new Fed chairman. Mortgage spreads are better. It's just,

03:29it's so different than the last few years, especially 2023 when mortgage spreads got above

03:353%. And if that was the case today, rates are above 7% today, but that's all gone. It's a much

03:43different backdrop. So everyone should address their housing mindset with this reality, which

03:50has not been in the past. Okay. You have existing home sales. We also have purchase apps.

03:54We had purchase apps. And of course, I always like to, you know, take everything in the second

03:59week of the year and going on. So up 16% week to week, up 13% year over year. We do not have the

04:08low end comps anymore. And always remember, you get that traditional bounce in purchase application

04:15data. But like what we've done for the past few years, we want to really focus on the week to week

04:21stuff. If we have double digits week to week and year over year here, sales, sales are going to beat

04:26everyone's estimates. So we keep that mindset because when sales are so low for such a low time

04:33for a long time, the buyer pool gets bigger in the sense that when people affordability gets better

04:39and they feel like they can move, you just get that kick up bounce in sales. So it's something to think

04:44about. But it's always a positive. You have double doubles, you know, double digit week to week

04:50growth, double double digit year over year growth. That rarely happens. But it's, you know, we will

04:56well, it's part of the tracker. We'll keep an eye on it. But week one positive existing home sales in

05:01December positive new home sales yesterday, even though it's a little bit old, still positive

05:05trending at multi year high. So there's all these things about the housing market. That if you listen

05:11to the correct people, Sarah Wheeler, you would have been all I'm down with this. You know,

05:17we are the correct people. You are the correct person. Absolutely. I think the thing that's

05:21exciting to me is that here we are mid January. And it things seem like we could be set up well for

05:27the spring home buying season. Yes. In the past, rates would be shooting up. But again, rates would

05:34shoot up at a time where home price growth was accelerated in the years before. Now the last two

05:41years, home price growth has slowed down. Inventory's up. There's enough homes, there's no

05:47there's no inventory shortage anymore out there. So it's just healthier back. Now one thing that

05:53that did happen that I did get wrong. For those that listen to our podcast. One of the things I

06:00thought that wasn't talked about enough. A lot of people had the last few months of the year having

06:06negative year over year prices. But they kind of went with demand being really weak and inventory

06:12going out. There's always the seasonal decline in prices. But for me, it was, you know, September,

06:18October, November, December has very hard comps like the year over year comps were going to be very

06:24difficult. So we should have, you know, one or two negative year and you can have one or two negative

06:29year over year median sales price in the NAR report and have prices up for the year.

06:34But that didn't happen either. And I was like, December is the only shot I have for this to be

06:40right. And it had the hardest comps of the year. And still I got a whopping 0 for 4 on that, even

06:49though price growth was very little, just like last month, the comps were so hard. And I think there's

06:55a little bit of confusing things where people saw the month to month data of Case Shiller going

07:00negative early in the year, but the year over year data here, the year over year data was getting a

07:06little bit lower, but the month to month firmed up. It's, you know, just follow the chart, Daddy,

07:10which we'll try to make sense of it. But I really anticipated that because the comps were hard, we

07:14would have at least one or two negative prints on a year over year basis. And that didn't happen.

07:20And even this month, I thought December had to be the month and we ticked up. So clearly the people

07:27that said, we would have the biggest home price crash in 2025 or the second biggest home price

07:34crash. Guys, remember, there's a lot of entertainers out there. They are not data

07:39analysts. Data analysts do not do porn 24 seven, right? They show models. They keep everyone

07:44updated. It's not the most exciting thing, trust me. But you got to listen to people that get it right,

07:51or at least can show you what. And so the last six months of the year just looked normal with the

07:56tracker slope of the curve and is exciting to see. It is exciting. So maybe you put it all

08:04together for us as far as affordability heading into the spring season, like the combination of

08:09home prices, inventory and where that can keep home prices, mortgage rates, like affordability,

08:15the whole picture. What do you think? So, you know, it's funny. There's a group of people that say

08:20it's worse than 2008. Active inventory in 2007 was 4 million. We ended the year at 1.18 million,

08:28right? 1.18 million. So a huge difference. Huge difference. In any case, affordability is still

08:35stretched, but it got a little bit better on its own. This was the whole concept of team higher rates

08:40in February of 2020. We had to get active supply up, right? Because what it does, it creates a more

08:47balanced market and price growth slows down. That's what occurred, right? 2023, home prices ended up

08:546%. 2024, I got my forecast wrong. I was looking for 2.33%. We ended up at 4% because rates went lower.

09:03Pricing firmed up in the second half. And here we're looking, you know, 1.5%, 2%. You know,

09:08price growth is slowing down, but wages are up. So the natural progression of time, right? Enduring,

09:14right? Enduring is always the hardest thing because everybody wants, you know, a quick fix on thing,

09:18but it's doing its course and now rates are lower, right? They're at a level to where you could

09:24actually have a year where home sales can grow and affordability got better. So you're not going to

09:32get the 3%, 4%, or 5% mortgage rates out there, but you could, like I've always said,

09:38it can work with low sixes because that's what the data has shown us. And then all of a sudden,

09:43we get a little bit of traction and things feel a little bit better than, you know, people saying,

09:48well, everyone's stuck in their house. There's a mortgage rate locked down. Nobody's going to sell

09:52their homes and buy, you know. Of course, he's going to bring that up. Listen, but your forecast

09:56has 5.75, so it can be in the fives. Well, I mean, just basically mortgage spreads get back to the low

10:02end of normal. You're there today, right? So that's, I've always said to get to 5.75%, you need

10:09two things. You need the labor data to get weaker or mortgage spreads get back to normal. 160 to 180 is

10:15normal. So we get down into that normal range, you're already there. But to get below that,

10:20right? To get in that, it's really difficult to get the 10-year yield under 3.80 with Fed policy

10:27at neutral. So things have to change for that. So it's not by, you know, coincidence that rates

10:33have never gotten under 5.75. Fed policy is 65 to 75% of where the 10-year yield, the slow dance,

10:41I won't ask you to slow dance on stage, but slow dance and then the spread difference. So

10:47considering everything we've been through, this is as good as you could hope for. And it took a very

10:54long time. But again, the only way I see rates go higher is labor data starts to beat. You know,

11:00today we had hotter PPI inflation data, retail sales slightly beat. You know, the 10-year yield last

11:06time I saw it was like, you know, 4.14, 4.15. Policy is getting the rate curve lower. And then we'll

11:12think about, you know, what happens in May, who's the new Fed chairman and what happens with the Fed

11:17governors. But you couldn't ask for a more realistic, better backdrop going into 2026. And

11:25now people can see that, you know, you don't need 3%, 4%, 5% mortgage rates to grow sales from these

11:31low levels. You can get there with 6%, but you need duration. I mean, I think I've been on CNBC like 200

11:36times in the last two years saying the same thing. You just got to get down to 6%, right?

11:41And we'll see it. Well, and to me, the fact that last week for a short amount of time on Friday,

11:45we got into the fives, 5.99, right? For some point. I know you don't, okay, don't get triggered. Okay.

11:52I know you don't like the idea of the sideline buyers, but I do think when they're psychologically,

11:58when people see five something, they're like, huh, maybe, maybe this is it. Maybe I just feel like

12:04more people will jump back in. Why would you think that would trigger me when I tell people

12:07demand gets better when rates get points? Because you don't like the idea of sideline

12:11buyers. The sideline home buyer is another marketing gimmick. It's like Bigfoot, you know?

12:16No, but that's different. That was like in the last decade, people said, rates would go down a

12:21little bit and purchase application. Oh, look, the sideline home buyer, like somebody would go,

12:25oh, honey, the 10-year yield broke that key level. We didn't think about buying a house. Let's go fill

12:31out an application. No. People prep themselves a year before if they're going to buy a house. So

12:36that's not how buyers and sellers work. Once again, I believe that you are just,

12:42you know, you're defining something in a way so you don't have to say that sideline home buyers

12:46see a lower rate and jump in. It's the same thing. Those are the sideline home buyers.

12:50I don't agree with that. I think there's a natural flow buyer out there. And then, you know,

12:55these people were always going to be able to buy a house in the calendar year. And when rates get a

13:01little bit lower, they pull the trigger. That's just a natural flow. The sideline home buyer is

13:05supposed to think like all of a sudden people just, I didn't want to buy a house, but now I saw

13:11the 10-year yield fell and rates got better. You guys let me know. Do you agree with my definition

13:17or his definition? I think I'm right on this one. Okay. Okay. Well, just like the mortgage rate

13:22locked down. By the way, I just want to remember everyone, the mortgage rate locked down. We had

13:27this another discussion today, 2010, all the way to 2022, two and a half to 5% mortgage rates

13:33that people had. Anybody that was selling their house that had a mortgage were not locked down.

13:40And because of that silent generation, baby boomers, Gen X, elder millennials, they had to sell that

13:48mortgage rate to buy another house. That's how the curve of three to 4% went lower. That's how the

13:53curve of 3% sub, sub 3% went lower. And then the 6% grow because the mortgage rate lockdown is like

14:00a doomsday scenario. Because first time home buyers, if you took the NAR survey on a monthly basis is 28

14:06to 32%, right? So they're obviously not locked down. Can we agree on that, Sarah Wheeler, that first time

14:12home buyers aren't locked down? I would agree on that. Because they don't have a house, right? So you take

14:16that, you got 70% of the buyers left. If you were locked down seriously, home sales would just

14:22collapse and stay low forever. I do think that your data on this after some years has convinced

14:30me to some extent. I still think it's just the way that you wanted to define it. So we'll find

14:35about that later. Okay. Anything else from the data this week that you wanted to talk about?

14:39I think the interesting aspect is the bond market isn't moving much, right? Whether it's hotter

14:46inflation data or better economic data, we're just kind of stuck in the upper range here. Again,

14:52Fed policy really matters, especially now. And I think Neil Kashkari, one of our favorite

14:58Fed presidents said, the economy is really confusing because the labor market is really

15:03slowing. Hello, McFly. Welcome to the party, pal. Here we go. It's been happening for 24 months.

15:12At some point, something's going to change this, whether it goes higher or lower. But my base case

15:18is that if the labor data actually did get better, that's your ticket for the 10-year yield and rates

15:24to go up. Trump hates this because he tweeted this out. He said, I want lower rates because every time

15:31the economy gets better, yields start to go up and it kills the rally. I'm like, what rally are you

15:38talking about? But in any case, it's going to be interesting. I mean, it's going to be such an

15:44interesting year with the Fed and governors and Fed policy and labor data and the economy. I think

15:49GDP was, Atlanta Fed came out, it was over 5%. But then the labor, you know, so, you know, in some

15:56senses, Kashkari had the right mindset that it is confusing that you can have growth and someone

16:03says that's productivity and all that stuff. But all of a sudden, the labor data, the labor force

16:09pool clearly has gone down. You know, does that impact demand going out in the future? So tons

16:15of tons of variable. And who else would you rather have to talk about all the nerdy stuff 24-7,

16:22not do boarding, the chart daddy. If I had a jersey right now, I'd put my last name in the back.

16:27That's what you want. Let the chart daddy cook.

16:29Have I ever called you the chart daddy? The answer is no. I will say we want, we want Logan. I'm glad

16:35you're here, but you have never heard me say, nor should I ever say that the phrase.

16:39Yeah, you and Clayton don't call me chart daddy, but hey, it's okay. Let the country,

16:43let the people speak for itself. We didn't even make that name up. They did.

16:47Oh, it's true. It's true. Okay. Well, thank you so much. And a week from today,

16:52by the time this comes out, we might have the new Fed chair named. We're going to,

16:56the Supreme Court will have that very important Lisa Cook appeal in front of them. So

17:02things are happening fast. We're going to stay on top of it.

17:05What is it? Jack Bauer 20, you're going to be my Chloe. That's what it is. You're Chloe and I'm

17:10Jack Bauer. I got to wear the Jack Barry shades and I'm like, oh, that's great.

17:13I got to get way better at technology. If I'm going to be Chloe, we're all in trouble now.

17:18That's what it is. We'll keep that thing going all year.

17:21Okay. Well, Logan, thank you so much for being on.

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