- 2 days ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how the jobs data could affect mortgage rates, plus the next Fed chair.
Related to this episode:
Supreme Court appears skeptical of Trump’s bid to remove Cook
https://www.housingwire.com/articles/supreme-court-fed-cook-trump/
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https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will visit trustandwill.com
Related to this episode:
Supreme Court appears skeptical of Trump’s bid to remove Cook
https://www.housingwire.com/articles/supreme-court-fed-cook-trump/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will visit trustandwill.com
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the jobs data and
00:11the next Fed chair. First, I want to thank our sponsor, Tristan Will, for making this episode
00:16possible. Logan, welcome back to the podcast. It is wonderful to be here and always when you're
00:22thirsty, have a nice, fresh Pepsi Wild Cherry Zero. You know, I have to tell you this funny
00:29story. When I when I did acting or when I was training to be an actor, they they first test you
00:34out for commercials with food and they give you a cereal box. And what always happens is that everyone
00:41when they're talking, they end up pouring the cereal or if they had milk because they're not
00:46used to having something in their hands and doing an audition. So they do this every year and they,
00:52you know, it's to show young actors that, you know, hey, listen, you got to be aware of your
00:58product placement or else you'll be spilling your cereal or milk all the way around. So
01:02I say this because I just debated a doomer and he had home prices crashing this year
01:09because of the New World Order. And when you and I have talked about this group, the New World Order,
01:15the, you know, the debt, Dr. Jekyll, Mr. Hyde, whatever it is, the European, whatever the Roman
01:23empire, the British empire, and we're 2026 is going to have like a New World Order and shipping lanes
01:29and everything. And that's going to force people to list their homes and not sell in distress, but
01:34sell at a big volume decline. Very interesting hypothesis. And I was like, so are rates going
01:41lowering this? Yes. Rates are going to go down and everyone's going to list their house and in the New
01:45World Order and where the world is. And I was like, 24. Sarah and I talk about this. This is like 24 on
01:51steroids. And I was like, no, some people just need to like stay off the internet and listen to
01:57conspiracy theories. And this is a, this is a person who is very well known in real estate circles. And
02:02so that's why you debated him because some people were like. I'm telling you, this is to all the
02:08anti-central bank people who are listening. You all created some crazy kids that are Gen Xers now and
02:14boy, goodness. Okay. I still don't understand what that has to do with product placement.
02:20I didn't understand. Cause I was like, you know, we don't really have enough time for the shipping
02:24lanes in China and Russia and all this stuff to impact housing this year for like 29% nominal price
02:30to clients, but whatever, homie. So. No, but I don't understand what that has to do with Pepsi and
02:36product placement. Oh no, I was just, I was just drinking. I just literally thought of when I was, when I
02:41was, you know, doing a Pepsi audition. So I just, I see the camera and I'm being a ham again. And I was just
02:47like, you know, and no one's ever going to find my commercial because it's all technology and it's
02:53pretty good. Well, and I think it's always confusing. If you listen to the podcast and you
02:57don't watch the podcast, you're like, why is he even doing that? But it's because he had it. I can't.
03:01A lot of people listen. I mean, a lot of people watch. I always see people on share on Instagram
03:05and they go, Hey, the chart daddy. And just look at how that hair flows. And I don't know what I did
03:10with my hair recently. It's just, it's gone. It's so big. It's, it's very tall. Okay. Well we have a lot
03:16to talk about. I think one of the most interesting things today was jobless claims data. And it's
03:22like, what is going on? Because I thought we could pretty much count on 26 being, you know,
03:28lower rates, but jobless claims still don't seem like jobless jobs are not breaking. Labor's not
03:35breaking. One of the reasons why I had home prices falling slightly is that I understand that everybody
03:42is in the lower rate camp. Trust me. Trump is talking about lower rates. Assets want lower rates.
03:46Everybody wants lower rates. My job as an analyst is to take all the variables together. And what if
03:53the economy in a midterm year doesn't break? What if they just throw everything they had just to make
03:59sure that, I mean, that's what history has shown us. They'll, they'll do what is needed, but what
04:06happens to rates if the economy doesn't break? If, if jobless claims stay very low, but then job growth
04:14starts to pick up and wage growth starts to pick up and the unemployment rate falls, I think that,
04:20you know, it's January and there's a lot going on and who knows, right? You and I were talking about
04:26Greenland last time. And then one hour later, Trump is doing a deal with Greenland, right? You know,
04:32so it's just, there's a lot of noise out there, but what if, you know, labor doesn't break? Does the
04:3910 year yield go back up? Cause we're going to have a PCE inflation report that's running at 3%.
04:44That's still 1% above target, but Jerome Powell is going to be done. However, it doesn't look like
04:50they could fire Lisa Cook. It's 24 with the federal reserve. Now there's a lot of moving parts that
04:56we're trying to get updates on. And, uh, uh, it'll be interesting to, to track this going out. But
05:02today is like, what happens to rates of the labor market rebounds?
05:06Well, let's talk a little bit about what you saw in the, in the jobless claims in the jobs report
05:11today. Like what, what are you taking out of that besides just the headline number?
05:15So to me, it's, it's always been the same story. The last two years, the labor market is softening.
05:21It is softening noticeably. We had the lowest job growth in the 21st century. It's pretty much
05:26healthcare and social services. Without that, we're losing jobs. Okay. In that context, we have a very,
05:32very low bar to just get a little bit of increase. So what happens lower rates does help capital
05:39investments costs, right? Uh, if you get rates low enough, housing starts to come back, you know,
05:44there's multiplier impacts with housing, you know, so you can make a backdrop that things get just a
05:50little bit better. But I think the, the, the, the fight is, is that so many, so many people are always
05:55in the recession camp that what do we do in 2022, Sarah? We said, you know, our, our sixth recession
06:01red flag model was all in place on August 5th, 2022, but said if the labor triggers don't break,
06:07don't go there. So we set, we set markers for everyone. Don't go into the recession talk unless
06:12jobless claims on a four week moving average heads to, uh, um, for 323 K back then the fed was still
06:20hiking rates. They hiked rates in 2023. We had a banking crisis and they still hiked rates,
06:25but now we have a lot of rate cuts in the system, right? Mortgage spreads are better.
06:31They're buying 200 billion or whatever it's left out of that 200 billion. So the labor over inflation,
06:37uh, uh, uh, debate becomes a little bit different at this stage because policy is less restrictive now
06:44than it was back then. And today, just before we got on the show, the 10 year yield, even with growth
06:49still, uh, uh, good jobless claims, good inflation data, uh, um, uh, looking to be 3% on the PCE,
06:57the fed truly tracks the PCE 10 year yields at fourth 25. Now, if you believe like I do,
07:02that 65 to 75% of this is still fed policy. It looks about right, right now, but trying to get
07:09it under three 80, the hoarder line, boy, you need changes, right? You need things to either break
07:15or the fed gets dovish or some, something has to come out of the woodworks. And that's another
07:19tug of war battle that we're going to have here this year that, you know, if the economy is really
07:24booming this year, why do rates go to the low fives or the mid fives or anything like that?
07:30Uh, uh, unless they have a new fed chairman and somehow they get more votes and they want to
07:35keep this going. So interesting battle this year, much different backdrop than 2022 and 2023,
07:41even 2024 and 2025, because we're going to get a new fed chairman and Rick Reader's, uh, uh,
07:46name is popping up again. So, uh, uh, fascinating times, man. I tell you, man, if you, even for
07:53myself, there's a lot to go off. I can't imagine what a normal person has to like, kind of progress
07:58and think about this. Cause I'm sure there's like maybe six seconds of their thought during a day.
08:02Oh, who's going to be the next fed chairman and what's going to be the policy around that.
08:06Okay. Before we get to Rick Reader, I did want to, uh, dig in a little bit more to the job. So
08:11you're still saying what, what you would consider breaking is 323,000 on the four week moving average
08:18jobless claims. The headline print today was around 200,000. So, so we're weighed. We're no,
08:23we are, we are, we are softening, but not breaking. That's why I like to use that term. The labor market
08:29got softer, but it doesn't break because when it breaks, things go linear, vertical, however you want
08:34to describe it. Um, there is no slope. Like we're seeing the unemployment rate rise as a slope,
08:40slope of the curve again, Sarah Wheeler. Um, but when it breaks, man, something happens to where
08:46growth really slows down. Investment slows down. People don't need enough workers. They want to
08:51protect their profit margins as much as possible. Companies go out of business and firings just
08:57take off. And that's how economic cycles have worked post-World War II.
09:01So, um, what did the manufacturing jobs look like? I saw something early this morning on that.
09:06Manufacturing jobs have been losing jobs since February of 2023. So we have a lot of announcements,
09:13but what had happened is we had a, we had a big increase in manufacturing jobs before, uh, uh,
09:21the mid part of 2022. And then it's been slowly declining. Uh, and again, trade wars, you know,
09:28it's not, you know, input costs and these things, you know, it takes time to, you know, get that,
09:34but capital investments, you know, one of the things with a tax cut and everything you're supposed
09:39to, you know, you, you, you can, you could, you could write off everything this year, uh, on,
09:44on, on equipment and stuff like this with lower rates, it's supposed to be, you know, uh, a better
09:50environment for job growth. Now, this is my theory on, on what the white house probably thought was
09:59going to happen, but didn't. Um, I believe personally that they thought that if they deport
10:04about 2 million people or whatever number they, they had in mind that people needed to hire people
10:10to replace them. So I think they weren't, they were a little bit surprised about how slow the job
10:16growth is because they naturally think these people need to be replaced, right? So why aren't
10:20companies rehiring? But what's happened is in a, in a few sectors of our economy, housing is one thing.
10:26Well, demands just simply doesn't warrant the multiplier impact to come up because existing
10:31home sales are still low and new home sales. They're just managing. They have too much supply
10:36to really get permits going. Uh, but with lower rates and the tax bill, you know, and they're going
10:43to throw everything they can at this, you know, why could it, the jobs data just be a little bit
10:48better this year than last year, because it would be a little bit concerning this year
10:52if the jobs data didn't improve. And this is why I have 6.75. This is why I have 440 to 460,
10:59just in case if the labor data really just starts to get better. And the fed says, Hey, listen,
11:04inflation now is, you know, has a possibility to go or, or stay elevated. So, uh, you get this tug of
11:11war. And I think that's where Trump does not want a tug of war fight. He wants his person at the fed.
11:16He wants, uh, uh, more governors. So we don't have this debate, uh, uh, six months from now,
11:22if the economy rebounds out there. So it's just, it's going to be fascinating with the new fed
11:27chairman is going to handle and what the governors do. Uh, because right now he doesn't have the
11:32chairman or he doesn't have the votes for this if he wants to go against it, but, uh, uh, good times,
11:37man, good, crazy times right now. And that's why another thing I thought the mortgage backed security
11:41purchase was, was done to as a defensive mechanism, right. To, to keep that, uh, things at bay.
11:49Okay. So your, uh, mortgage rate forecast for 2025, 2026 is five, seven, 5.75 to 6.75. Yeah. We do
11:59ranges, but we don't target mortgage rates. We target the 10 year yield and spreads. So better
12:05backdrop spreads are lower. Yields are lower. New fed governor coward, fed chairman coming up going
12:12to be a little bit more dovish, right. And, uh, a real push to try to keep rates being just keeping
12:19it down here is so much better than up there. Right. It's really hard to get rates above 7% again
12:24with the spreads of this stuff. See the spreads, the spreads Wheeler. It is the spreads. Oh my God.
12:30Where's my peanut butter gel thing. Oh my, I got to bring that out again. You know, that really
12:35changed the backdrop, uh, uh, uh, here. So we're, we're, uh, uh, we're going to deal with some really
12:40interesting, um, fed talk soon, but, uh, uh, it is going to be fascinating on how the bond market
12:47reacts to better data. And so far, if you take away the Japan Greenland kind of craziness for 25,
12:5610 year yield looks right. You know, uh, with fed policy, look into neutral. Remember bond market is
13:02already priced in neutral policy. You, you want to get under 380. You need to, something has to
13:07change for that to happen. So, uh, we talked a little bit about the Supreme court, uh, oral arguments
13:13yesterday in the Lisa Cook case. It did seem like, uh, they were not persuaded that, that, um, it's
13:20going to be really hard for, uh, Trump to fire fed governors in for cause or, you know, I'm not a
13:25lawyer. So, but, but it seemed like that didn't maybe go his way. We won't know yet, but he can't count
13:31on that. So what does it look like for the fed chair? You said you, uh, we think the Kevins are
13:36out. You don't think Chris Waller's in, in contention. Well, the, the Kevins are all in play,
13:41but I think, you know, they're, they're waiting to, I mean, at least now we could say this,
13:48they're probably waiting until the last minute to make sure they get the right person in, uh, uh,
13:53Rick reader is a, is a, is a, is a bond guy. So, you know, he doesn't really have like a background,
13:58uh, uh, on the fed and, you know, he said some very hawkish thing about inflation before. So,
14:05uh, I, I, Christopher Waller would be the best choice for Trump in, in a realistic world that
14:14he can't fire fed governors, right? Cause whoever the fed chairman is, is going to have to rile up
14:20votes, you know, you know, get votes to go to keep things. And, uh, everyone hates Kevin Warsh.
14:28Like nobody at the fed likes him. And it's just like, you know, he, in, in, in a normal setting,
14:33he'd be the worst pick out there. Uh, Kevin Hassett is still a yes guy, but he, you know,
14:39Trump talked about, I want him at the economic council to defend me more. Waller would be the
14:44best in terms of trying to keep everything. Let's, let's make sure that the labor data is in a better
14:48spot out there. But Rick reader is to me is, is interesting. If there's stuff in the background
14:53that we don't know about, uh, he's been surging in these little gambling polls or whatever, uh,
14:59out there, but man, if he can't fire governors, they're going to try other tactics to make it
15:06really hard for them to, because the Beth hammocks of the world are going to be the ones targeted this
15:10year. Cause she probably wants to raise rates, uh, if the labor data, so you're going to have,
15:15if the labor data gets better, you're going to have certain fed governors talking about raising
15:18rates because policy clearly isn't restrictive enough. And the inflation is still, you know,
15:24close to one or 1% above target. Your personal opinion on raising rates. Tell me what your personal
15:30opinion is. I, I would do it the same way I did it before. I never would have raised rates above 4%
15:36because the history of global pandemics are very inflationary and then a disinflation. I understand
15:40the tariff things, but I already would have been in neutral policy right now and let it kind of
15:46ride and always get ahead of weakness in the labor market. Right. I need to make sure manufacturing
15:52jobs are being created. I need to make sure that housing starts are growing yet. I need to make
15:56sure permits are growing. I need to make sure that the economy is running out here. I don't want to
16:00risk the labor market on tariff inflation, which the federal reserve has told everyone it's a one-off,
16:06right? So I've got to, I've got to defend my institution's mindset out here. Uh, uh, so I would
16:13have, of course I would have done the same thing I would have done in the past. I never would have
16:16taken us the fed funds rate to that level because the disinflation would have happened. Of course,
16:20now, of course, goods, inflation and tariffs and everything, but, uh, uh, keep everything intact.
16:26Now keeping everything intact means that you don't have that recessionary bond yields going down and
16:32rates really falling. But, uh, um, that's, that's how I would have approached it. I just think
16:37Waller is a better suited person for now and for how long he wants to do it for, uh, um, Kevin Warsh,
16:46I'm really concerned that when Trump leaves, he's going to be so hawkish because he's super hawkish in
16:52real terms out there, uh, uh, and nobody likes him. Right. So, uh, and Kevin Hassett, to me, it would
16:58be somebody who just quits his job when Trump's out. So different people, but that's, that's how I
17:04would have operated. Anything today that changes your, you know, we had a pretty sunny outlook for
17:092026. Um, still pretty sunny, comparatively speaking, right? Like we've, we've got some,
17:16some things that make this a more normalized year and some things that, that would set it up.
17:21Anything today that, that changes that for you? Well, God, if the new world order and the world
17:26collapses, all by God, you know, everything will change because shipping lanes and, oh man, man.
17:33I think the thing that really surprises me when people are, are doomer-ish like that is like,
17:38so they think everyone's going to sell their house and then what are they going to do? Like
17:42they need a place to stay. Why would you sell your house and do what and, and go rent and, and why?
17:48Like that, that's the part that never makes sense to me in this scenario.
17:51Sarah, do you know what I tell all doomers for the last two decades?
17:55What?
17:56Some bleep, bleep bleeps are always ice skating uphill. You know, that's just, it's just what
18:03it is, man. Some, it's just the whole new world order, the whole federal debt thing and all this
18:09stuff. And, and those who have followed me in the past decade, you know, you know, my takes on this,
18:15but, uh, for housing general, for all of us, uh, again, very simple model for this year,
18:20we can get 237,000 more existing home sales rates, six and a quarter and, or stays under there
18:27because that's what the data has shown us in the past. Right. And the sales curve so far,
18:32we're starting the year we're, we're, we're positive, right? This isn't like a booming
18:36housing market or anything, but it's positive, but there's just so much crazy information out
18:40there. Sarah. I just, I think people just get lost with that stuff, but just keep it simple as
18:44that price growth is cooling down. Inventories up choices for everyone. The fed is
18:50not hiking rate. All these things that were problems in the past. Remember last year,
18:54the theme was the worst is over for housing. That was the theme line for this. This is like,
18:59it's game time, right? It's time to, it's time to play ball. So, uh, the backdrop is much healthier
19:05now than in the last three years. Spreads are better. Pet is cut rates. Rates are lower.
19:10Inventories up price growth, buyer, seller, market chart, daddy doctrine. It's good. Uh, um,
19:15and you just kind of take it off that, but there is, you know, the variables that if people ask me,
19:19what can kind of sour housing, I say the same thing. Well, labor data gets better. Bond yields
19:25go up, rates go up and, uh, uh, they stay, uh, in the upper end range. And the fed just basically
19:31says we need to, we need to be more hawkish. That is, that is a legit thing for this year. Cause
19:36we're working from. So, but so far this year, considering how crazy things are, it's like a 24 movie.
19:42Um, uh, not, not a bad start, not a bad start. Okay. We'll end there. Thank you so much,
19:48Logan, as always. Pleasure.
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