Will housing inventory drop in 2026?

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about trends in inventory and housing demand and what the early numbers mean for the rest of the year.   Related to this episode:   Housing demand is still positive even with epic snowstorm  https://www.housingwire.com/articles/housing-market-resilient-2026/  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   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 inventory and

00:15housing demand. As always, I want to thank our sponsor, Trust & Will, for making this episode

00:20possible. Logan, welcome back to the podcast. It is wonderful to be here. I'm in Houston,

00:26Texas, about to speak at an event in a few hours, so I'm dressed in the event's colors for today.

00:34Yes, very dapper today, as per usual. Okay, well, so what a weird week because we don't have jobs

00:41report again. Just when you got it back, now it's gone again. Yes, we're going to do a jobs week

00:46preview today, but because of the shutdown, things have been delayed. We do have some ADP and some

00:52private sector labor reports we can go off of, but kind of the big ones, job openings and

00:58the BLS Jobs Friday report are the things that really drive Fed policy. So we're going to have

01:06to wait for that, but we had a weekend tracker that kind of stunned me to a degree, and we're in

01:15February, so we're getting ready for spring. So I think the topic is, are we going to have some

01:21weeks this year that our tracker data has negative year-over-year inventory?

01:29That is so interesting. Okay, so what was it about the tracker data that stunned you?

01:35Well, we have a huge snowstorm, and our weekly data is very prone to be hit by either a holiday

01:43or some kind of weather-impacted event. However, you know, the weekly pending sales were still

01:53positive. I mean, I could say that, you know, it could have been more positive, but I was

01:57anticipating a decline in the weekly pending sales data. The purchase application data, I had expected

02:06a decline. By the time this podcast comes out, we're going to get the freshest data out there,

02:12but we only had a 0.4% decline week-to-week, up 18% year-over-year. So the spring demand is going

02:20well, and again, we're near 6%, even with a 10-year yield is, you know, close to 4.30 right now,

02:29the highs that we see last September, spreads got a little bit better, but the demand curve is

02:38good enough to where the growth rate of inventory has slowed, starting from when? When the housing

02:45market shifts, Sarah?

02:47Mid-June.

02:48Mid-June. And because that has slowed, the slope of this curve might not be strong enough for a few weeks

02:55right now that we might have negative year-over-year inventory. The last time this happened

03:02was actually in 2023, when mortgage rates did get to 5.99%, we had one real big sales print

03:11in February of 2023, got almost a half a million more home sales. And then, you know, back then I

03:17used to write, okay, that was the peak of sales for this year, the same thing in 2024. And then

03:22home sales started to slowly go down, but the growth rate of inventory just couldn't compete with

03:28the year-over-year comps. So we might be in that situation this year where the year-over-year

03:34comps last year were really strong, really good. Remember how happy it was for the inventory growth

03:38last year? I was like, this is great. But because we're dealing with harder comps, and if rates stay

03:45lower for longer, we might have some negative year-over-year prints on our weekly inventory data.

03:52So, you know, as someone who was right in the middle of that giant snowstorm, I can tell you

03:58that like it fully shut down streets here in the Dallas area for like four days. And some streets,

04:04my street wasn't fully open for seven days, six or seven days. And that snowstorm impacted two-thirds

04:12of the country, population, two-thirds of the country. So it's pretty crazy.

04:16I'm like, man, I really was anticipating. Now, inventory fell a little bit and new listings data

04:23fell a little bit. But, you know, on the seasonal data line, that looks somewhat normal. But still,

04:29I was a little bit surprised how well demand held up, which makes me think that demand might have been

04:36better if everything was sunny and there's no snow around the country. And eventually time, you know,

04:43snow goes away, we get back to normal. It all works itself out at the end. But the tracker for the

04:50month of January just kind of reaffirmed what we've always talked about since November of 2022,

04:57that when the forward-looking data gets better, you get about 12 weeks. And right now, you know,

05:03every week in the tracker has been positive. You know, the supply and demand equilibrium changes.

05:09So the growth rate of inventory doesn't have like what it did last year. Like last year,

05:14mortgage rates were still above 7%. And the housing market just doesn't operate well with 7% plus

05:20mortgage. But late 2022, early 2023, mid 2024, mid 2025, and now early. We've got four. Now we have

05:30four. It's above a Trinity trend here. The data just looks a little bit different. So inventory is still up

05:38year over year. But at 9.65%, we were running at 33%. So if it does occur that inventory is negative,

05:47put kind of more weight on the comps are really hard and rates are lower. Right? And it's still

05:53going to be a very healthy year in terms of inventory levels. We're nowhere near the unhealthy and

05:58savagely unhealthy levels that we saw in 2021, 2020, and early 2022. So all positive in the sense of

06:06creating a balanced buyer and seller marketplace across the country, but also mortgage rates are near 6%.

06:14And this is, this has worked for different times.

06:19You always talk about demand picking up when mortgage rates just get to 6% and of course, lower.

06:25Makes total sense. And then sometimes I ask you about what about those sideline buyers? So let me ask you this

06:30question. When you look at demand right now, what would tell you that like, it's more than the normal

06:36demand as far as like, maybe we're getting some of those missing buyers over the last couple of years

06:41when we're like a million down over the last couple of years? So sales aren't booming. They're just

06:48growing slightly from a very, very low base. If I saw existing home sales get above 4.71 million,

06:57then we're back to kind of what we saw in the last decade, like 4.71 to 5.3 million. That's very doable

07:07in the last decade. Of course, housing was a lot more affordable back then. And we have a lot more

07:15inventory back then. But all I'm seeing is a bounce from a very, very low base. Affordability got a little

07:23bit better on its own by just price growth, pulling down and wages rising. And now rates went lower. So

07:29for now, just look at it because when housing takes off, it looks like COVID. Remember COVID,

07:36we're like, oh, how's it going to be back in six to eight weeks? And people are like,

07:39oh wait, we're going into a depression. Nobody's going to buy. And then it was six to eight weeks was

07:44the sharpest recovery in housing demand in the history of America. And what we saw was like 27,

07:53and 33% year over year growth. And we were just flying through the numbers because it was a V-shaped

07:58recovery. Right now, all I see is kind of a little bit of growth from a very low base.

08:04If mortgage rates got below 5.75 and headed lower, I'd have a much different take about housing. I just

08:10can't get there with neutral policy being around three or three and a quarter. It's hard to get the

08:1710-year yield below 3.80. I mean, we're just sitting right here. It's like 4.28. We're at

08:23monthly highs in the 10-year yield right now. So as long as neutral policies here in the labor market

08:30isn't breaking, this is kind of the low level that we should kind of expect until something

08:35changes out there. But it is interesting to me that our tracker looks the same

08:41when we get rates near 6%. Demand curve looks a little bit better. The growth rate of inventory

08:49tends to slow down. But again, I want to get people into the realm of we used to have a time

08:55where we have rising sales, rising inventory, rising prices. That used to be the norm in previous

09:02decades. And because we're working off of such low base, we can have that again. And that's what

09:07we're seeing this year. Inventory is up year over year. New listings data is up year over year. This

09:12last week was down a little bit. Purchase application data is up week to week mostly and year over year

09:19every week, double digits. Rates are near 6%. So a healthier housing market. So if there are some

09:27weeks that inventory is negative year over year, just remember we have very, very hard con. We were up

09:3433% at one point last year. We have a lot of sellers that want to be buyers, but some of them

09:39didn't get what they wanted. So they just hold the house back much like they did 2022, right? And

09:472022, we saw new listings data decline. So people took their homes on the market and then when rates

09:52were better, just remember supply is a function of demand in housing. That seller 70 to 80% of the

09:58time is a buyer. So the hypothetical seller's buyer's market, just remember a seller is going

10:05to be a buyer. So that is, it's, it's not so clear cut when people say it's a seller's or buyer's

10:11market, because that seller's also needs a sell and he, then he or she then becomes a buyer right

10:17after that, or getting ready for the process to put an offer as well.

10:20So I had Mike Simonson on yesterday, your friend, Mike, our friend, Mike. And he talked about

10:28echoing some of these same things. And his takeaway was like, listen, it looks like a positive

10:33going into spring, but it's not like anybody thinks it's going to be blockbuster, right? Unless

10:38mortgage rates actually drop pretty, you know, into the fives in a way that like spurs that,

10:44but otherwise we're just looking at just trying to get back to normal.

10:47Trying to get back to normal, but I mean, just a little bit of growth. We've never had

10:51growth in home sales, existing home sales the last few years. We've had flows of data,

10:56right? When I talk about flows of data, rates get near 6%, demand picks up, then rates shoot up

11:02past 7%, demand slows down. We do this back and forth on here and that changes the data for us as well.

11:11But another interesting aspect of the tracker is our price cut percentage.

11:17For the first time in a while, it's now negative year over year. So even with inventory growth

11:25picking up, the price cut percentage went a little bit below last year's levels because demand is

11:30picking up. And this is the thing that I've always shown. There is a supply and demand equilibrium.

11:36Everyone always likes to talk about supply so much. We've literally had supply rise for years,

11:42right? But it's only when rates get near 6% that the demand picks up. We just kind of work off of

11:48that. So that's why the tracker to me is very, very prolific. It's very, very nitty gritty. It gets

11:54to, you know, all crooks and daddies, you know, if you're trying to like brush your teeth perfectly

11:59and it looks forward out here, right? You know, these pending contracts, 30 or 60 days going to

12:06existing. So you're already looking February, March and April kind of mindset. And so far,

12:11so good. And I think to me, the one key variable is rates didn't go above 70%, right? A lot of people

12:18thought, okay, that's going to cut rates at the end of the year in 2025. Rates are going to go back

12:22at 70% because it didn't happen this time because the labor market was much different this time. And

12:30we're entering a new area where we're going to get a new Fed chairman and all this stuff. But

12:35I'm not so convinced on the mortgage rates breaking so much lower than some people think.

12:44I'm a little bit more bullish on the economy going into this year. This is why we had 6.75 as the high

12:49end. This is why the 10-year yield can get to 440 or 460 if the labor data starts to improve

12:55out there. And then we work off and see how the housing market reacts to that. But for now,

13:03not bad. Because I was anticipating weekly pending sales down, purchase application with a week to

13:08week having more aggressive hit and everything and just staying down near 6. See, there's no

13:15volatility, right? We have all these crazy headlines and mortgage rates barely budged for like eight,

13:21nine days out here. And we're on monthly highs on the 10-year yield. And that's why I always say when

13:30the mortgage-backed security announcement came, I thought that was more of a defensive move than an

13:37offensive move. Because if the economy starts to pick up, you don't really can justify the 10-year

13:42yield below 4% or rates going much lower. Because we're fighting to get to neutral policy,

13:49not a commenter, right? Just a neutral policy.

13:53Speaking of policy, since the last time that you and I were on the podcast, you were on,

14:00was it ABC News, CBS? What was it?

14:02ABC, yes.

14:04ABC, sorry. So you're on ABC News, a national audience, and they wanted to talk all about Kevin

14:09Warsh and what you thought this Fed was going to do, which I thought was really interesting for that

14:14larger consumer audience. I think at this point, the Fed drama has, you know, gotten into the mainstream.

14:23You know, it is, I have a lot of thoughts on Kevin Warsh and a lot of thoughts on what might be

14:30happening here, maybe for another time. But it's not shocking to me that the 10-year yield didn't go

14:36much lower because of him. Kevin Warsh is talking about reducing the balance sheet

14:41and maybe getting short-term rates and they're doing some regulations. And I've always thought

14:48he had a weird take on QE and inequality and all that stuff. And he's always very hawkish when a

14:55Democrat is in the White House, but when Trump's in the White House, all of a sudden he changes his

15:00attitude. So it'll be interesting to see because it looks like to me they want to somehow change

15:06regulations and reduce the balance sheet and then maybe get short-term rates lower. Some people will

15:12say that might raise the 10-year yield up higher, might get mortgage rates up, but always remember

15:18what the trinity impact of our policy or theory was about Trump's White House. He needs a lower dollar,

15:26he needs lower oil prices, and he needs lower rates. But he's always talked about lower rates

15:34about the interest paid on the budget. And if they cut rates more, the dollar can get

15:41stay weaker or easily below 100. So there might be some other game plans here with Myron and Hassid and

15:50Warsh and the White House that might not relate to housing. We'll cross that bridge when we get there.

15:55But for now, that mortgage-backed security rate, even though it's only 10 to 20 basis points

16:01difference, defensive mechanism, right? On days when yields go up, spreads get a little bit better.

16:07It limits the damage here and it keeps us near 6%. So for now, the month of January, the tracker

16:14looked good. Just continuing what we saw the second half of 2025 take the last few weeks, Christmas,

16:23New Year's, and first week of the week out of the equation. The next existing home sales report might

16:29be a little bit lower just because of that. Then we just take it off from there. So very happy. I

16:34could not have asked for a better start of the year with this, but I am surprised that demand held up

16:39considering so much of the country was in a snowstorm. Absolutely. Logan, thank you so much for being on.

16:46We will see you in a couple of days now, next week at the Housing Economic Summit here in Dallas.

16:53It's going to be amazing. Talk about timing. Talk about having all that talent into one event in

16:58one day and all these different takes. You know, Barry Habib's going to be all about

17:02silencing, Modetta Cushy, Dr. Laos from the NAR. We have a host of people. There's a lot of people

17:10speaking. So I think it's good because we've got enough data now. We always said by February,

17:16you get a good idea of what's going, but what gets you there, right? And I think the big difference

17:22now, the big difference since the second half of 2025 is rates are near 6%. It's so far. It's not

17:29shot above seven. Spreads are normal. Hug a mortgage spread. Take a selfie with it. It's all about the

17:34spreads. All positive. All positive. Logan, thank you so much. Talk again soon.

17:40Pleasure.

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