Interpreting the latest housing data on demand and inventory

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how to interpret the latest housing data on demand and inventory.   Related to this episode:   Housing demand snaps back as mortgage rates near 6%  https://www.housingwire.com/articles/housing-demand-rebound-rates/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   To learn more about Trust & 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 behind the sce

Transcript

00:09Welcome, everyone. My guest today is lead analyst Logan Motoshami. He's going to walk

00:14us through the weekly data to see what's actually happening as we're heading into the spring housing

00:18market. Before we dive in, I want to thank our sponsor, Trust & Will, for making this episode

00:23possible. Logan, welcome back to the podcast. It is wonderful to be here. A very interesting

00:29weekend with the tracker data. I think a lot of people are confused because, again, a lot of

00:37people put way too much weight on that last existing home sales report, which many, many,

00:43many, many, many months ago, we said, when you have the slow thing of Christmas and New Year's,

00:49and then on top of that, you're going to have to deal with some of the snow impact. But what

00:52happened

00:53is the inventory growth is not much this year. The price cut percentages are now down almost 1%.

01:00Places like Florida, like Jacksonville, there's almost double-digit year-over-year declines in

01:07inventory. So there's a lot of confusing things. But my job here today is just to kind of make it

01:13understandable and simple and not to put so much weight onto one report or one data line,

01:21especially when you have holiday and snow variables into place, and just take the trend.

01:27And the trend is now, we are now almost eight months of a certain trend, and we just kind of

01:34want to go with that until that trend kind of goes away. So today is just about clarifying a lot

01:41of

01:41things. I think it's interesting because the headline on the tracker was kind of like,

01:46the stability, right? And really, this whole year has been like, mortgage rates have stabilized.

01:52We have these positive things happening in the housing market. And then I think the data just

01:56got funny, which we knew it would, because of the snowstorm, because of the holidays. And just to

02:00see people take that and run with it and not understand, I was like, but we've been talking about

02:06this, because really, it's the same story. I'm really glad that people are starting to focus on

02:12weekly data. But also, weekly data, as we write in the tracker, can be hit to the upper downside on

02:21very short-term fluctuations. So, of course, the last two weeks of the year, the first week of

02:29January, I mean, we didn't even write the tracker, because even before that report came out,

02:34this thing is going to tank, because just kind of keep things simple. When did the housing market

02:40shift, Sarah? It shifted starting in mid-June.

02:43Mid-June. Okay. So, what happened in mid-June is that the growth rate of inventory started to slow

02:48down. The new listings data peaked already. And then all of a sudden, the 10-year yield is about

02:53to break under 6.6%. So, what occurred was the forward-looking data, pending sales, purchase

02:59application, all this stuff started to get a little bit more positive. And then existing home sales went

03:05from a low in June to a nine-month high. That nine-month high is a trend about six months.

03:12Then here comes the holidays. Here comes winter. So, we said, got to be careful of this. And what

03:18happened was the growth rate of inventory has really slowed. And last week, it's now down to 8.24%.

03:27There's parts of the country that is now down year over year already. And just always remember,

03:32take the Florida data with not a grain of salt, but in context to where it was last year. So,

03:38when we see inventory down in parts of the demand curve, it's positive, double digits. It's just

03:44very, very low bar to show improvement. But this last week, the price cut percentage

03:51is now down almost 1%. So, I thought what happened was everybody put too much weight on that existing

03:58home sales report and not this trend from mid-June all the way to mid-February.

04:04And part of this is when January happened, right? You always get that rebound effect from the

04:11holidays. Purchase application data positive, multi-year high. Weekly pending sales, multi-year

04:19high. Total pending sales. And then all of a sudden, here comes a snowstorm, right? So, that snowstorm,

04:25of course, it's a huge snowstorm. That thing works itself out. But you can see it that the places where

04:31there was a lot of snow activity really fell compared to the places that were sunny.

04:36Should it be shocking? The jobless claims did it, did this. And that's the thing with weekly data is

04:41you got to be a little bit mindful. But on a week-to-week basis, we saw a little bit

04:45bigger

04:48recovery in demand that I thought would be the case, just because the previous week wasn't as weak

04:53as I thought it would be. But here we are just continuing the trend. That's it. And oddly enough,

04:59the December existing home sales report, that headline number is actually higher than my total

05:05forecast for 2026. That's how high that number was. That slope really picked up toward the end of

05:11the year and then the holidays and snow. And then you just kind of go with it. But the lack

05:15of inventory

05:16growth and the decline year-over-year in price cut percentage is confusing people because they

05:23naturally thought home sales crashed, right? It had nothing to do with holidays or winter and

05:27everything. And they assume that price cut percentage would be accelerating. Inventory

05:34would be growing. It's not that year so far. So now we're in mid-February. Now you start to get

05:40into

05:40the seasonal increases in inventory. And just remember, the comps are going to be very, very

05:45difficult this year because last year was really good. We're not going to obviously get that same

05:50kind of growth. So if we have some negative week-to-week data on the inventory side, take that in

05:56context. So I'm trying to clarify this stuff because a lot of people were confused that

06:01why is the price cut percentage falling? Why is inventory not rising? Home sales just crashed.

06:08Trend, right? Aggregate data trend is more important than kind of one thing, one report,

06:14especially when you have different variables impacting. And this is why last year we focused

06:19on the tracker. Be careful of weeks where there's a holiday. Be careful of Christmas and New Year's.

06:25Be careful of one of the biggest snowstorms in history. So you're going to have to wait it out

06:30and just go with the data and how it flows out. And hopefully that makes sense because I could just

06:36see the confusion by some people like, why is an inventory not skyrocketing? Why is price cut

06:42percentages not rising? What's going on here? And just take it from mid-June to mid-February,

06:48take the holidays out of the equation, take the snow out of the equation. It's a basic trend out here.

06:53And we just kind of go with it. So you mentioned the price cut percentage and that's what stood out

06:57to me on this tracker because what last summer, I think the price cut percentage normal is about

07:0233%. It got as high as 40% that homes were taking a price cut before they could sell. Some

07:09people ran

07:10with that and they were like, oh my gosh, this is, you know, the start of the crash. Really what

07:14it was

07:15is like just always people have to adjust their expectations on the seller side. But to now see it

07:20go down a whole point. And now we're at pretty low. I mean, we're lower than normal.

07:26Well, I would say one third is we're normal right now. And we're elevated from, let's say, the points

07:31of COVID where it was really unhealthy. So it's just, it's kind of like a normal year. And I think

07:38that's not what some people were anticipating. So again, I urge people, you have to be careful

07:45who you listen to, right? We just had a debate with a new world order guy, right? And it was

07:50just

07:51like, man, Omi was talking about shipping lanes and mortgage rates going from six and a half to

07:55five and a half percent to have the biggest home price crash in the history of America nominal in

07:59one year. That's not economics. That's not, that's doom porn. That's attention. That's engagement.

08:06That's not what people should be listening to. You follow the data. Why? Numbers are the closest

08:12thing to the handwriting of God for a reason. Because if you take the human element, you put

08:16the human element into it, then you can become just the most craziest things ever on either side

08:24of the, of the tail. So just follow the data and run with it. And so far it's kind of

08:30the same thing.

08:31Demand just picked up a little bit. The growth rate of inventory is cooled down. It's still up year

08:35over a year, but you can see the slope of the curve, Sarah. You love this. We always say we

08:41love

08:41our data because it's the slope of the curve. And that slope of the curve looks different because

08:46the weekly pending sales or the snowstorm was positive. The growth rate of inventory had already

08:51slowed down. And we're just trying to visually get people to understand what is going on. So

08:56they're not surprised that the price cut percentage is now down year rear because

09:00when rates get down near 6%, things change in the data line. And a lot of that is because you're,

09:06when you're working from such a low level of demand. And when I talk about the lowest levels of sales

09:12ever, I'm adjusting it to the workforce, to the household. So it doesn't take much to move the

09:19needle. That's what, how many times have I said that for the last three years? It doesn't take much

09:24to move the needle, but the supply and demand equilibrium needs an entire slope of the curve data lines

09:30were inventory, new listings, data, price cut, weekly pending sales, total pending sales,

09:35purchase apps, 10-year yield spreads. That's why the tracker was created to get everybody on page

09:41so things won't be so confusing as it is because there is like, I mean, a lot of people are

09:47just,

09:48what is going on? So hopefully that makes sense of the weekend tracker report.

09:53It does. Okay. So let's talk about mortgage rates. Interesting morning. So we are recording this

09:58on Tuesday morning. And, and what's happening. We, we weren't sure what was going to happen with

10:03the bond market coming into this morning. Walk us through that. Well, again, for those who are part

10:08of the Instagram family, nerd nation, 24 seven, we are in a, what I call a bowl formation on the

10:1410-year

10:14yield. We got up to the upper levels. And then all of a sudden that uptrend that we were creating

10:20on

10:21the 10-year yield, it hit that key level. And then all the bond traders just went for it. I

10:25would tell you

10:25this. People that I know that are, that are bond people who really think yields should be higher.

10:32They even flipped. Right. And I'm, I kind of show this in a video. Technically speaking,

10:38there is no bond vigilantes. These guys are traders. These men and women trade to make money.

10:44If they don't make money, they don't have their lifestyle. So their ideological things don't care.

10:50And all of a sudden, technically something broke. And then all of a sudden it was a really big drop.

10:54We almost got down to 4%. Again, I'm going to have to bring out that picture,

10:58a running joke for me. Whenever the 10-year yield goes below 4%, I always bring that picture out.

11:02We all survived the 4% 10-year yield because people freak out when the 10-year yield got to

11:074% a few

11:07years ago. In any case, we are at the low level of the range here. And there's a lot of

11:15talk on the

11:16market side that this is really the AI disinflation is happening. Unemployment rates are going to go to

11:2115%. You know, there's no way bond yields should go up higher. There's always, it's really

11:26interesting. There's a deflation camp. And then there's the inflation camp. And these, a lot of

11:31these people are actually kind of on the same team and they just can't, you know, they always have to

11:34take it to the extremes on both. So money just went into the bond market. Technical levels broke.

11:40We got down here. Again, we've not been able to break under 3.95 or really 4% anytime recently.

11:46So just kind of look at it as we're down toward the bottom end of the range. I have to

11:51defend my

11:52edges right on the bottom side and on the high side. And to me, it's just really hard for the

11:5710-year yield to break under 3.80 unless the Fed gets dovish, the labor market breaks. You know,

12:03some of the inflation data that the Atlanta Fed and the Cleveland Fed, Beth Hammock, who used to

12:08highlight the business inflation expectation as her main thing for raising rates, that thing is pre-COVID

12:13levels. The Atlanta Fed, Bostick, who's leaving, who said, oh, the business, you know, inflation

12:19expectation is high. That's at pre-COVID levels. Are they going to change their theme? Absolutely not.

12:25They would probably want rate hikes, right? Because it was about the labor market. Because some of the

12:30inflation data, does it warrant, you know, talking about maybe not cutting? It's just, again, labor data

12:36breaks. Everyone is on the same page. The data lines that they really focus on, on breaking, just hasn't

12:43broken yet. And this is why you have these hawks that are still here, where the Christopher Waller's

12:49early 2025 was like, hey, the labor data looks soft. It's going to get revised lower and everything. And

12:54here we are with that. So interesting day with the 10-year yield. I just think technically speaking,

12:59it just hit that level and money flowed and we're down here near 4%. Again, it's February.

13:05We're almost in March, right? And we have not had that rate spike that we're accustomed to

13:10in the past few years. And now the spreads are better. And a really good question from somebody,

13:15why are the spreads getting worse when yields go down? Just remember the spreads duration has made

13:22a really, really big move from the highs of 2023. But when yields go down aggressively,

13:26the spreads do get worse, right? When yields go up, they do get better. So it manages that,

13:31you know, supply and demand equilibrium investors and all that stuff on both ends. But we are below 2%.

13:38Huge difference than what it was up there. And I believe the weekend tracker, we highlighted that

13:43if we had the highest levels of mortgage spreads in 2023, we're at 7.0, over 7.20% with

13:50mortgage

13:51rates today, but we're near 6. So a lot of difference, right? A lot of this isn't like,

13:56this isn't like the COVID V-shape recovery or anything. I'm just looking for a couple hundred

14:00thousand more home sales, even below the December print that we saw of last year. And that's just

14:06working. And inventory is still elevated a lot that I don't have to worry about prices escalating out

14:13of control or anything like that, right? The very, very savagely unhealthy housing market of 2020 to

14:18early 2022 is over. Balance, boring. It's a good thing, right? And I just think so many people might

14:26have been thinking shock and awe or something like that's happening out there. And it just isn't the

14:31case. So again, we take it one week at a time, one day at a time, one economic report, but

14:36we want to

14:36show the trend. And the trend is what matters. And right now, the 10-year yield is toward the bottom

14:40of my forecast. We're only about 20, 29 basis points away from the low end of the mortgage rate

14:46forecast of this year. So if things change, which they do every single year, we go with the data,

14:51both positive and negative. But for right now, we're just here. And we just, we have to wait till

14:55April to get the March data, which probably has most of the snow thing out of the equation.

15:00And we'll take it for spring and summer. And that means that, you know, the backdrop

15:05is stable so that people can go and do their business. Like they don't have to worry as much

15:10this year about like, it's the volatility of the rates. Yeah. I mean, it's never, it's never a healthy

15:15thing when, when rates spike up super fast or they, they go down super fast. For those who don't

15:23remember on March 9th, 2020, when COVID happened, my first tweet that morning wasn't about COVID or

15:32anything. I was like, oh my God, we're going to, we're going to have a mortgage market meltdown.

15:36Like the early payoff risk was just crazy that week. I mean, that mortgage rates fell 1% that

15:42week and then went up 1% that same week. I mean, it was just, the business can't handle volatility

15:48and hedges and stuff like that. And, and you get kind of margin calls and, you know, some mortgage

15:54training, but boring, slow and steady wins the race. Right. You know you don't need kind of wild,

16:03wild hair or wild action, just kind of be the tortoise and we just move with it out there. So

16:09kind of condense everything down to all this is positive. And we haven't had that reversal

16:16in yields like some people were looking for, but again, 21st century lows in job creation

16:22last year, 15,000 per month. It's probably even going to get revised lower one more time.

16:27Even this year, the job data is not breaking, but you know, it's so narrowed down to areas. And now

16:32you have all these concerns about AI and the disinflation and software stock selling off and

16:38everything. So it's, it's crazy. It's a safari out there. I don't know. I understand there's a,

16:42there's a lot of crazy headlines. My job is only just to guide you through the path, you know,

16:48you know, walk like cane and Kung Fu walk slowly. Right. Oh my gosh. Now that is a throwback. Okay.

16:55You gotta be elder gen X to even get that reference. You know, it's funny. I actually,

17:00when I was like, when I was a kid, my father and I used to watch Kung Fu all the

17:03time. And then,

17:04you know, uh, uh, one time he like, we always had to bring the, the, the, the, the curtains down,

17:11you know, those roller curtains with a metal blade, you know, uh, back in the old days. And

17:16I was underneath and he rolled it down and the thing came and smashed my nose. And I still have

17:20a crooked, broken nose from that, uh, smasher getting, getting, getting so ready to watch cane

17:27Kung Fu. That's so funny. Oh my gosh. Logan, thanks for walking us through this and we will talk again

17:33soon. Appreciate you. Pleasure, Sarah.

17:41You want to take this?

17:42What do you do?

17:43Me?

17:44You?

17:45You?

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