Housing demand remains positive for now

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how mortgage rate changes are impacting housing demand amid the ongoing uncertainty of the Iran war.  Related to this podcast:  Housing demand still positive, but for how long with rising rates? https://www.housingwire.com/articles/mortgage-rates-6-41-volatility/  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. http://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

00:09Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about how the recent

00:15increase in mortgage rates is impacting housing demand, and of course, how all of that's being

00:20affected by the war with Iran. Before we dive in, I want to thank our sponsor, Trust & Will,

00:25for making this episode possible. Logan, welcome back to the podcast.

00:30It is wonderful to be here. We survived another weekend, and it's Monday morning. Again,

00:36when we do these podcasts, 27 things can happen after. So you'll all hear this Tuesday morning, but

00:46oil prices down just a little bit, 10-year yield down just a little bit. We have not broken over

00:53that 430 level, level that we saw on January 20th. That means this bowl pattern that we've talked

00:59about for many months since September is still intact. But it was an interesting weekend in the

01:07sense we're almost to March 21st, and I thought by March 21st, we'd get a lot of questions. But

01:13we're kind of asking for help now with NATO. You mean the U.S. is asking for help? The U

01:20.S. is asking for

01:21help on the Hormuz, you know, straight and getting oil flowing. And again, every week that goes by,

01:27energy prices are up. Production of other stuff starts to go down. Singapore's fuel costs for

01:35transportation, which is the number one hub in the world. That's at multi-decade levels high. So

01:40it starts its toll, right? Not just here, but around the world. And the longer this goes,

01:49you know, it's harder to get things up and go in again. So that's why I've always said that March

01:5621st date, that do we hear anything on trying to get this over with? Or is this going to be

02:01multi, you know, if this is going to be a three, four, five month affair, or is it never going

02:06to

02:06stop? Or is it going to stop now? We always hear it. This will take weeks, not months. But

02:13I think part of the reason why oil prices are down and bond yields are down is that

02:18if we're asking for help, then, you know, whatever the war modeling was, you know, I don't know if

02:27things went according to plan. I don't think we were going into this saying we were going to need

02:32NATO's assistance, or else we would have talked to them beforehand and say, hey, listen. So

02:38it is what it is. It's an ongoing thing. New headlines. Are we going to have boots on the run?

02:43Whatever it is. But at least for this Monday morning, the 10-year yield rejected a key level

02:49and oil prices down just a little bit. The oil prices are still very elevated.

02:54But the bond market for now has a calm Monday.

02:59Okay. So what does that mean compared to Friday? Give me some understanding there. Because Friday,

03:03we had higher mortgage rates.

03:06We had higher mortgage rates. The 10-year yield got back to close to the yearly highs,

03:11but the spreads were bad on Friday. So the spreads were a benefit. It's nowhere near back to what they

03:20were. It's one of the things I did over the weekend and on the Tracker article is that, you know,

03:26if I

03:26took 2023 spreads, mortgage rates would be 7.59%. If I took 2024 spreads, the worst levels, mortgage rates

03:35would be 7.21%. If I took 2025 spreads, mortgage rates would be 7.02%. And we just do not

03:44have any

03:45positive demand data curve when rates get above 7. That's the thing I talked about on CMBC Fast Money

03:52that, you know, it's always rates come down, demand picks up. And then if rates shoot back up,

03:58that curve of the data starts to get weaker and we don't go anywhere, right? That's been the last few

04:04years. So this year, we were always under six and a quarter and the volatility was compressed and

04:10we're going into the spring. It's like, we had this. We were just going to like run this. But

04:13what happened on Friday, rates got to 6.41%. The spreads were, you know, so the whole calm model

04:23just went away because of a conflict, right? So now we have to look at the data to see, did

04:28it impact

04:29the Tracker data for this last week? So I do want to talk about that just a little bit more

04:36before we

04:36get into other parts of the Tracker. Of course, the spreads, you know, is an important part of

04:40what we cover on the Tracker. So I guess we could do it in that context. But it's like, you

04:45have made

04:46the point over 2025 that the spreads were the, you know, the unsung hero, right? And they were the

04:51superhero in 2026 because even as the 10-year-old went up, we didn't see mortgage rates like we did

04:58before, like in the sevens because of the spreads. So how do you, how does a conflict like

05:03what's going on in Iran, how does that, how does that impact the spreads over time? Like,

05:09because we saw the spreads get so much worse after, you know, Russia invaded Ukraine, after we

05:14had the Silicon Valley crisis, and it took forever for those to come down to normal. So what's the

05:20escalation on the other end? We don't have spreads reversing course. Okay. Unless two things happen.

05:27And this is goes back to the seventies, right? I mean, I wish I could do a dissertation on the

05:32spreads because it's, it's, it's a really fun topic for me, but I just don't think a lot of

05:35people care about it. But if there is a world market events where the markets aren't working

05:41correctly, or there's a fear of a recession happening very quickly, the spreads start to

05:48reverse course. We haven't had the spreads reverse course. They just got worse on Friday. They're still

05:54much lower than what we had in the last few years. But let's do a hypothetical. Let's just say that

06:02this escalates into like five, six months of fighting and nothing gets resolved and oil prices,

06:10aluminum prices, tariffs, everything to the point to where economic activity starts to decrease,

06:17but the Fed stays very hawkish, right? During this period of time. If you look at the history of

06:23economic cycles and going back decades first, for the, for the reality of what we have to deal

06:31with today, usually there's an oil spike right before the recession, right? We saw this in the

06:36seventies. We saw this, uh, uh, in the, uh, by the Gulf war, we saw this in 2008. It did

06:43not happen

06:44in 2022, even though a lot of people thought we were going into recession. So the markets are just a

06:51little bit mindful because they've had this before. So if this ends within a very short amount of time,

06:57we could go back to normal, but it's always the escalation thing that, you know, because you just

07:02don't know what's happening next. And then the other variables about production and reduction of work and

07:08supply, all these things start to take its toll because there's economies. There is a reason why

07:14other presidents and administrations hasn't attacked Iran like this because of the fear of the straight

07:22or four moves, because it's a, it's a big deal. So we'll see how this progresses. We'll see how spreads

07:29act this week, but this morning, 10 year yield is lower. Remember we have a lot of rate cuts in

07:34the system

07:35because we have a lot of rate cuts in the system that, you know, the, uh, the, the 65 to

07:4075% of where the

07:4210 year yield of mortgage rates can range is fed policy. So fed policy is less restrictive now

07:47than what it was in 2023. So as of now, mortgage rates are still in its lowest rate curve in

07:54many

07:54years, still even today, because the spreads are much better. That's why I wanted to show the spread

07:59outlook for the last few years, like 2025 and 2024 and 2020, all sevens, we would have all 7%

08:07handles

08:08right now. Uh, so spreads are still like, even now the unsung hero, because it could be a lot worse.

08:14But, uh, again, we're dealing with a daily conflict and how it hits the data line. But for the first

08:20time, mortgage rates went above six and a quarter and the volatility is picking up. So again, what was

08:26beneficial for going into the spring, that variable is now gone. So now we have to track data to see

08:32what does it mean for the housing market on a weekly basis. So we don't wait for monthly reports.

08:39So on the tracker, what, you know, it's a weekly data is the freshest data out there,

08:43but because things started happening on Friday, our data for the tracker this week still showed

08:49pretty positive demand, correct? Pending sales, positive year over year purchase application

08:53data, which is a little bit backward looking on the previous week, 11% growth year over year,

08:587.8% growth week to week. Our weekly pending sales are at multi-year highs. So the spreads,

09:06because how we track the spreads is based on a weekly mortgage rate. So it can't pick up the

09:10volatility for one day. So mortgage spreads look like it was 1.93% on the weekly data, but that

09:16Friday

09:17was the first noticeable reversal on that. So probably way too early to pick it up. But now going out

09:24in the

09:24future, we're going to have purchase application data on Wednesday, and then we're going to have a

09:27tracker going out. We'll see. Because we're still, we're not at the levels that we would have seen

09:33in 2025, 2024, and 2023 above 7%. This would have been a all multi-year 7% plus mortgage market.

09:42So we're still not there, but it does highlight how critical spreads improving has been because we

09:50would have had seven handles any other March month in the past three years, just not this year. So we'll

09:59take it one week at a time. And then we're dealing with a very, very high velocity event that's driven

10:04on headlines and everything. And for now, on this Monday, the 10-year yield is lower.

10:09Yeah. I think it was just like, it's just so, it can be really like a punch in the gut

10:15when you're like,

10:16we're heading into this really good season. But I think what you would take out of the,

10:21before we had this sort of, you know, all this volatility, but what I got out of reading the

10:27tracker this week is that like, it's still, we're still seeing positive signs. We're still seeing,

10:32you know, it hasn't, it hasn't gone on long enough to suppress the demand the way that it would have

10:37in

10:37the past. And so that's good. And that's why you said, you know, like you put a date of like

10:41this week,

10:42March 21st, back when it started, you're like, if it goes beyond March 21st, then we run into some

10:48risks of it really affecting this. It does. And it also puts everybody in a, it puts bond traders

10:55in a unique position. Like if you thought the US economy was just going to run right through this

11:00and grow and inflation was going to pick up, then the Fed needs to get more hawkish because input costs

11:07are going to rise and bond yields should go up. But for now, the 10 year yield has held that

11:12ground,

11:12right? It's now tested that level twice, actually almost three times this year. It hasn't broken up

11:18higher. There's also another camp that would tell you there's no way our economy could withstand this

11:24and whatever the 15% tariffs are going to be, whatever this is, this will hit consumption.

11:29We have no job growth really in 12 months. So bond yields shouldn't go up. They should go lower

11:35because economic growth will get hit. That's the tug of war right now, which between bond traders or

11:40people out there that we should see higher yields because the economy could take it. We should see

11:44lower yields. For now, we're just in a channel back and forth. But clearly since the conflict,

11:50the longer the conflict went, the higher the 10 year yield was. But for now that test right there,

11:57that 430 level held and we'll take it for one day at a time because this is, you're dealing with

12:03something that could, that could end very quickly. And then you have to deal with the aftermath of

12:07how long does it take to get things back going again and everything. And what's the concern going

12:12out? See, once you, once you dance with the devil in the pale moonlight and then everyone gets to see

12:18that this, this, this country can do this. So how are you going to make sure that this doesn't happen

12:25again? Right. You know, going out. So it's complicated, but we just have to deal with

12:33what's in, what's in front of us and ahead of us and see how the market reacts.

12:38Let's talk about other parts of the tracker that I thought were interesting were inventory and new

12:44listings because it, you know, we got more inventory last year. And at one point we were up like a

12:49whole

12:49much. And now that growth of inventory has slowed, but wouldn't you expect that in a, in a February,

12:55March timeframe? No, the, the, the, the, literally the entire housing market flipped June. And we,

13:03we were, we had, we had a really good spring inventory growth year because most sellers are

13:08home buyers. Like the new listings data was never showing any kind of stress, but it was growing year

13:13over year. So we had people ready to go. They put their homes on the market. You're just waiting for

13:17that mortgage buyer. You mean last, last year, last year, last year. Now we're basically kind of

13:23we're slightly below last year's levels, except demand is higher now. So we want to teach the

13:29supply and demand equilibrium. Like why did, why did, why has the growth rate of inventory slowed

13:34since mid March? Well, it's very simple. Mortgage rates went below 6.64 that historically in the last

13:41few years, demand picks up. So when demand picks up, it's hard for inventory to pick up growth and speed

13:47because most sellers are home buyers. If a mortgage buyer comes in, especially a first time home buyer

13:52that does not provide you a house, you know, less inventory or the growth rate slows down. So

13:58because we have some hard comps this year, we're probably going to see some negative year over

14:03year, but it's a very healthy year just because we're, we're, we're elevated now, right? There's,

14:07there's the conceptual thought we get, we had another mortgage rate lockdown discussion over the

14:12weekend that nobody would sell their homes. Nobody would sell their homes and buy another house with,

14:17because mortgage rates are too high and inventory, inventory grew since 2022, right? It's a, that's

14:24not, that hasn't been the problem. People are listing their homes. New listings data is higher than what it

14:29was in 2023. So it, it, it's a functioning market in that sense, but you have a better housing market

14:35when people know there's demand there because then sellers can list, then they become sellers or buyers.

14:40First time home buyers come in, it's a little bit more function. So it's a little bit of growth in

14:44home sales. Price cut percentage is down year over year, the growth rate of inventory, but it's a

14:49functioning marketplace, much better than what it was in 2020, 2021, 2022, especially 2023, like 2023

14:56housing market was not, not a good one, but it starts to get a little bit better and better price

15:01growth cools down. There's still parts of the country where, you know, you're definitely seeing

15:07declines, but as a whole, man, it was really good compared to what we used to be, but the growth

15:14rate slowing down is not shocking because that's what typically happens over the last 10 to 12 years.

15:20So interesting because at the housing economic summit, you know, you're, we had a pretty sunny

15:27outlook on the housing market for this year, right? You're like, here's why you should love the

15:312026 housing market. It was great. Um, how much have you tempered that?

15:36Nothing has changed on my thing because this is a quick event. It's the duration of the quick event.

15:44That's the thing is that you cannot, you have so many months within a year and every single year

15:50there's been a positive curve and a negative curve. So the, if rates went up to 7% and higher,

15:58that has always been a negative curve, but here you can't extrapolate a spring or a year based on

16:05events that has the possibility of either escalating more, making it worse or ending out there. So it is

16:13a live tracking thing. And for now, as crazy as it sounds, mortgage rates are still at the lowest rate

16:21curve going into a spring than it has been in the past. Cause you know, it, we didn't break under

16:27six

16:28point six, four last year until like June last year, rates were higher, right? So we're still

16:34dealing with a lower rate environment, but we lost the six and a quarter below and the less volatility

16:43that would have, that has changed. So now we have to look forward to see what the data is showing.

16:49Cause if it was 7% plus, it's very easy. We just, we, that things slow down every single year.

16:54We're just not quite there yet. And the bond market doesn't want to just take us higher

17:00quite yet. And we're going to have a fed meeting, which again, I, a lot of doves might just be

17:06hawks

17:07now and say, listen, there's no rate cuts until we get some clarity here and get every week that goes

17:13by. It just gets a little bit harder to get things going. So that's why I'm waiting until the 21st

17:18to

17:18see, but it was somewhat encouraging. If we're asking for help, that there's, there's some kind

17:24of understanding that this can't prolong itself because you know, so much of our, so much of the

17:29world economy revolves around oil and the flow of energy and everything. And so many things that

17:34goes into inputs and industries and everything like that. You can't have that kind of, that amount

17:38of barrels being lost. So we'll take it one day at a time, but nothing, nothing really changes

17:43for a year, unless we have this situation prolong itself out there because what happened last year,

17:50and this is the, when, when we thought the housing market shifted mid June, we went an entire six

17:57months with nobody adjusting to it. Right. We still, we had people who were thought home sales were

18:03crashing toward the end of the year. We had people that thought prices were crashing. We had people

18:07even in the month of November and December not acknowledging it. And yet we had a nine month high in

18:12sales and the pricing curve shifted. So this is why we track live, fresh weekly data, because

18:20if things flip, you don't want to be the person that's six to nine months old out here. So

18:25we're mindful of it, but the rates are still not back above seven. If it was 2023, if it was

18:312024,

18:32even if it was 2025 spreads, 7% plus doesn't work. We've shown that in the data for years,

18:38but for now, it should get hit. Purchase application data should get hit this week.

18:44We have a 40 basis points increase when you were going with growth and you have that kind of

18:50increase to, you know, we should get a hit, but we wait for that to see what it is. And

18:55then

18:56who knows by Wednesday or Thursday, things might change. 10 year yield might get lower.

19:00And then we wait for the next week. And then we just track it this way there. But for now,

19:04for now, just because I thought it was a little bit late in the week for it to hit the

19:08data,

19:09demands up, purchase application data is up, growth rate of inventory is now down to 6.35% from 33%.

19:15Price cut percentage is still down. It's still somewhat intact, but we move with how this conflict goes.

19:22We move with it. Since we last talked, we had a judge come out and say that Trump should,

19:30that his, what was his subpoenas against the Department of Justice regarding Powell were,

19:36he's quashed those, he threw them out. And so you and I talked on Friday afternoon, we're like,

19:40listen, this could be an easy win for Trump. He could just be like, okay, see, I lost.

19:45But he couldn't do it because until he drops this, there are senators that said they won't,

19:50they won't approve Warsh in. So I think he doubled down over the weekend. Again,

19:57something that could change very quickly, but the Warsh-Powell thing continues. I'm so surprised

20:03we're still talking about it. I'm going to tell you this. If I'm Kevin Warsh,

20:07I don't want to be the Fed chairman this year. I think Trump is doing Warsh a favor by keeping

20:12him

20:13delayed. I know that sounds crazy, but Kevin Warsh cannot come out here and say, we're going to do

20:18massive rate cuts. No, he can't do it. So you might as well keep him not the Fed chair for

20:24a while.

20:25I don't believe, I don't know if that's a strategy, but if I was Kevin Warsh, I would tell

20:29Trump, don't have me be the Fed chair while you're doing this war. Don't do it. Because I'd have to

20:34say,

20:35I can't tell people we need, we need rate cuts right away. You know, nobody's going to believe

20:40me. Everybody was going to say, I'm wondering, Logan's going to do his, I'm your boy. And I'm just

20:47going to do so. Maybe, I don't know. This is very Machiavellian. Maybe Trump just delays this until

20:53the war is over and then he can get Warsh in there. I don't think Kevin Warsh could do what

20:57he wants in this environment. I even think of the, a lot of the hawks might be, or a lot

21:03of the doves

21:03might be hawkish now. So in a weird way, it, it, to me, it kind of makes sense if Trump

21:10delays the

21:11Warsh hearings or confirmation until this war is over. Because if Kevin cannot, I've, we've not heard

21:18Kevin talk. It's true. And he's not giving, and he should not give an interview. He should stay

21:23away from every camera. Do not get in front of Congress while this war is going on. Okay. Cause

21:29he's, he can't say what he, Trump wants him to say. So in some ways, I know a lot of

21:35people were

21:36like, you know, Trump was really mad at the judge and everything. And now he wants to investigate the

21:41contractor, whatever it is. I almost think it's tactically smart to delay his confirmation until

21:48this is resolved and have him not talk. Cause Kevin Warsh would say no rate cuts in this environment,

21:55you know, and then you got, you got to deal with that. And, uh, uh, that might be too much

22:02creative

22:03thinking in this context, but if I was Trump, I would not, I would hold off on him, beat up

22:09on Powell

22:09as much as you want. And then when the war's over and everything, then you could get Kevin Warsh in

22:14cause you're not doing him any favors or you're not doing your, we need emergency rate cuts or

22:19whatever it is now. And I don't think Kevin could come on TV and say that now with what's going

22:26on

22:26with input costs rising and, and, and commodity commodity of all things, commodity inflation is

22:32like, this is his thing. He'd be like, Oh, right. Raise rates, raise rates. So, uh, that's why

22:39I, I, I, I, I'm not shocked if they delay this entire thing. And Powell is still the fed chair

22:45for, for months to come now. Crazy times. Well, we will be, uh, staying on top of it,

22:50Logan. Thank you so much, especially for the tracker. And then also, um, you guys, uh, if

22:55anything happens, uh, economically Logan, like he, he cranks out an article, uh, pretty quick

23:01just to keep us all updated. So make sure you, uh, look at that. And our timing is impeccable

23:07for the gathering. We, um, it's going to be late April, right? Um, that's going to be

23:11incredible. You're, you're, uh, one of our featured speakers. You and I are going to do

23:14a late night, um, talk with each other. It's going to be fun for an audience and they can

23:19ask questions. It's going to be great people. You guys need to, uh, sign up before the, um,

23:23rates go up again. Hopefully, uh, by that time we have a little bit more clarity, you know,

23:29uh, on this situation. Yes. Yes. Okay. Well, we will talk again soon, Logan. Thank you.

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