- 3 days ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about mortgage rate volatility after the recent escalation of the Iran conflict. The two discuss what might be next, including higher mortgage rates.
Related to this episode:
Mortgage rates are breaking higher — and things can get worse with Iran conflict
https://www.housingwire.com/articles/mortgage-rates-are-breaking-higher-and-things-can-get-worse-with-iran-conflict/
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
Related to this episode:
Mortgage rates are breaking higher — and things can get worse with Iran conflict
https://www.housingwire.com/articles/mortgage-rates-are-breaking-higher-and-things-can-get-worse-with-iran-conflict/
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
00:09Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about what's happening
00:15with the Iran war and how that's going to affect mortgage rates and the housing market for the rest
00:20of 2026. Before we jump in, I want to thank our sponsor, Trust & Will, for making this episode
00:26possible. Logan, welcome back to the podcast. Madam President, is there any way I could get Chloe
00:32to come help us with charting war economics with these crazy headlines? Wow, wow, wow. It is Friday
00:40morning. And boy, the last like 18 hours have been very, very interesting. And it's March 20. So
00:50tomorrow would be March 21. By the time this podcast comes out, it'll be past that
00:56beaker for me. So we are in a very, very interesting spot with the economy, this conflict with the
01:0510-year yield, oil, everything, because we have now gone that full timeframe that I would have to
01:12reassess everything if we're still in this conflict by the 21st of March. I think, you know, we're not
01:18still just still in this conflict. It seems to be escalating. We thought yesterday on Thursday,
01:23there was a little, there was a drop in oil prices that made us go, hey, what's going on? And
01:29we
01:29thought maybe, you know, we had found an off-ramp, but it feels like today the off-ramp is even
01:35farther
01:36away than it was. So during the day on Thursday, Netanyahu came out and said, maybe the, you know,
01:43we have 20 days of bombing, maybe, you know, Iran can't make missiles or enriching uranium. So
01:48the 10-year yield fell right away and oil prices fell. Then after that, everything kind of turned.
01:57Now they're, I'm calling it Skull Island. I know it's Kroll Island or whatever, but there looks to be
02:02maybe a process of trying to take one of those Iranian hubs on that island as a tool for
02:15negotiation. And if that's the case, it might be another four to six weeks of bombing
02:20to soften the blow even more. And because of that, the 10-year yield just shot up right now,
02:28even though oil prices didn't shoot up, the 10-year yield shot up. And if this is the case,
02:33because now that we're in the 21st, to me, it's like, if this didn't end, then it's something
02:39bigger than all of us thought. And if it's something bigger than all of us thought by the
02:4421st, then you have to start modeling out embedded inflation for the rest of the year,
02:51which means that we're talking about rate hikes now. There's no more rate cuts at all for 2026.
03:01So the question is, does the Fed raise rates before the year is over? And today,
03:06Friday morning was the first time that a 50% chance of a rate hike in October was put into
03:12the marketplace. So the 10-year yield, oddly enough, the day before the 21st, as of this
03:18second is 436. So it's broken out of that key, that ball pattern that we've had for this whole time
03:27and keeping rates lower with less volatility, that has completely gone astray. But it can get worse
03:35worse, right? Because if this escalates even more and more, then you can see higher yields,
03:43higher inflation, rate hikes, because at some point, this has to close itself, or it just escalates into
03:52a longer kind of conflict. And if that occurs, we've seen what the Iranians would do to their
03:59neighbors. And if you start blowing up more energy and gas things out here, it just makes it
04:05problematic. And my concern is that, you know, at this point, you know, you have two sides that,
04:13you know, don't want to take the off ramp. And it could just make things much worse and longer,
04:20which changes the paradigm of everything, right? The whole Trinity thing that we've talked about since
04:26November of 2024 was that Trump couldn't get away with the trade war tap dance or the tariffs and
04:33everything if energy prices were low and mortgage rates were low, the bond yields were low. And you
04:39had this like setup for the year, and now it's all breaking aside. So I don't know what happens over
04:50this weekend. We might be here Monday morning and things have changed. But we're now at that inflection
04:55point where things can escalate for much longer. If you're talking about occupying islands and putting
05:03boots on the ground, which the Iranians would start bombing all the neighbors, gas production goes away.
05:10Uh, and it's just embedded inflation, which even Fred governor Waller, who was a dove is now hawkish now,
05:20which means Kevin Warsh has no one on his side, except for, uh, Stefan Meyer, uh, Michelle Bowman
05:26talked about, I still penciled in three rate cuts, but still it, it, this became complicated because of
05:32duration, the escalation has, uh, uh, gone on. So, well, of course, Monday morning, things could
05:39change a Friday evening. Things could change Saturday. Things could change, but this explains
05:44what happened with the 10 year yield this morning, uh, and why everyone now is getting more hawkish on
05:50rates. Listen, I hope it changes because the last thing that, you know, maybe our country needs, but
05:56especially let's just think about our industry or the folks listening to this, like we were set up for
06:00a pretty good stable, um, spring. And then now it's like, I mean, we talked to someone yesterday,
06:05we were at the Alta conference, the title conference yesterday, met some lovely people
06:09and including some of our fans, uh, great to meet you guys. Um, and someone asked you a question of
06:14like, you know, what should I expect? You know, I'm, I'm looking out, you know, three or four months
06:19as far as hiring, as far as volume, it's like this kind of news. It's not good for anybody in
06:24our
06:25industry. Escalation and duration are never good things when you're talking about
06:30bond yields in a time where people want to see great cuts because oil is different. Oil is a
06:39game changer. And, uh, uh, if it was like a, if it was like a 10 to 14 day bombing
06:46thing and things
06:47got back to normal, it's okay. I mean, people, I mean, we saw what the market wanted to do, right?
06:53The 10 year yield fell and energy fell, but we're getting to the point to where even after the
06:59conflict, you might have embedded inflation just because it's going to take longer. Like the IEA
07:05basically said, it might, it's going to take like six months to get things back going again.
07:10You know, if things keep on escalating because that the international energy,
07:14yeah. I mean, I don't know what that is. So they're basically saying, and if this is,
07:19if things don't get more damaged, so it is interesting that in an election year,
07:27in a midterm year that you had this set up and now that is, it's getting riskier and riskier
07:38because to me, it's like, if we weren't done by this, by the 21st, something went wrong. And when you
07:43have two groups of people who don't want to budge on this, then you have a, you're more prone to
07:48something becoming worse, right? Because you know, you might force yourself to do something that you
07:53didn't originally want to do. And then you can't control the other variables that can happen after
07:59that. And, but we'll see again, a lot of this can be, you know, Friday and then Saturday changes,
08:07Monday morning things changes. But for now we're at the point to where whatever we started the year
08:13with, that is gone. And it can get worse if the escalation gets worse and worse out.
08:20So here's the thing that I think is so surprising for people who maybe they voted for Trump, maybe
08:24they didn't, but just having Trump in as president where he had that, that focus on affordability,
08:30on lower mortgage rates, on lower energy costs. It, I mean, this would seem to be a very surprising
08:35thing. And it's like, at what point does he realize, or has he realized that like, this is not,
08:39I mean, you can't have those things that you said you wanted and, and keep doing this war. So
08:44that's the hope that I have that at some point, he's going to realize the damage on, on these other
08:50things that are really important to him and have been important to his, you know, his presidency.
08:55Trump is such a wild card on what, what he does, but still, there was still an idea that,
09:01you know, midterms are coming up, but we got to realize this is, this is his last midterms and
09:07typically the incumbent, uh, uh, party loses. So maybe this is his last hurrah. This is kind of like,
09:15he can't, you know, if the Democrats take a house and the Senate and all this stuff kind of goes
09:20away,
09:20but, um, it is, it is an interesting concept of putting this right now. If you thought you can
09:30close this out within 10 to 17 days, that's one thing, but now we're here. And if we're taking
09:37this to another, that's going to be four to six weeks of bombing, then we go after an island and,
09:43you know, those things, you know, you start to push things out to 2027. Uh, uh, and, um,
09:51it just gets, it gets more complicated the longer this goes on. Now we saw what happened when there
09:55was a hint of things closing itself out, but, uh, you're getting to a point that even if the war's
10:01over, things just don't get priced in as fast as, uh, people thought. So we'll, we'll, we'll see.
10:08And, and part of this is trying to explain to people because a lot of people say, well,
10:12there's no way the U S could stay, you know, uh, um, in an expansion with this much hit this
10:19much,
10:19this much tax onto the economy, this much inflation on stuff that people pay for every day.
10:26We also have to remember that after 2010, and I put that chart in the article that we, that we
10:32showed,
10:33um, the U S has been able to expand its economy, even with oil prices here.
10:38This is one of the reasons I think why Trump's they're, they're going to try to talk the market
10:42down to not let oil prices get above a hundred. Cause we've had elevated oil prices in the early
10:47part of the last decade. We had elevated oil prices in 2022. Of course they eventually came down,
10:53but if this is going to be like a multi-week things, they're going to try to keep things intact
10:59because they think that can go, but you get escalation, you're at one 50, you got 200. Then it just,
11:05it's, it's, it's chaos, right? And in chaos, you can't control all the variables. And that's part of
11:12the problem. The concern I had at this lasts above the 21st of March.
11:17Listen, I hope he has some people talking to him who are like, this is counter to your goals of,
11:22you know, lower mortgage rates, lower, whatever. And, and like you said, even if, even if, uh,
11:28Powell left, they dropped the investigation, Powell leaves, he gets worse in there. This,
11:33this isn't something that anybody can do. And I think just yesterday, Trump called for lower
11:38mortgage rates, like much lower mortgage rates. It's like, these things don't go together.
11:41He called for lower, lower, lower rate cuts, but he's, he's lost Kevin Waller.
11:49So, um, when you lose one of the doves and really he's got probably just two people in,
11:55so they're completely outnumbered now, but also Kevin Warsh himself, right? Kevin Warsh himself would
12:03be raising rates. So he cannot put Kevin Warsh on TV because they're going to ask him, what does this
12:11war do to your, and, you know, if he goes, oh, we're, we're still, we, we still want to do
12:16rate
12:16cuts because we want it. So it's, it's complicated, right? And it's, to me, I always think of advantage,
12:23disadvantage. What, what are you gaining here? If you really believe that you're going to change this
12:30regime for, you know, that's for 40 years, there better be like a long-term short-term
12:35and medium-term plan on it. But I, my, my concern is that things get worse and people,
12:42so many people have thought this is a very short-term thing, but now we're at the point
12:47to where the escalation can make this more prolonged. So again, we'll see who knows by the
12:53weekend's over, something might change. But it gets, it gets more dicey after the 21st because
13:01to me, something went wrong on this. This wasn't a, by the way, this is going to be multiple months.
13:08We want NATO to help. We don't want NATO to help. We don't need their help. You know, so it
13:13just,
13:14all agents of chaos when their time of calm comes, you know, does this. And I thought the bond market
13:22did accordingly, it went up higher, right? And the longer this goes up, the more the 10-year yield
13:27can go up. And now that we're talking about rate hikes, it's not just rate hikes here in America,
13:33but rate hikes and other, the whole curve of everything changes right now. So whatever their
13:38plan was, you know, execution or whatever it is, we're at the stage to where things can get
13:47protractively worse by the actions. So you say that, you know, whatever happened
13:52up to, you know, that's gone. So let's talk about mortgage rates and your mortgage rate forecast and
13:56what you think, like in real terms, what could this mean for people as they're trying to figure out the
14:02next six months? So right now, of course, we get a lot of questions. And first thing is people are,
14:09can mortgage rates get back to 8%? So we have a lot of Fed rate cuts in the system
14:13and the spreads are
14:14much better. So 8% isn't something that could work. You would need the 10-year yield to go much
14:19higher.
14:20Now, I've always said that last year we saw an example. When stocks were falling, the White House
14:27didn't really flinch. But when the 10-year yield got to 450, 460, the set came into the White House
14:32and got Peter Navarro out. And this was Godzilla tariff related. Okay. So now the peak forecast for
14:402026 was 460 on the 10-year, 6.75%. But that was based on, well, the labor data gets better.
14:48Maybe the tariff situation goes away in companies and there's all this backwind of tax cuts.
14:53This is eliminating all that and you get higher rates. So it's not the positive aspect of higher
15:00rates. This is inflation being embedded higher. So there's limits to where the 10-year yield can go
15:08and how much energy prices could go up where it doesn't put you in a recession, but it slows the
15:14economy down. So it's more complicated than that. But if mortgage spreads hadn't improved,
15:21we're already above 7%. If there are 2023 levels, we're almost to 8% today again. But because mortgage
15:31spreads have gotten better, but now you have this other variable, which the longer this goes, the more
15:37chaos it is. So that to me, past a certain point, which was the 21st, you get to see this
15:44action.
15:45And it took it, it took all the way to get to this point to where we're seeing the 10
15:48-year yield at
15:494.36 this morning. And it's correct in that sense of higher yields, higher inflation,
15:56rate hikes being priced in, no more rate cuts. The curve is moving the opposite way
16:03with the inflation data. PPI inflation is heading up. PCE inflation is heading up.
16:08And this is no longer tariff-related anymore because the input costs, diesel costs, energy costs, food
16:15costs, everything goes in into the whole production. And I remind everyone that President Trump said if
16:23energy prices fall, everything else will go down with it. So now it's reversed on his own logic down
16:30here. So again, if it ends quickly, then we could change and try to see when do we get back
16:38to the
16:39pre-conflict war. But the longer this goes, you're worried about somebody making a bad choice and that
16:47it's something you can't come back from very quickly. So you said you don't think 8%, thank God.
16:53But it sounds like if your previous forecast was 6.75 on the high and now we're in the sevens.
17:00I don't change the forecast until I see the 10-year yield get above 4.60 because of the spreads.
17:09Now,
17:10the spreads are not better and they're rising up as they accordingly shoot to a market event. But so far,
17:18everything has stayed in the range out there. But again, we are dealing with something that can end
17:24like this or it can get much worse. And this is the conflict when you're dealing with some chaotic
17:33event. It's not like we're dealing with normal economic things anymore. We're dealing with chaos
17:38and you have to take things one day at a time. I think a lot of people were just happy
17:43to see that
17:43the 10-year yield fell from that key level when Netanyahu was talking that maybe we're done,
17:49but then this happened. So it can get worse, but also we have to be mindful that there are probably
17:57limits to what Republican governors, House and the Senate, energy executives, IAE and the world,
18:07our allies in the Middle East who basically said, hey, why is our place getting bombed?
18:14And clearly Iran has showed that, listen, scorched earth policy. And so they can make things a lot
18:22worse. So we'll see. We'll see how it is over the weekend and next week. But it took all the
18:27way to
18:27get here to get that 10-year yield higher than 4.30. And I thought it was the right move
18:33because now
18:33we're reversing. We're talking about rate hikes. We lost a lot of the doves right here, even with the
18:39weaker labor market. Europe is talking about raising rates. So the whole curve shifted because
18:45of the duration of this event. I think that what we've seen in the past, and you mentioned the
18:49Godzilla tariffs, is that when key things start to break, this administration pays attention. So
18:55I wish it didn't take that. All of us in this industry probably wish it didn't take that when
19:00it comes to rates specifically. But it could be, that's another thing that it could be that,
19:04you know, if something, if he perceives something breaking in this area that he goes,
19:09oh, okay, no, nevermind. We'll find an offer. To me, it's the 10-year yield. Like same thing I've
19:14always said. The bond market really runs the show. Energy prices here at elevated levels,
19:20that's obviously not doing it. You know, they're going to try to manage that. But the only thing I
19:26saw last year with Godzilla tariffs was $450 to $460. So we still have some, we still have some room
19:32to
19:32get there. But it's tricky, because still there's a lot of people that says, well, this can end
19:39anytime they want. When you get into chaos, and things blow up even bigger and bigger, it's harder
19:46to get back. That's why I said by the 21st, if things aren't done by here, I have to reassess,
19:53because escalation can get worse. Okay, well, we have one day, we're doing this on the 20th. So
19:59we'll see what happens by the time this comes out. We'll know. But Logan, thank you so much for
20:03walking us through this, no matter where it leads. And for the tracker, whatever the tracker data shows,
20:12as the rate curve goes higher and higher, we have to look at all the components into it. Inventory,
20:18new listings data, pending sales. Up until this week, everything was positive. Weekly pending sales
20:26were positive year-over-year. Purchase application data was positive. The growth rate of inventory
20:30slowed because demand picked up a little bit. But now, if we start to go back up to 7%, we
20:36know what
20:36happens in housing. It has never had a positive curve going out there. We need to let the data show
20:43us that to confirm at what rate level does it go. But we had, boy, we had a good thing.
20:49We had a very,
20:51very, very slow, boring housing market. Rates weren't going anywhere, everything.
20:57And chaos. 24, Sarah. We set it aside. It's 24. Where is Chloe? We all need a Chloe right now.
21:02It's
21:02going to be 24. All right. Logan, thank you so much. We will talk again soon. Pleasure.