Mortgage rates fell on Iran war news. What's next?

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the shifting mortgage rate environment amid a potential beginning of the end of the Iran war. The two also discuss the surprisingly strong housing demand given the macro environment.   Related to this episode:   Housing demand still growing as mortgage rates reach inflection point  https://www.housingwire.com/articles/housing-demand-still-growing-as-mortgage-rates-reach-inflection-point/  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

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

00:14crazy things going on with oil and with mortgage rates this morning. Before we dive in, I want to

00:21thank our sponsor, Trust in Will, for making this episode possible. Logan, welcome back to the

00:26podcast. You know, it's Monday morning, and in Monday morning, we've already had like three crazy

00:33headlines. Over the weekend, President Trump basically gave an ultimatum to, you know, I'm

00:40going to bomb your power plants if you don't open or move straight before moves in 48 hours.

00:47My first tweet on that was like, I don't know if this strategy works, you know, this game planning,

00:52because, you know, you play bully ball or bluffing to play bully ball at this stage where escalation

00:59gets, I mean, once you make a commitment to break out here, it becomes more problematic. So

01:04President Trump said, Hey, listen, we're going to do a five day. We'll give it a rest. And then we'll

01:10we're doing some positive talks. Iran came out and said, No, there's nobody talking. So what we saw is

01:15oil prices fell right away, 10 year yield fell right away. But as soon as Iran said, Hey, we're nobody's

01:21talking to anybody. Oil prices went up, 10 year yield went back up. And now Trump made another

01:27talk, you know, we need to get a deal. They need good PR people. I think we killed a lot

01:30of their PR people. In any case, I'm hoping this is the start of the end in this in this

01:40regard. Because again, like we talked about in the last podcast, we're past the 21st of

01:46March. This means the next move can really make things problematic. And what happened over

01:51the weekend was he threatened to bomb the power plants. Iran said, Fine, we'll bomb all the other

01:56regionals. And then this is the escalation fear. So hopefully this is the case where we start the

02:05process to find a solution to this. Because, you know, if you start doing more bigger attacks at this

02:14point, the response can be bigger. And then you get medium to long term more damage to the energy

02:20infrastructure to fertilizer prices, all these things start to and then you're running into a

02:25midterm year. It's kind of crazy that this is happening in a midterm year. So just just for my

02:33observation, I don't know. But I don't believe they thought, you know, Iran would be able to close

02:41their straighter for moves and attack their neighbors in that regard. So this is such a

02:47high velocity event. We're talking here, we're probably gonna get 27 more headlines by the time

02:52this podcast comes out tomorrow. But it is not, it's not shocking to me that things are escalating

02:58at that point. I think that's a great point. I like the way you frame this. Maybe this is the

03:02beginning of the end. Now Trump has said like, No, you have five days, let's let's not we won't shoot

03:07anything off for five days, which kind of puts it at the end. He doesn't want to royal the markets,

03:11right? So he's saying like, after the markets close on Friday, let's talk or whatever. It

03:16doesn't really work like that. And so far already this morning has been wild.

03:20So this is the playbook. Friday night, crazy news dump. You know, it's hard to do this stuff during

03:28the marketplaces because then you can get very, very wild market reactions. And again, every day that

03:34goes on is a business day lost, or, you know, a business day where input costs go up, you know,

03:40it becomes problematic. It's like chaos, like, you know, Godzilla tariffs were like this, you know,

03:47stocks were down. But, you know, the 10 year yield getting to 450 to 460 got Besson to come and

03:55try to

03:55get Trump to calm this down. So I think we had as high as maybe 445 on the 10 year

04:00yield. But in any case,

04:05hopefully this is the start of the end. And then once you get closure, it's going to take time.

04:11You know, we're not going to get oil prices right back down to 56. You're not going to get the

04:1610

04:16year yield down to 4% right away. But closure, you know, you could actually start, okay, let's,

04:24let's, let's think about what, what the economy does after this is over. But we'll see. This is a

04:29very high velocity event. And who knows, one side can make one big mistake, and it escalates even

04:37more. But clearly, now that we're many weeks into this, there is no firm ending to this process. And

04:45we're at a dangerous stage at this conflict. And hopefully, something positive will come toward the

04:53end of the week. We do hope for that. So on Friday night, when all this news broke, and this

04:57you

04:58had said Saturday, you'd said March 21. If things go beyond March 21, which was Saturday, you're like,

05:03you know, then we have to read, you have to redo your models, you have to kind of take everything

05:07else into into consideration, redo it, because the escalation, then it's gone beyond a certain point.

05:13And then that happened Friday night, where you like, wow, that was that was pretty good timing.

05:17Well, here's the thing. The two year yield, we went from pricing in two rate cuts this year,

05:24to now pricing at a possible hike. So in a short amount of time, the entire scope of the year

05:30changed. And just to give everyone an example, the White House said that if energy prices come down,

05:37everything else will follow it. That was, you know, the Trinity impact. Well,

05:40that completely flipped here. So we'll see how this ends. Again, this is, you know, who knows,

05:48get 30, 30 announcements in the next 24 hours, and nothing gets done. And this escalates. But

05:52the crazy thing throughout all this, the housing data, still positive with the weekend tracker.

06:01I don't understand. So our housing data goes through Friday. So it was pricing in. I mean,

06:07it was already looking at the things that when mortgage rates went up on this week, right? Last

06:11week? Yes. So, of course, mortgage rates are still lower on a year over year basis. We're under 6.64.

06:19Usually what occurs is when rates are above 7% and housing demand is slowed already because of higher

06:25rates. When rates break under 6.64%, remember, it's a flow of data, you're working from a lower level

06:32of sales, and then rates break down, then you move up. What's happened over the last three years is

06:36that we don't stay low enough long enough. We had that whole game plan going to the housing market

06:42shifted mid-June 2025. We were running for sales, and now rates are moving up higher. We're starting

06:49to get closer to that 6.64 and up. And what I like to do with the tracker is basically

06:55take the worst

06:56levels of the spreads in 2023, 2024, 2025, just to show people why mortgage spreads are still the

07:02unsung hero. 2023 rates would be 7.60. 2024, it'd be 7.30. 2025 would be like 7.10. But

07:11because the

07:12spreads are better, we're not above 7% already, where it would have been the case in the last three

07:18years. So hopefully that stays its course. In any case, the data, if you did not know what was

07:25happening around the world, if you didn't know oil and everything was going up, you'd be like,

07:30oh, the housing data is very stable on the tracker. Weekly pending home sales were up.

07:36Purchase application data was positive week to week, year over year. The growth rate of inventory

07:41has gone now from 33% all the way down to 5.61%. That's the lowest year over year growth.

07:46And remember,

07:47now the comps get very harder to show year over year growth as we have the seasonal increase.

07:54Places like Florida, this is something I showed over the weekend, Florida showing a clear negative

07:59year over year decline in inventory, but that was working from an elevated level where the national

08:04data wasn't. So if you didn't know, you'd be like, okay, a very stable, boring housing year.

08:13And, but every single time in the past few years, when rates get above 6.64 and head over seven,

08:22we've never been able to sustain the same type of growth. And this is what we call the flow of

08:26data.

08:27Rates go over 7%, sales slow down, rates head down to 6%, sales pick up, we don't really go anywhere.

08:33So this year, we were easily heading to growth. And as of last week, we're still positive.

08:41So we shall see if eventually, it's harder to keep that growth rate going when rates are elevated.

08:47And if they go higher, it's always been a negative thing for the housing market. So we shall see

08:53what happens because if you can just get rates down to 6.25 and under the data has predominantly been

08:59very positive. But it is, it is kind of interesting how, if you just read the tracker, you're like

09:05thinking, wow, it's just a literally a boring year in the housing data. Price cut percentages picked up

09:12a little bit, still down year over year. The growth rate of inventory is still up, but it's slowing down

09:18and weekly pending home sales are, are, are still positive. Meanwhile, I think, you know, obviously for

09:24us, we're, we're in the, looking at the news all the time, it's like 24, but also if you're running

09:28a

09:28business right now, I'm sure it doesn't feel like, oh, plain old boring, because I'm sure your

09:32borrowers and your consumers have a ton of questions and, you know, things are going up

09:37and down really fast. This is where I think people don't appreciate, you know, there was an old

09:45Republican saying that how could businesses make decisions if they don't know what the rules are

09:50or what's going on. And what the first trade war tapped ends in 2018, it was a very mild compared

09:57to

09:57what we're doing right now. And even with the corporate tax cuts that Trump got the first time,

10:03business investment went to zero that because, because nobody knew what the rules were here.

10:10You know, we don't have a lot of hiring. So when we think about hirings, business decision,

10:15like, where do you think things are going? Manufacturing jobs have been, I mean, it's very,

10:21it's, it's a slow decline, but it's been still slowing for some time. And it's just, to me, it's

10:27when you get clarity and stability, you can make choices. And now on top of everything else,

10:34we went with 15% tariffs because of the Supreme court law. And then this war happened. So it's difficult

10:40to sit there and think, what's the next move? Do I make this choice to hire? Now we're going to,

10:46the corporate, the new tax cut bill, you know, expenses, we're going to go to zero. There was

10:51all this headwind, you know, or we had leeway for, to have a positive year, but when you did 15

10:59%

10:59tariffs and now you have this war, it just, it makes things complicated on that. That's why I think

11:05it's, it's, it's amusing to me that the housing data is literally boring, slow, and that's how

11:12housing data should be. But again, the longer this goes, the more problematic and the closer

11:18we get to the midterms. So hopefully cooler heads could prevail, but it's, it's difficult with war,

11:25of course. So we got to a key level, what you thought was a key level. And then that's in

11:30the

11:30past where we've seen, um, the Trump administration reverse course, uh, happened on, um, with Godzilla

11:36tariffs. It seems to have happened in, we don't know if that's exactly why we're doing the pullback.

11:43I don't think it's so much of the 10 year yield. I think when you threaten to blow up,

11:46you know, the plants and then Iran says, Hey, listen, we're going to blow everyone else's plants.

11:51Right. Boy, I mean, hopefully that was the tip off. Okay. So it's just like, you know,

11:56you, if you commit to that, you've got to commit to more chaos and more damage. So I'm just hoping

12:04that cooler heads prevail, but again, conflict war, you know, whatever, whatever we want to define

12:13this as, uh, it's lasted longer than I would think the white house thought. And, you know,

12:18there's two sides to this, right? It can't just be Trump doing a headline and saying, okay,

12:23uh, Iran has to be willing to play ball. You get a, uh, maybe India or Turkey, somebody to come

12:29in

12:29there and be a mediator or something. But, uh, again, I don't know by the time this podcast ends,

12:36there might be another crazy headlines. It might be over. It might be accelerated. That's what

12:40happened this morning. We were on earlier and then we had to redo. Yeah. So it's just,

12:44it's just one of these things that it's chaos, right? It's 24. Jack Bauer, man.

12:51Well, Logan, thank you so much. And just for those watching who can see, so we are, uh, in person

12:56at the New Jersey Mortgage Bankers Association where you're going to be doing, I got to speak

13:01like in an hour or two. So, and I'm going to do a panel. It's going to be great. Um,

13:05and we found

13:05a quiet place. So anyway, thank you so much for being on. Hold on, hold on. Oh, we got to

13:10do our

13:10rock, paper, scissors. Okay. Oh, okay. What? There we go. Dang it. I won earlier. Okay.

13:21Thank you guys. Um, you know, just stay tuned. I know housing wire will have, you know, up to the

13:26up to date stories as you usually do for us, Logan, but thanks for jumping on and we'll talk again

13:32soon.

Category

Transcript

Comments

Recommended