- 2 weeks ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how housing data is holding up amid wild swings in oil prices that change with every headline.
Related to this episode:
Mortgage rates rise as Treasury yields hit 8-month high
https://www.housingwire.com/articles/mortgage-rates-treasury-yields/
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.
Related to this episode:
Mortgage rates rise as Treasury yields hit 8-month high
https://www.housingwire.com/articles/mortgage-rates-treasury-yields/
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.
Category
🗞
NewsTranscript
00:09Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about wartime economics
00:15in the middle of this crazy time. Before we get started, I want to thank our sponsor,
00:20Trust & Will, for making this episode possible. Logan, welcome back to the podcast, another
00:25in person because we are still at the New Jersey Mortgage Bankers Association Conference.
00:31We're leaving today, but here we are in the lobby. Why am I still a guest? Why don't you say
00:38it?
00:39It's true. It's been going on for a while, so everyone gives Sarah grief for that. I feel like
00:45I'm being entered into a room every day. Oh my gosh. No. You see what he's always like,
00:52okay. We have a lot to talk about today. I think the craziest thing is that the headlines,
00:57literally headlines, can move the market up and down within a day quite a bit. We saw this
01:01yesterday. We're seeing it already this morning. What to take away from that as far as mortgage rates?
01:07So it's really simple. You look at the 10-year yield chart, look at oil charts. They're moving
01:14in tandem to a degree. So of course, any headlines that there's something positive,
01:21things get better. It's Wednesday morning. The 10-year yield was at 432. Oil price was down. And
01:27then Iran brought a headline out saying that the ceasefire is not acceptable. 10-year yield went up.
01:34Oil prices went up. So we're in this kind of market. And this is chaotic, wartime economics out
01:39here. It's fluctuating. And this is always the concern. I mean, the trade war tap dance is one thing.
01:48But when you have the trade war tap dance and you're doing tariffs back and forth and you're
01:52threatening to do this, you can taco your way out of that. You can't really kind of taco your way
02:00out
02:00of this. So to me, it is positive in the sense that it seems like the world is now taking
02:10this
02:10seriously, that it's not so much about oil prices coming down. It's like things don't get worse.
02:15Right.
02:16Because, you know, if this continues longer and longer, you start to really see some input costs.
02:24And hopefully this is something that every country can kind of see how problematic this situation is
02:32if it continues. So it's not shocking to me that there are, you know,
02:36mediaries and trying to get this this thing done.
02:40But for now, you have to live with the chaos of headlines until you see something closed.
02:47OK, and then you get follow through action where ships are coming through.
02:52Right. Because that's the main thing.
02:56It's not so much getting oil prices back down to 50 or 60.
02:59That's not going to happen. But you've got to get things moving again or things get protractively
03:03worse out there. You could only jawbone so much.
03:07But if if companies are reducing production, if airlines are taking capacity off and going to,
03:14you know, it just it just there's a it's another wrinkle into a very headline driven kind of economy.
03:22And that's kind of the last thing you you want. Boring. Boring is a good thing.
03:27Where is boring? We have not had boring. So I guess my question to you is like in this time,
03:33like how do you decide, you know, your range for the for the 10 year yield and mortgage rates?
03:38It's like it has actually not gone up as much as it could have. It could have been worse.
03:43Well, it's time. It could have been worse because because if you had 2023 to 2025 spreads.
03:48So this is one of the reasons why I shaved half a percent off on my 2026 forecast in the
03:56past two
03:56years at seven and a quarter as the peak, but it's six point seven five for mortgage rates.
04:01So, of course, the war is is something that, you know, it's not something you forecast going into a year.
04:09But mortgage rates are still in that range.
04:12I just think it gets more problematic if escalation happens.
04:17Right. And this isn't the money going into the 10 year yield that that trade hasn't worked for years now.
04:24When you have rising inflation, PC inflation, PPI inflation.
04:29Now you put the war impact on you have a supply driven a hit.
04:34That means inflation goes up very like covid demand inflation is a whole different thing.
04:40But in this context, you have now to supply driven inflationary things going on.
04:46So we'll see how how this week and next week goes.
04:50But the talk, the clock is ticking. Yeah. Right.
04:54And, you know, by the end of this week, I think you get maybe a little bit of clarity.
05:00Is this serious or is this a delay for another attack?
05:04But it is apparent to me that the world is starting to take this more seriously because the longer this
05:11goes and the more problematic of the outlook of the straighter for moves.
05:15Do you get, you know, the pirates down south, you know, stopping the the the other passage or ship?
05:23So a lot of things going. But for housing, what has this done to the housing data so far?
05:30OK, so this is the question, right? Here we are. We've been at this this conference for mortgage bankers.
05:37These are the people on the front lines trying to, you know, get loans done, lock them in this environment.
05:43So, yes. Tell us, what does this mean for the housing market?
05:47So for the first time to me, you could see the higher rate impact, even though purchase application data was
05:54positive year over year.
05:56The week to week growth was hit. Also, the year over year growth was hit as well.
06:02So we went negative week to week, about five percent. The year over year growth is now down to five.
06:06Are you talking about purchase?
06:07Purchase application data. So that's the that's the fastest forward looking data line you can have until we get our
06:14weekly pending contracts data at the end of the week.
06:16So to me, going into the year, the whole thing was based on if mortgage rates could just stay six
06:23and a quarter and under with no volatility.
06:25We got this right. So even though rates are only like a quarter higher than that or 30 basis points
06:32higher than that,
06:34the volatility compressing because it's hard for me, again, to have mortgage rates go under five point seven, five percent
06:40with Fed policy going to neutral and inflation above target.
06:44That's very difficult. You actually need jobless claims to break or some type of recession.
06:49So we've stayed in that range for years now. We've never gone below five point seven five.
06:53But now the escalation factor is now pushing rates up half a percent higher.
07:01And the longer that goes in the sense you could see softness.
07:05So to me, this is the first week that you saw negative week to week.
07:08And we've had negative week to week data that that's not abnormal within it within a calendar year.
07:14But the growth rate on the year of year slowed down, too.
07:17So it's something to think about in the future.
07:19You can't have like sales crashing anymore because sales are such low levels.
07:24And of course, you know, starting the year around six and a quarter and just going to six and a
07:28half isn't going to going to do that.
07:30But the growth rate is is what I'm keeping an eye on because up until last week, you know, housing
07:38data was positive.
07:39You know, the weekly pending sales were positive, everything like if you did not know there was a war going
07:43on.
07:44Right. And oil and all that stuff, you're like, wow, this is a very boring year.
07:47So this is the first time I've saw softness in the data.
07:52We just take it one week at a time.
07:54But we also have to be mindful of headlines.
07:56And how how does the bond market and oil market work off of headlines?
08:01See, what I'm seeing right now is that there's no more escalation in oil prices.
08:05And the 10 year yield didn't have we had a really bad bond auction on the two year yield.
08:11Ten year old got to four forty five and everything.
08:13And then all of a sudden, 45 minutes after that, we're like, OK, let's get a ceasefire coin.
08:19So I joke that the bond market is king.
08:21You know, you get a bad auction going on here.
08:23You know, they need to calm things down.
08:25So keep an eye.
08:26It's it's I mean, it's not people's jobs to look at 10 year yield and oil and headlines.
08:31But until we get closure and we get an opening and ships are able to go, we just have to
08:38deal with this volatility.
08:39I think that thing that you look at, the thing that strikes me is just the seasonality.
08:44Like if this is not a good time in the housing market to have this kind of volatility, have this
08:49happen in like October, November, you know, but we're in the in the right in the middle of that spring
08:54home buying season.
08:55And we don't want to see anything squash that because this was going to be the best spring we've had
09:00in years.
09:01You know, going into this going into the spring that, you know, the forward looking demand still was positive.
09:07The weeklies I take the holidays and the snow out of the equation looked fine.
09:14You know, in the past, rates tend to fall toward the end of the year and the forward looking data
09:21tends to get better at that point.
09:23So we still have our best sales reports kind of in winter in the past few years, even going back
09:30to in the last decade.
09:32So you always need to keep an eye on the forward looking data, whether seasonality is here or not.
09:38But the setup was really good, you know, under six and a quarter and no volatility.
09:44You couldn't have asked for a better thing because the housing market is different than it was a few years
09:48ago because inventory is up, price growth slowed down.
09:52And then because of that, price growth slowing down, affordability got a little bit better on its own.
09:59Then you add lower rates into the equation.
10:01There you go.
10:02You know, that in itself is a positive into this year.
10:05That's why I was really excited.
10:06But now nothing's normal.
10:08So you just got to deal.
10:10You got to deal with this situation.
10:12But clearly, hopefully everybody could see these headlines are moving oil and the 10-year yield.
10:16Of course, oil went from 56 to like 100.
10:20The 10-year yield went from, you know, sub 4% up to now, I think the last thing I
10:26checked is 434.
10:27So it's not a one-to-one, but you could see energy, oil, inflation is moving here because this is
10:34wartime economics.
10:35And this is now supply-driven.
10:38Lack of supply is very, very inflationary.
10:41COVID showed us that as well.
10:43But if you go to other wars where you have a restricted supply, you know, World War I, World War
10:48II, price control, stuff like this, the world needs to get this going again.
10:53You know, I think that's what I've seen this week is that people are taking this seriously.
10:59And it's not so much about getting oil prices back down.
11:02It's making sure things don't get worse.
11:04So, you know, obviously, war, inflationary.
11:07But at some point, if it hits the economy, especially when you look at, like, we didn't have any job
11:11growth in 2025, right?
11:13At what point does it become recessionary or we go into a recession, which would be, although we don't want
11:19a recession, it would be good for mortgage rates?
11:21We have never had an authentic recession after 2010 outside of COVID because the U.S. balance sheets are much
11:29better than what people talk about.
11:32We had higher oil prices from 2011 to 2015 with weaker balance sheets back then and a softer labor market.
11:40It took a while to get all the jobs back after the great financial recession, and we held it.
11:45So speaking as somebody who looks at this, demand destruction takes time, and we don't have good data that show
11:55energy prices here doing that.
11:57That's the concern I have for the 10-year yield.
12:00It can stay elevated with inflationary pressures because it might take some time to see the weakness in the data
12:07lines.
12:07And, again, if we wait months to wait for the data, that means the war is still going on.
12:13Right.
12:14And then we're past the time of, you know, it could get protractively worse.
12:18So I know the theory that, okay, so oil shock, inflationary, it's going to put us into a recession.
12:25We've been able to handle oil prices and diesel prices here.
12:28It's just that now I think the world is taking this seriously.
12:32They just don't want things to get worse.
12:33So an unfortunate reality of this year, I thought it just in the housing sense, but just something to keep
12:40an eye on.
12:41And, you know, if we do get closure and we can get the straight home moves, how does the bond
12:46market react to that?
12:47The spreads get a little bit better, and we'll take it from there.
12:52From your perspective, given everything that's happened, rate cut or rate hike this year?
12:56There is no rate cuts at all while this goes on.
13:01There will not be a rate cut.
13:03Inflation is above target, and now you did a supply shock.
13:06So the Fed is not going to – the Fed will only talk about a rate cut if jobless claims
13:10break at this point.
13:13If inflation was running near 2%, it's a whole different story.
13:16But before this war took off, PC inflation was above target, PPI inflation was above target, and we went to
13:2315% tariffs, which was higher than the levels that we were collecting, and then this happened.
13:30The Fed's not going to talk about rate cuts in this environment.
13:33Now, if you get the war over with, right, you get oil prices back down.
13:38If things are starting to work, you know, they can loosen up.
13:41But this is a – it's a very complicated situation because the U.S. has been able to handle a
13:48lot of shocks in the last few years.
13:51But this war, if it keeps on protracting, becomes more of an economic problem, and it becomes more of a
13:56rate issue if oil prices stay elevated, inflation stays elevated, and diesel prices and nitrate.
14:03All these things, all these input costs start to increase, and then airline fares have to go up and all
14:08this stuff.
14:09So it's – you know, the White House talked about if energy prices fall, everything else will come down with
14:15it.
14:16That was a theory.
14:17Some people could question that.
14:18But in any case, that's gone now, right?
14:20So we lost one of the big trinity effects now, and now rates are rising on it.
14:26So the two things, two of the three things that I thought the White House needed to make this work
14:31are now going against them.
14:34Interesting.
14:34I think the other thing about this particular conflict or war, whatever you want to call it, is that we
14:39have, you know, Iran coming out.
14:41Their headlines are moving things too.
14:43So it's not just like in a – maybe in a more – I don't want to say a normal
14:46war, but like in previous conflicts that we've had where it's like, okay,
14:50you would not have like the back and forth on social media from both of these sides.
14:55You mean World War II didn't have a Twitter account, you know, and we're going back and forth.
14:59But even like the Gulf War, even the war in Afghanistan is like, you know, yes, you would have things
15:05happen.
15:05But here it's like literally something happens, 45 minutes later, someone else comes out with something, 45 minutes later.
15:12It's crazy.
15:13This is why one of the things I stress is less volatility is a good thing, and we had that
15:19earlier this year.
15:19We did have that.
15:20But for what it's worth, mortgage rates are not above 7%, you know, and to me that you want to
15:28keep an eye on the markets.
15:29If they really think things are coming to an end, people are here to make money on the bond market
15:36side and the oil side,
15:37so they don't want to be caught off guard.
15:40So we'll see.
15:41We've got to take this one day at a time.
15:43And, again, I thought we're past the point of like, okay, this is not a short-term thing anymore,
15:47and it looks like everyone wants to get things back to normal.
15:51At least the world does.
15:52There's more countries concerned that we're not getting any traction on ending this war.
15:59So, Logan, thanks for being on and just walking us through this.
16:04I feel like you're doing it minute by minute.
16:06You get on Instagram.
16:08You talk about it.
16:08You've been writing stories for us.
16:10We're doing this podcast.
16:11So you guys keep listening in.
16:13And, boy, what a setup for the gathering.
16:17I hope I don't have to talk about this at the gathering.
16:20So the gathering is at the end of April, and, you know, we have all the top executives of real
16:26estate and mortgage there,
16:27and I really do not want to do a wartime economics housing outlook for the rest of the year on
16:32that.
16:32So hopefully something can get done before that.
16:35Everyone, cross your fingers.
16:37We all need to cross our fingers.
16:38This gets done quick.
16:39But if you're planning on going to the gathering and you've been thinking about it, go ahead and lock that
16:43in.
16:44Prices are about to go up.
16:46That is a very hot ticket.
16:48We know we're going to sell out.
16:50So go ahead and pull the trigger there so we can get all the best up-to-date information.
16:56It's called a trigger.
16:57Oh, my gosh.
16:58Yeah, okay, no, not good.
17:01Go ahead and make that decision.
17:04No, not trying to do that, man.
17:06At least you didn't say press the button.
17:07Oh, my gosh.
17:08There you go.
17:09Okay, see, I'm not trying to do that.
17:11All right, Logan, whatever.
17:13Sign up.
17:14And, Logan, thank you.
17:15Pleasure.
Comments