Does the ceasefire give housing room to grow?

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how the ceasefire is affecting macro and housing data, including the 10-year yield and mortgage rates. The two also discuss purchase apps and how the Federal Reserve is interpreting the jobs and inflation data.   Related to this episode:   Compare Current Mortgage Rates - HousingWire  https://www.housingwire.com/mortgage-rates/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q   To learn more about Total Expert visit totalexpert.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

00:11welcome everyone my guest today is lead analyst logan modashami to talk about purchase apps

00:16inflation what the fed might do next even in the midst of some other crazy iran war headlines

00:22before we dive in i want to say thank you to our sponsor total expert for making this episode

00:27possible logan welcome back to the podcast it is wonderful to be here we technically have maybe a

00:36ceasefire maybe i don't know yet but uh um definitely the the worst case scenario of

00:42tuesday night uh didn't occur so here we are today this morning with oil down and the 10-year yield

00:49down but we shall see yes absolutely i was gonna say okay we have averted disaster or at least that

00:55particular disaster um although you know there was a ceasefire announced and then there really

01:00wasn't a ceasefire and uh right before we came on i saw of course we're doing this on uh wednesday

01:06about midday that the ceasefire is officially over but these things change pretty quickly so it's hard

01:13to say what's happening but i did want to check in with you on like so far how how is

01:18the 10-year

01:19yield reacting to this chain of events so yesterday the 10-year yield got us high on tuesday about 438

01:27so we never actually went back and tested that double top that we talked about in the podcast

01:33in the previous week about you know 446 448 so as the day progressed and pakistan got involved and you

01:43know talks oil fell 10-year yield fell and then the announcement came overnight 10-year yield went as

01:50high as 438 came all the way down to 424 which is we're in the bowl we're under 429 we're

01:57in the bowl

01:58that's what you you want you want to be okay what does the bowl mean the bowl is from september

02:03all the

02:03way until the war started the 10-year yield has been in a low level channel and i call it

02:09the bowl because

02:10we don't really leave it we don't go above it or don't go underneath it except as the war progressed

02:16we got over 430 eventually when you got to the second or third week and uh got as high as

02:24448 but

02:24then kind of that was it the bond market was trying to get ahead of this supposedly ceasefire um in

02:31any

02:32case oil prices got as high as like 117 so the 10-year yield didn't follow along with higher oil

02:39prices

02:40something we've talked about here is that there was a divergence two fridays ago that divergence

02:45stayed in place but in the morning as there was more bombs being in lebanon and all this stuff the

02:5010-year yield bounced up from 424 up to 429 it's thursday morning so who knows where we're at who

02:56knows what will happen on wednesday night but um the worst case scenario was taken off and i think that's

03:05what everybody was just okay whatever whatever the ceasefire whatever it is the worst that had

03:10happened and uh it looks like all parties somewhat kind of understand that if they take it to this

03:17next level it's it's it's it's tough to get out of that anytime soon so interesting because um you

03:25know even a couple weeks ago you were talking about how you saw the divergence between oil and the 10

03:31-year

03:31yield which thank goodness right because the 10-year-old went up a little bit but you know it

03:35wasn't like following oil up in the same sort of fashion and then we saw that again overnight correct

03:40yeah i mean they both kind of moved down together but the 10-year-old never got back up to

03:45the yearly

03:45highs as oil prices broke to yearly highs so that divergence stayed in place and and you know i do

03:52these

03:53like instagram lives just because you you just want to you just i'm so nerdy i want to show people

03:58these things in the charts and um i think one of the confusing things for a lot of people is

04:04that

04:04you know uh we we we got the eight percent plus crowd again because they say oil prices are shooting

04:11up higher so one of the things i've done and i encourage everyone if you're if you really want to

04:15nerd out go look at oil prices like the last 30 years we had higher oil prices from 2011 to

04:232014

04:25elevated with duration but mortgage rates were like three and a half to 4.75 the entire time

04:31during that period of time so it doesn't what what happens with oil does not necessarily mean

04:38mortgage rates have to be at x amount uh 65 to 75 percent of all of this the slow dance

04:47that we do

04:47with the 10-year yield and 30-year mortgage rates and then we add the spreads to it is fed

04:52policy

04:52so there's a lot of rate cuts in the system and because there's a lot of rate cuts in the

04:57system

04:57and there wasn't any real talk about hiking rates

05:03policy is where you know i mean i mean i thought rates could possibly go higher early in the year

05:10because the labor data was going to beat and inflation was above expectation so we've had these

05:14you know two real positive reports and one negative reports but considering everything that is as crazy

05:21as this sounds the 10-year yield looks kind of correct to me uh and mortgage rates never got

05:30above 6.64 percent they've stayed majority of the year under 65 a good portion of the year before i

05:37mean

05:37the entire portion of the year before the war started under six and a quarter so the question is

05:41can we just get back into the bowl and get spreads a little bit better and then take it from

05:47there but

05:48again we have a very high velocity event um with certain characters that are running the show so

05:56we'll we'll we'll see uh if this can work but i the one thing that i'm glad about is that

06:03i think

06:03everyone understood what the next stage of this could have been and you don't want that next stage

06:10because you know if you're starting to blow up infrastructure energy and then everyone else gets

06:16involved in it it it it can be a very long time until things get back to normal and um

06:23i don't care

06:24who's who got who to talk or what ceasefire that the worst case for now is is off the table

06:31so the 10-year

06:32yield that last i checked was like 428 429 uh we got up to 431 before even the war started

06:40so

06:40we're gonna hopefully if this ends and we can get things going again we can go back to the

06:45economics of the 10-year yield and mortgage rates and the fed policy and what the fed thinks

06:50that's that's where we would rather be it's funny because i'm i'm recording from our studio in our

06:56um housing our headquarters uh in dallas and i'm sitting in front of a framed copy of the very first

07:02magazine that housing wire ever put out september october 2008 and on the cover along with distressed

07:09mortgages is oil and mortgage the connection and i was like wow 2008 we were talking about totally

07:15different conversation today yeah well back then we we had a actually oil prices were uh uh higher

07:22during that spike uh back then and you know adjusted to inflation and wages it was a it was a

07:28heavier hit

07:29but you know you had the you had the credit markets breaking before the oil shock you had that in

07:352008 and

07:36you also had that in the gulf war where the credit markets were getting weaker and weaker

07:40uh um here uh you have private credit but that's not that's not you know spawning itself out to uh

07:47general credit out there and you know you look at some of the weekly uh retail sales data it actually

07:53held

07:53up pretty good uh uh so uh the economy i mean think about everything this economy has had to go

08:01through

08:01after 2011 all the way to 2026 and if it wasn't for covid we would still be in the longest

08:08economic

08:09and job expansion in history and every american bear in america i don't we don't care about the

08:15russians or the chinese or the iranians because they're bearish all the time but every american bear

08:20from 2011 all the way to 26 still got it wrong uh um the economy's taking a lot of shocks

08:26it's held up

08:27uh not just uh massive rate hikes oil shocks uh covid you know so it's still kind of still intact

08:35uh um and i think that's hopefully we could just get back to that story and not have these high

08:41velocity variable events that we don't really have any control over you don't know what's going to

08:46happen next okay well let's talk about some of those housing economic factors we would rather be

08:52focusing on um let's start with purchase apps so purchase application data for the first time this

08:57year was negative year over year now we had a you know very hard comp last year at this time

09:02we saw a

09:03big spike in purchase apps so we had positive week-to-week data but down year over year um if

09:08you smooth it out it looks like it's just slightly higher than last year uh if you take the trend

09:13so

09:14nothing too dramatic is like the uh tracker data where we saw week-to-week growth but a slight

09:20decline year over year but since rates got above six and a quarter headed towards 6.64 percent um we

09:26went from 12 percent purchase application data growth year over year five one to negative seven

09:31so the growth trend slowed down um week-to-week data uh uh held up and now rates are a

09:39little bit lower

09:39than than what we saw so hopefully getting back into that bowl because housing data looks a lot better

09:46when we're below uh 429 on the 10-year yield but the the sweet spot it was always six and

09:52a quarter

09:52and under and the forecast for 2026 was that if we could stay six and a quarter and under we

09:58get 237

09:59more uh 207 237 000 more existing home sales that would be the trend that we've seen and for the

10:07most

10:07part we were under six and a quarter and you could see what happened the growth rate really slowed down

10:13when rates started to get back up to 6.64 but unlike the previous years where we saw a lot

10:20of negative

10:20data because rates get above seven percent that hasn't happened so who do we want to give a hug to

10:25sarah a mortgage spread a mortgage spread because mortgage spreads if they weren't back near the levels

10:34that we saw then we we wouldn't have this conversation rates would be over seven percent already

10:40uh so thankfully that's the case and this is one of the reasons why i've made this a huge talking

10:45point of mine uh and now we go kind of like we're going to get inflation data thursday when this

10:51podcast comes out so what does the fed do now like what's what's their mindset if the ceasefire holds

10:59i mean there's so many more variables than i think about what the fed is usually looking at maybe

11:04that's naive of me right we've had wars before all that kind of stuff but i think it's the nature

11:09of

11:09how fast things change right now on that global level and how that could affect the markets and

11:15i'm like how do you balance that if you're them what what do you think their move is so i'm

11:20going to

11:20tell you what nick tamaris of the wall street journal did wednesday morning uh because he's kind of the

11:25mouthpiece of the fed on one hand if the ceasefire is good and oil prices don't elevate and we you

11:33know

11:33the fear of demand destruction kind of goes away but then you know you kind of had before the war

11:41started pce inflation was above three percent ppi inflation was near four percent and the jobs data

11:48got better now when i say the jobs data got better that's the federal reserve telling nick tamaris to tell

11:56everybody in the country including bond traders because that's who they want to talk to

12:00that the jobs data got better so logan was always right about us it's jobless claims that matters

12:07right because we don't care if there's 3 000 job growth it's not going negative so we're okay with

12:13it um so when nick tamaris said that that to me reaffirmed my belief because we talked about in the

12:20previous podcast that the federal reserve is completely fine if job growth is above 30 000 because of their run

12:27rate and population growth and you know so much of the labor force growth falling back down to 1977

12:32is really just elderly people it's not so much uh um tech people losing their jobs to ai you know

12:39jet klucko had a good chart on that that you know it's the baby boomers especially in the 60s that

12:44are

12:44leaving the workforce that are pushing that 55 and over labor force participation rates fall down which

12:49looks looks normal in that sense um so whatever any of us thinks about the labor market or what the

12:56fed

12:56should do they are basically telling you hey listen if jobless claims don't rise we think you know

13:04rate cuts are looking a little bit iffy you know there was only like two rate cuts really priced in

13:09for 2026 uh anyway we're closer to the end of this rate cut cycle so uh it becomes a little

13:17bit more

13:17interesting because oil prices are at 94 still uh and diesel prices are going to input costs and

13:23everything's going to go up so we took months out of the equation right before before this this is why

13:30the whole this episode in an election year just i will not understand the advantage disadvantage

13:38it takes time to get everything kind of going back in but so a few few months of input costs

13:45being

13:45elevated especially diesel prices i'm glad that a lot of people understand diesel prices really matter

13:50for transportation of food and food costs and input costs so hopefully hopefully we did some big

13:56hope if the ceasefire holds and then there's progress going down in future then we can just

14:00kind of get back but uh we can get back to the labor over the inflation argument and i was

14:06gonna say

14:06you're gonna have to get out your mug that says labor labor and the federal reserve seems okay

14:12okay okay with 30 000 plus jobs i mean we're averaging kind of you know uh uh 60 000 plus

14:19but

14:19that i think i think the the fed is telling people hey listen this is where we're okay with this

14:26so

14:26don't don't start you know pounding down rate cuts happening and then you know whenever kevin

14:31warsh comes into play whenever he gets confirmed and you know then we can go into a whole nother

14:37discussion about there's going to be a huge fight between federal federal reserve people between

14:41the hawks and the doves we'll cross that bridge when we get there but for now i thought that was

14:47very noticeable that nick tamiris came out in the morning and said hey guys listen inflation was above

14:52target and the jobs data is not getting worse the jobs data has to get significantly worse for us to

14:58change and all we are talking about is getting to neutral policy neutral not a commentative

15:05commentative is a whole different story 10-year yield can go down and a lot of stuff can happen

15:09if they start saying we are done with neutral policy we want to be a comment but they have

15:14never ever talked about that once so we shouldn't really think about going there until jobless claims breaks

15:22till the jobless claims so uh next week speaking of kevin warsh he is scheduled to uh to have his

15:28uh

15:29time before congress right i would i would love to see the prediction markets on whether he's actually

15:35uh whether that's gonna hold or that gets pushed because i don't see that going well for him if he

15:40did

15:41that since you have senators who are like listen we're not gonna vote yes on him unless they get this

15:45other um you know federal reserve lawsuit settled all that kind of stuff so interesting and i know you would

15:52probably say like kevin don't come don't go they cannot have kevin warsh in public i mean seriously

15:59has anybody seen kevin warsh nobody has seen kevin warsh alive since the war started so and i agree

16:07with that i would lock him up in a cabin in the middle of nowhere and you know not let

16:12anybody get

16:13close to him so um i understand that i you cannot have kevin come out in congress during this and

16:20talk

16:21about because he would have to be hawkish that's the that's the kevin we know on commodities and

16:26input inflation so but here we are it's april okay we're now officially in april and fed chair uh

16:33powell's uh term ends as fed chair in in may it's like i said before i think he stays longer

16:40than people

16:41think because you know trump likes you know somebody to punch and as long as powell's there he could just

16:48keep on saying we could cut interest rate because what is he going to do with warsh warsh isn't going

16:52to

16:52cut interest rates day one so what's going to happen he's going to start bashing warsh you know so

16:58keeping powell in there you could do those tweets and go too late powell major rate cuts we should have

17:05the lowest uh interest rates in the world you know stuff like that if he puts kevin there he can't

17:10do that

17:11anymore so you know as long as this war goes on this extended out i mean the whole lawsuit is

17:16this

17:16you know it was i don't know i don't know who convinced who that that was a game plan but

17:21in

17:21any case i feel powell could stay longer you know people used to go higher for longer fed chairman powell

17:28could be fed chair for longer as long as this you know war and oil prices are elevated uh i

17:36wouldn't

17:36be surprised i mean i would be surprised if if kevin war shows up in april uh out there but

17:42i i know

17:43trump wants him in there but you know it's easier to bash on powell until kevin gets in and then

17:50you know

17:50what's he going to do he can't cut rates unilater that's not how the fed works and they don't have

17:55enough votes right they don't have enough people you know all they have is myron and and christopher

18:01waller might be and michelle bowman but there's just not enough so it's going to be very interesting for

18:05the first time in my lifetime you have the civil war that we brought up with the federal reserve

18:10uh uh last year and in late 2020 now you you get to see how a real civil war kind

18:17of look between hawks

18:18and doves and and a new fed chairman but we will cross that bridge whenever it happens but today

18:23you know ceasefire for now just kind of take that as a victory and and uh uh hopefully it could

18:32stick

18:33and then we could just move on from this and hopefully we learn how it's not the easiest thing

18:38to you know uh uh get accomplished in there there's there's a reason why we've not attempted to try to

18:45do this the straighter four moves is is very key for oil flow and uh uh it just it just

18:52threw another

18:52crazy wrinkle in a crazy year so far and uh um we are our job is to talk about it

18:59every single day

18:59what matters to everyone listening about the 10-year yield mortgage rates inflation because that's all

19:03the 10-year yield and spreads really is the most important thing for everyone out there uh so you

19:09can do the supply and demand equilibrium inventory growth has slowed down this year there's not really

19:14much too much going on new listings data nothing you know great but boy that 10-year yield and spreads

19:19that's that's the story and uh this uh this conflict definitely threw a uh wrench into a lot of things

19:27logan thank you so much for uh coming on talking about the latest and also what you're looking for

19:33um on that longer term appreciate you as always pleasure whaler it's been a crazy first few months god

19:40we still got a lot more to go so can't wait for it can't wait and everyone needs to join

19:44us at the

19:45gathering so they can see you in person they can see us do a um a version of this live

19:51they can ask us

19:52questions logan thank you so much we'll talk again soon

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