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On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about what’s happening at the Fed and what it means for mortgage rates.
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Related to this episode:
Compare Current Mortgage Rates - HousingWire
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HousingWire | YouTube
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More info about HousingWire
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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
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NewsTranscript
00:09welcome everyone my guest today is lead analyst logan modashami to give us an update on what's
00:14happening at the fed some very interesting things and how that might affect mortgage rates before
00:19we dive in i want to say thank you to our sponsor total expert for making this episode possible
00:25logan welcome back to the podcast it is wonderful to be here um another crazy week but as of this
00:32morning the 10-year yield is 4.27 we're back underneath the bowl so whenever we get under
00:39kind of 431 we're in that little bowl pattern that we were you know end of august early september all
00:46the way until the war broke us out oil prices are down there's a little bit of talk and then
00:52maybe
00:52somebody could get a deal going on and then all this fed news came out today where kevin warsh is
01:00going to be doing his uh uh um getting on congress and trying to get approved uh scott besson came
01:08on
01:08and said hey maybe the fed shouldn't cut rates while the iran uh conflict is going on and austin goolsby
01:15the head of the chicago fed is like hey listen there's gonna be no rate cuts if uh uh uh
01:21inflation
01:22keeps on uh uh staying up here he was mostly talking about the war too so is it are are
01:29the
01:29rate cuts completely out of the question because we're getting kevin warsh i know trump's gonna
01:34want warsh to cut right away that's into saying let's just wait a little bit and goolsby is hey
01:40maybe no rate cuts if this continues so it seems like besant is giving a cover for warsh right so
01:47let's first talk about the fact that warsh is not a shoe-in because um you've had several senators
01:52including so uh senator tillis who said he will not vote for uh warsh to you know join the fed
02:00as
02:00the chairman if they're still investigating if the doj is still investigating the federal reserve and
02:06powell and so far that's still going on even though they could drop it they don't want to drop it
02:10they've been ruled against it so first thing is we don't know if kevin warsh is going to get um
02:15confirmed but even if he does is this besant giving cover to be like we understand that he's not going
02:22to be able to come in and cut rates so this morning the ppi inflation data was running at four
02:31percent
02:31you know um pc inflation is above trend uh if this is old kevin warsh oh lord he is hiking
02:41rates
02:41you know uh immediately but this is new kevin right kevin 2.0
02:48trump's boy and i i think with commodity inflation up um i think it'd be hard for him to
02:57maybe cut rates the first time or not of course he can't cut rates unilaterally but he can't really
03:03talk uh uh a dovish uh scott might have scott besant might have just given a little bit of
03:10clear way but to me i think what the white house what we call the summer camp rule where you
03:16get
03:16everybody on page is like well let's wait until the oil shock is over and then we'll go back to
03:23what
03:23it was maybe two maybe three rate cuts into the system so scott might have been giving some cover
03:30to kevin to just wait a little bit but you know kevin really can't do it by himself anyway but
03:38it
03:38looks like they kind of understand that the inflation data is is is not getting back to two percent and
03:45the war is is impacting some stuff but maybe down the line when it's all done you could maybe get
03:51those
03:51two final rate cuts maybe three uh uh all together later down the road because i i just imagine that
04:00they never thought this would last this long in the Iranian conflict so uh this is where we're at but
04:06the you know the question is uh uh i mean what what would it take for them to get rate
04:11cuts and what
04:12would it take for them to not have well let's let's dive in there because of course if you're in
04:15housing
04:16you're like please give me some idea of if this is just off the table for the rest of the
04:21year so for
04:22me as always whenever the 10-year yield is near four percent or under we're pricing in neutral policy
04:30so the rate cuts are already priced in there uh it's when you get the you know the divergence and
04:36i
04:37think that's like the confusing thing right now is that the 10-year yield is at 427 but inflation is
04:42like
04:42you know uh uh heading up and now you have an oil shock you know so some people why why
04:48isn't the
04:4910-year yield at five percent why don't we have eight percent mortgages well fed policy is trying
04:54to get to neutral so they're not talking about hiking rates um but because they're trying to get
05:00to neutral just kind of think about this four to 380 on the 10-year yield that's neutral policy
05:06anything below 380 it's something's gone wrong with neutral policy or the labor market's breaking
05:15so i think the question is now is if this is the white house's agenda to say okay okay okay
05:21we'll cry uncle on the rate cuts happening right away but once the oil shock is over
05:27you know hey listen it's transitory it's funny to think of them saying that and then the growth rate
05:36of inflation should come back down like the federal reserves talked about the the tariffs
05:40one price offs now the the counter to this is that trump wants 15 tariff collection this is higher
05:47than what he had last year and we're clearly seeing goods pricing pick up with you know lower tariff
05:53collection but i think that's that's where they're going to just maybe get the last two rate cuts in
05:59of course trump's not going to get his you know fed funds rate down to one percent and
06:03kevin warsh can't unilaterally cut but they're trying to create a pathway i think to maybe get
06:09two rate cuts or just talk the market down so the 10-year yield doesn't go off on them because
06:15the one
06:15time where they blinked was last year when the 10-year yield was at 450 to 460 we quite didn't
06:22get
06:22there this year we're at 448 uh after the the war started but i to me that's their best case
06:30scenario
06:30that oil goes down everything goes down and you know the disinflation happens and the tariffs will
06:36run off and we can get those two rate cuts left in the system and the labor market will still
06:41be intact
06:42and we we take it from there so we're in april we're mid-april um i think there's still what
06:4810
06:48days left before the blockade you know there's some there's some period of time before like okay that's
06:53going to come to a head then we have to you know negotiate what's next and then it's like and
06:58then
06:59things start to get through so you know best case scenario we're still looking at a couple of months
07:04of just disruption at this level right even with disruption this is crazy to say this but the 10-year
07:12yield was higher earlier in the year with no war okay so i think that's that's where it's confusing
07:20some people because we are lower now with inflation picking up and oil up so i i get that confusion
07:29just
07:29remember they are trying they want the fed to guide lower uh to get those last two rate cuts and
07:37really
07:38that's all all that's left but we just have to always remember it is very hard to get mortgage rates
07:44under 5.75 unless the labor market's broken or they talk about more rate cuts or maybe going
07:50off a neutral policy so so this is as good as anyone could hope for uh on the mortgage rate
07:57side of the
07:58equation so i think that's that's what you know the white house wants is to maybe get those final
08:05few rate cuts and that's it where the fed hawks say no no no no no we don't want any
08:11rate cuts
08:12in 2026 while this is going on and once the war is over we better see some disinflation
08:18happening uh from certain levels and then maybe we could get kind of the two rate cuts in
08:24now you have to now you have to get into a back and forth fight well the hawks were saying
08:29well
08:29we cut more than we wanted to because the labor market's breaking well the labor adp data was
08:35you know beat estimates 30 000 plus jobs this federal reserve group is hey we're all good
08:41you know we're good with just 30 000 plus jobs being created because the labor market isn't
08:47breaking so i think the hawks are trying to to like not go to that next level of let's raise
08:53rates but
08:53they want the threat out there you know they want people to not have conditions get easier uh uh uh
09:01and
09:01have inflation being embedded because it is it is kind of noticeable we have like you know ppi inflation
09:08take it off pce inflation take it off now oil and we have the 10-year yield lower as of
09:14this morning
09:15than what it was earlier in the year so i get that confusion just kind of remember 65 to 75
09:22percent of
09:23where the 10-year yield and mortgage rates can range is still fed policy the fed has kind of said
09:28uh we'll
09:28wait on those rate cuts i think the white house wants those last two or three and then that's that's
09:34it
09:34for the uh cycle and then we'll take it from there so one of the things that happened early this
09:39year
09:39that you saw as a defensive move was when um the president directed fannie and freddie to buy
09:45mortgage-backed securities that helped our uh mortgage spreads that kept rates low even as all
09:52this ground is there any more of that coming that could be a quick way to do something yeah so
09:57i remember
09:57last year we talked about this that we said you know if i was the white house i would just
10:03have
10:03freddie and fannie not go public not going to go public in november you can't do this if you're public
10:11authorize them to buy mortgage-backed securities i mean they have the money there to do it it isn't
10:17it isn't going to be anything magnanimous or anything they were buying mortgage-backed securities last
10:23year and they're doing it this year the the talk of the purchase actually pushed traders traders
10:30always overreact but they pushed they pushed uh spreads to get almost back literally to the
10:36to to the normal levels so there's i i don't i don't know if there's another trick up their sleeves
10:44i mean there are things that could be done to maybe get some mortgage-backed securities uh purchases
10:48but however let's let's be realistic here that story is mostly done right we are we are basically
10:57almost back to normal already so uh that's why i like to show those things on the tracker reports where
11:03how much improvements we've made so we can get a little bit 25 basis points maybe 40 40 basis points
11:09lower uh out there but that that story's kind of over there's there's limits to what freddie and fannie can
11:15do uh out there but they have not become publicly traded companies yet it is april 2026 and it it
11:24would
11:25seem that they do they have a lot of other things on their plate that that is not on the
11:29table in any
11:30meaningful way right now do you really want to push the the buttons now right i i'm not a fan
11:36of freddie
11:36fannie uh getting out of conservatorship i i never uh have been but uh the white house for its
11:46credit decided not to go there and decided to purchase mortgage-backed securities so whoever was
11:51listening to the podcast last year wasn't that long after the podcast that they started buying
11:56you know uh uh that helped a little bit of course early on in the year i mean rates rates
12:02went lower
12:03earlier than that i thought they would be because if you look at the jobs data and what when i
12:07say
12:08the jobs data is improving i'm only talking about this in in in the mindset that the federal reserve
12:13are writing dissertation papers and telling you uh just 30 000 plus jobs is fine uh out here so
12:20it's a complicated story but i think the white house has their game plan and i thought what scott did
12:26was to try to give some cover like you said uh uh with with kevin until this until this uh
12:33war is over
12:33once oil goes down hey they're gonna go full blitz on getting more rate cuts it's i think they realize
12:40it's a little bit more difficult to do it now when goods and inflation is up and and and ppi
12:46inflation
12:47is up remember cpi inflation is so much shelter so you know it's lower than the pce data but that's
12:54that's
12:55the game plan for the second half and then the hawks are just trying to hey we're not we don't
12:59want to
12:59do any rate cuts until this is over with so uh you have a good back and forth uh kind
13:03of a good civil
13:04war now but you're going to probably have it without powell so i am surprised that you know april 21st
13:10i
13:10think they're going to have they're going to start that process but i think trump wants to get him in
13:15there uh and just like just go with it i mean at some point you're going to have to pull
13:20the trigger
13:21with kevin or you just want powell to be your punching bag for the rest of the year but
13:27uh a very interesting day very very interesting day sarah with with what was said today by besant
13:33and goolsby and kevin warsh now you know that process is starting but it doesn't seem like um
13:39okay you get warsh in there and no one should expect that to be like i mean whether it's warsh
13:44or powell
13:45some things are not going to change for the next three or four months well i think one thing kevin
13:50will do is kevin is going to talk more dovish than powell okay so kevin kevin did bring up the
13:58housing
13:58uh component into it now of course for me it was it was a little bit different the the take
14:04i had last
14:04year is that you know michelle bowman said oh home prices are are falling i'm concerned the federal
14:11reserve that's not their dual mandate right if you want to say housing construction is falling and we
14:18want to get production going or hypothetically speaking if i was an an agent representing kevin
14:26warsh and trump i would say the ai disinflation is happening but what is one sector that does not
14:33cannot be impacted by ai is construction so we need to get you know we want to have more employment
14:39we need to have more people uh building more homes you look at the multi-family permits you look at
14:44housing property they're not really going anywhere so if you wanted to make that case you know for it
14:51uh that would be a little bit more reasonable than saying well you know home prices are falling in this
14:58one city in florida like the feds shouldn't care at all right and that was a that was a big
15:03talking
15:03point last year we did that podcast where a lot of people said home prices are falling the
15:08unemployment rate is rising the fed is behind the curve i was like no that's not what the that's not
15:14that's not what's happening the national home prices are not falling and the unemployment rate
15:19if you want to make a jobs argument make it but the fed did it they were like oh the
15:24labor force growth so
15:26we're here um and i think it's we we could finally say this there's going to be conflict
15:32conflict and war within the fed like we've never seen because i think what what what the white house
15:38is doing is prepping everybody for trying to get those rate cuts pushed after the war is over but
15:45realizing it's very difficult to do it now very difficult is there any other economic reports or
15:50political reports you're looking at for the rest of this week it's only tuesday i mean to me it's
15:55consumption what is the one thing that higher oil prices can do people can consume less right because
16:03more disposable income now we've been able to and i encourage everyone if you really want to nerd out
16:08if you go look at oil prices after 2010 we've had elevated oil prices before right so i think the
16:16the
16:16stock market's up the 10-year yield is down people are like what's wrong oil prices are are but this
16:22is a
16:23conflict this is you know similar to what when russia invaded uh ukraine but you know because of
16:28ukraine's wheat production you know wheat prices really took off back then not so much now i i want
16:34to see not so much sediment i think the consumer sentiment is the lowest levels ever but you know i
16:39you want to discount that how much bite does this take right and do you see this in the service
16:47sector
16:48uh consumption data because in general we've been able to handle this like the we have elevated prices
16:54oil prices for like four years in the last decade with a labor market not recovering and lower wage
17:00growth so it's a little bit different now but i i i i think that the notion of real wages
17:06falling
17:08you know because oil prices are up uh a real crazy stat for people uh real wages actually get better
17:16during a recession why is that sarah wheeler i don't know why because oil prices crash and because
17:23oil prices fall headline inflation falls and wages don't really like fall that fast because of that
17:30your your real wage growth looks really good you know uh here it's just the opposite case oil prices went
17:37up so i don't believe the white house likes that headline you think about in an election year
17:42and they they used to talk about real wages are up real wages are up because oil prices are down
17:49the
17:49trinity now it's like real wages are down now you know because oil prices are up so um i i
17:56want to i
17:56just want to see on the consumption side going out for as long as as long as oil prices are
18:01up here
18:01how much damage does it does to service sector or things like that or does it not i mean do
18:07people
18:08just you know say hey listen i could i could handle this because i could dump five ai subscriptions and
18:16and hulu and i'm and i'm fine you know but uh but i mean it's just to me it's i
18:22really want to see the
18:23consumption because the investment the investment data doesn't necessarily get impacted here but the
18:27consumption can well very interesting week as you said thank you for walking us all through it because
18:32i can tell you i've been confused and you can see online people are very confused things don't
18:37necessarily all go together but thanks for breaking it down especially you know what you
18:41could be confused about too what guess what other data lied when somebody says it's the most sellers
18:47in the history of america it's the highest price cuts in the history of america and all of a sudden
18:54somebody's price index perks up but that could be confusing that's out there as well so hey who knows
19:01my job is to make it all make sense and for all of you that are coming to the gatherings
19:06and
19:06austin texas it'll be a very very feisty fun presentation out there uh of course no normal years
19:14after 2020 and uh um i thought it was i thought we had a lot of good questions on the
19:20inventory data
19:21and the article that came out uh yesterday hopefully that answered some of them as well
19:26incredible we will talk to you again soon thank you pleasure
19:37you
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