The direction of home prices and the Fed’s civil war

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the direction of home prices and division at the Federal Reserve over interest rates.   Related to this episode:   Case-Shiller: Home price growth remained slow in February  https://www.housingwire.com/articles/case-shiller-home-price-growth-remained-slow-in-february/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   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

00:09welcome everyone my guest today is lead analyst logan modushami to talk about home prices and

00:15what is happening at the fed especially as the war continues before we dive in i want to thank

00:21our sponsor total expert for making this episode possible logan welcome back to the podcast we're

00:26all back we're back in our home offices back in the home office of course i'm i'm leaving to utah

00:32and then memphis and then we're going to be in san diego uh and then uh also uh i'll be

00:40going to

00:40miami so i've got a lot more traveling left but we are home home is where the heart is and

00:46it's

00:46friday morning and we've got a lot of stuff fred civil war trump tariffs oil uh but first we're

00:53going to talk about home prices let's talk about home prices so it is now may may 1st so where

00:59are

01:00home prices and and where are we for the spring so the reason i'm bringing this up is because

01:05there was a big x account that talked about well the housing bubble now is a lot bigger than the

01:12housing bubble you know back then and i don't think he was intentionally trying to say anything i just

01:18i don't think he's a housing person so he just made that off the cuff and and then i showed

01:23what

01:23i always do the the the all the data from 1943 to you know 2025 and i said people forget

01:30about the

01:31housing bubble of 1943 to 1947 why is there no love for that and one of the reasons why i

01:36always say

01:37that we we want to be a society that read books instead of burning them and when i put that

01:43data up

01:43all the time there's people like oh my god i have never seen this i said yes yes so i'm

01:50here to

01:50teach and you know we've had now a few you know since the 1940s we've had a few periods of

01:58times

01:58where home prices escalated out of control but the biggest was 1943 to 1947 that like makes everything

02:05else look look crazy but of course you know world war ii inflation people coming back you know uh the

02:11the

02:11the start of the boom of the middle class gi bill all these things were happening back then that was

02:16very inflationary it wasn't black rock nor was black stone black stone or the fed buying mortgage

02:24backed securities i could do a dissertation on that only but then there was the 1970s right and we

02:31you know whenever we talk about this in in the events you know home prices rose faster from 77 to

02:3779

02:37with mortgage rates going from age to 13 percent than the covid period with sub four percent rates

02:43so not a lot of people know that or remember that but that was the case but you we have

02:47to remember

02:47the labor force growth was booming in the 70s right inflation was taken off so we have two periods

02:52times where inflation takes off but the 70s also had major labor force growth then there was the housing

02:58bubble you know and then what i tell people if you look at the housing bubble your first clue is

03:04inflation wasn't taking off this wasn't like you know inflation was running rampant and the cost

03:09to build and everything else goes up with it uh it wasn't like wages were taking off it was a

03:13massive

03:14massive credit boom and credit bust right adjusting to inflation debt mortgage debt just expanded beyond

03:23belief right and of course whenever you do these recasts on these payments there's no way that that recast

03:30payment could work and about 30 30 to 35 percent of the loans were were adjustables or arms all that

03:36so that was a credit boom and credit bust but it's may 2026 so i've always said this housing market

03:45you know in terms of pricing reminds me a lot of the late 70s early 80s the early 80s had

03:52two recessions

03:53two two recessions the credit data was worse there there was a lot more inventory back then

03:59home sales crashed but prices never crashed price growth slowed down so my thing over the last three

04:06years and trying to teach everyone this is that you know 2024 price forecast was 2.33 percent

04:12adjusting to inflation home prices were negative right so there's there's not much growth there

04:17we ended up at four percent when rates came down to near six percent pricing picked up just a little

04:23last year last year had 1.77 percent forecast we have a one handle when it's all said and done

04:28and

04:28all the data is in so that looks right to me in this year this year looks right to me

04:35like there's not

04:35much going on with home prices to the upside of course there's no prices crashing i know a lot of

04:41people

04:41look at some weekly data lines and they see pricing picking up always remember there's a seasonal

04:46pricing curve but uh the comps are going to get easier and easier so uh if pricing firms up just

04:53a

04:53little bit and i had a negative 0.62 percent price forecast into that so what's happening right now

05:00what's happened last year and what happened in 2024 is very healthy for housing because what i've seen in

05:07the history of home prices going back to 1942 i i don't really like doing pre-world war ii economics

05:13because it's so different uh back then uh especially when we had no social services

05:19safety nets or anything you know um in any case what what i saw is that throughout the decades price

05:27there's periods of time where prices do nothing 1954 to 1967 prices didn't do anything they really

05:33declined but they didn't grow much uh 1990 was a was a year where national home prices fell 0.7

05:40percent

05:40and i'm always using case shiller 1991 0.2 percent negative but from 1990 to 1996 prices didn't do

05:47much either so for housing to get back kind of affordability it's not these epic national nominal

05:54home price crashes that these professional grifters and dooms doomsdayers right the demagogues of

06:00society 2 000 years of human civilization we've always had demagogues out there but price growth

06:05cooling down wages rising like there's a lot of places where rents look better now because wages

06:10have always been rising but rent uh inflation is now not only disinflation but deflation so

06:16it's it's looking really good it's looking great i'm so happy for what's happening but it looks

06:23right to me and if you study the history of housing economics there we are it looks looks looks good

06:30this

06:30looks about what should be happening right about now you know we had so many conversations at the

06:34gathering which we had this week with um fans we loved meeting everybody oh my gosh we we have a

06:41whole lot of stories there to tell but one of the things we talked about with someone was he was

06:44talking he was asking you about price price growth and you were talking about how if it can just be

06:49if it can be like a year like this year if it can be a year like that year and

06:52people's wages are rising

06:54we we get affordability in a better spot without some huge crash which is what you just said

07:01um and you know he wasn't sure about that he was like i i don't know about that and you're

07:06like no

07:06you know wages rising over over a certain amount of time and especially now if we can just level out

07:11the house uh home price growth yeah and um you know when you tell people what the history of nominal

07:17home prices have done like i would tell you this 99 people don't know it but when they see it

07:23they go

07:24okay i said it's 2026 guys it's 2026 the the the prices that follow volume declines well that volume

07:33decline happened in 2022 right the danielle demore booths of the world prices follow volume in that

07:39crew well it's 2023 didn't happen 2024 didn't happen 2025 didn't happen 2026 not happening what does

07:46this look like looks like the early 80s what does it kind of look like 1954 to 1967 that it

07:51would get

07:52over 80 years of data show this right we don't have a lot of history where nominal home prices

07:58declines but nominal home price crashing you know the supply and demand equilibrium the only period in

08:04time that we saw this was 2005 sales peaked 2008 not only did sales crash price inventory went vertical

08:12and uh i spoke to that gentleman later and i told him i said i don't think a lot of

08:17people remember

08:18this but the housing bubble years prices were rising while inventory was rising i mean that's

08:23very common anyway uh pre-qualified mortgage but inventory went from two to two and a half million

08:29you know uh in the early part of 2000 and 2005 but but because demand was outstripping supply the

08:37prices escalated because that was a credit boom the 80 the 1970s were different because inflation and

08:42labor force growth but home sales were booming because labor force growth was really picking up

08:46uh back then here home sales roughly have gone nowhere for years but they're not declining and

08:53inventory isn't going vertical i know there's some people that say it's the most sellers ever it's the

09:00lowest home buyers ever it's the highest cancellation ever and that group just came out last week ago

09:05uh looks like demand's picking up you know and million sales prices so i mean i my job if i

09:11could teach

09:12the history of this and teach to supply and demand equilibrium this is why housing wire intelligence

09:17and not only is housing wire intelligence we have housing wire the app came out as well

09:23yes we have an app and you'll have access to data in your own area my job is to teach

09:31the economics of

09:33housing because the supply and demand equilibrium works different in every area but the national still

09:37kind of roughly stays the same home sales aren't crashing anymore inventory isn't going vertical

09:44monthly supplies above four months which i think is is is is the balance and fair market it's not

09:49six months or over and it's an it's a tug of war between prices so if home prices did what

09:55they did in

09:562023 where they think about 2023 we had like extremely low levels of sales historically mortgage rates went

10:04from six to eight percent and home prices went up six almost six percent that year that is not a

10:09good

10:09thing that you get no advantage disadvantage just hypothetically speaking let's say home prices were

10:15flat in 2023 and they weren't up near six percent in 2022 because home prices were accelerating early

10:21in the year and even with the decline that we saw in the second half it didn't bring it down

10:25to flat

10:26imagine we take 12 percent uh off the total affordability gets better so now that we're in

10:332026 healthy as long as wages are outstripping home price growth that's the way because we don't

10:40have a lot of history of nominal and now we are in a 2026 homies i this is what i've

10:46been trying to

10:46teach some people are getting it and some people are now i hate a second now that it's been years

10:51and

10:51years and i've been doing this for a long time i've been tracking the doomer since 2012 but

10:56hopefully this makes a little bit of sense and why i'm happy why i was happy last year a lot

11:02with

11:02inventory growth why i'm happy this year because you need buyers and sellers to work off each other

11:07because that's what a normal housing market is and it's been a while for that because we've had we

11:12had such a unhealthy sellers market that you could just put your home on the market don't really need

11:17to do much and just because there's too many people chasing now it's different now you all got

11:23to play ball out there you know so i love that aspect which which is why we were team higher

11:29rates

11:29in uh february of 2021 we want to get balance back and we got it i'm i'm nothing but smiles

11:35on my face

11:36okay now we know that there are areas right in in the northeast you have so little inventory that

11:41home prices are going up you have areas in uh texas florida maybe some in arizona where um prices

11:47are falling because there might be too much inventory but even given those there's is there

11:53anything worrying there even in certain areas the the i when i think of texas arizona colorado

12:01florida those places found the healthy equilibrium right florida's inventory is down austin's inventory

12:09is down dallas's inventory is down even in colorado denver because you you get a more healthier

12:15housing market in that the northeast is sav Connecticut rhode island new jersey savagely

12:23unhealthy those are not good housing markets to me because you still have too many people even with

12:30all the price inflation chasing too few homes and as you can see like we're not back to normal

12:36like the active inventory nationally it's not two to two and a half million we're not back to normal

12:41there so in this context those places still have need a lot of work but everywhere else is is a

12:48much

12:48more buyers and sellers market and that's how you get back to normal okay well let's now talk about

12:54the fed which has heated up even since the last time you and i spoke right we have all sorts

12:59of fed

12:59governors presidents coming on tell us what is going on with the fed so friday morning the hawks came out

13:05to play not the atlanta hawks how they looked like against new york knicks lord that was that was

13:10terrible uh in any case uh all of the entire gang came out lori logan came out beth hammock came

13:17out

13:17and neil kashkari came out and they were like hey listen this is the right reason i'm dissenting we

13:22shouldn't be having an easy kind of mindset policy that we're going to be cutting rates while

13:27inflation is up we don't know when the war is going to end if the war ends neil kashkari even

13:32said

13:32maybe we could you know wait it out and and stay in but we don't know inflation could get worse

13:38i

13:38mean the producer price index for for some of the manufacturing stuff was elevate i mean

13:44i tell you if the labor market didn't have you know low levels of of job creation numbers boy

13:51they would be hiking and i think there's a lot more hawks than doves now of course all that matters

13:57is

13:57the voting but i think you're starting to build a coalition of more hawks than what warsh or

14:04christopher waller or michelle bowman and and them can can handle so uh they came out to defend

14:12their stance and you know the civil war that we talked about last year it's going to be a much

14:16different it's going to be open conflict right because kevin warsh is he came in there that job

14:22to do one thing cut rates and now he's like okay pc inflation is above three percent ppi inflation is

14:30above three percent even cpi inflation is not not down to two and here we are with an oil shock

14:36out

14:37here remember we did our podcast i think it was two years ago like what would it take to get

14:41like

14:42you know the 1970s inflation it can't be done by like tariffs or or economic growth booming or

14:48something but a supply shock out there you know we saw what uh a global pandemic did so now we

14:55got

14:56some chips are more expensive part you know there's all this stuff going on and they're like hey listen

15:00we don't want to have an easy buy-ins so this is the conflict now this is why i always

15:05thought man

15:06kevin warsh coming into it with the war still on and and also you know people are starting to do

15:12the

15:12math on the oil reserves you've got about probably four to six more weeks if this still goes on and

15:20four to six i mean you you're you're dwindling down the supply of oil then it gets bad it gets

15:27really

15:27really bad after that point uh so you can do the reserves and send it out there but man there's

15:33there's

15:34just there's a clock now uh on needing to get this done and the the blockade of course is impacting

15:41iran is iran getting help from russia or china you know financial whatever whatever is going on here

15:47boy you're you're now past march 21st now you're in may and you're when you get into june and how

15:54the

15:54oil reserves are falling down it gets problematic so they're like hey listen we just we don't we

15:59don't want to talk about easing in this environment so uh they all came out in force and it's just

16:05going

16:05to get much more crazy when wars comes in and then see how they go so when when we look

16:11at fed speeches

16:12during the week and who's talking that's a big deal now especially if it's the hawks if it's the

16:18ghoulsby's the logans the uh kashkaris the hammocks the schmitz all these people they're going to be out

16:24there fighting this uh uh so we need to keep an eye on what the bond market is now with

16:29all the crazy

16:30headlines and trump said 25 tariffs on europe i don't know if you could do that anymore but in any

16:34case

16:35um the 10-year yield is kind of flat you know went up went down early on picked it up

16:40off the news

16:41off the fed went down again so flat 10-year yield and you know where inflation's at and labor not

16:47breaking 438 it's not crazy you know it's not crazy okay so i at the fed do you feel like

16:54it's

16:54sort of a draw you've got you've got the hawks but now if they're up against worse and there are

16:58other

16:59people i mean like what's the what's the level now i mean to me it's it's the voting that

17:04matters non-voting people don't really matter in the big picture um uh i i'm sticking to the stance

17:11that we had when this conflict first started there's no rate cuts as long as this war goes on

17:16okay you know there's no there's nothing uh if the whenever see whenever the war whenever we think

17:22there's a ceasefire or anything the 10-year yield goes down to you know 424 but the two-year yield

17:28starts to go lower and that means that the the market is betting for those last i mean we're talking

17:33about two or three more rate cuts left that's it you know so uh this is we're getting toward the

17:39end

17:39of this uh cycle but as long as the war goes on and the longer it goes there's no rate

17:45cuts that's

17:46not gonna happen like jim mora talking about football playoffs we're not thinking about the

17:51playoffs are you kidding so so this conflict has to end ships have to be flowing oil prices need to

17:59come down right there has to be a recognized a recognized treaty out there that everyone's okay

18:06and then you know we could we could work off of the tariff inflation and if it's going to be

18:11a one-off

18:11but as long as that war's still going it's may nobody's somebody was thinking about may on here

18:17and uh um i think we'll stick to the original stance no rate cuts while this war continues so

18:24when it when it goes away we'll take a look at everything and and re-evaluate but but i think

18:30the hawks have the edge here okay uh and you're not getting your massive rate cuts like trump wants

18:36we want the lowest lowest interest rates you know in the world because we're the best economy that's

18:41not how it works not how it works and of course it is friday morning so anything could happen and

18:46friday night seems to be a time after markets close when things happen but it's hard to it's hard to

18:52imagine what else could be thrown at this situation but i shouldn't even say that i'm just jinxing us

18:57you know what you know it's interesting the respect everyone has for markets you know that we can't say

19:05these things during a week but we can do them on the weekends and you know we can say something

19:09on

19:09friday and change it up on sunday you know before futures and you know it's just we live in this

19:15kind of

19:16society where you know headlines drive so when people if people see markets falling yields going

19:21up remember godzilla tariffs right godzilla tariff stocks had an 18 percent draw 18 or 19 percent

19:28drawdown right that's almost a bear market but it was when the 10-year yield got to 450 and 460

19:36that

19:37scott besant and and others came into white house they go trump homie come here

19:42hey is pier gone yeah lock the door don't let that guy in here tweet this out to calm the

19:48markets down

19:48you know and i think that the tax the the tariff revenue collection or how much we we charge was

19:54like 9.7 percent so it wasn't like the massive godzilla tariffs out there so they didn't make that

19:59adjustment but weekends right it's the weekend you know daniel craig james bond that meme where you go

20:07it's the weekend that's where we see and then we wait for sunday futures and like i do these

20:11instagram live updates daily looking at the 10-year god that's how what a nerd i am everybody's showing

20:18how much fun they have on instagram and i'm like here's oil here here's the 10-year yield here and

20:23this is like oh but you love it you wouldn't want to do anything else man literally i've been like

20:28i'm

20:28sitting there telling people in 1954 to 1967 home prices were you know what happened to me you know so

20:35in any case man i can't wait to stop doing that like just get back to normal stuff but it

20:42is what

20:42it is right we we dealt with covid we every year there's crazy stuff going so we're we're somewhat

20:48uh desensitized or accustomed to uh non non-normal years but uh we'll take it one day at a time

20:55it's

20:55fun wheeler we got we always we always got something to talk about uh oh yeah no that's for sure

21:00and i

21:01appreciate it logan so glad that you're a nerd i don't know what we do without you being such a

21:04nerd

21:05so thanks again and we will talk to you again soon pleasure

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