Jobs data, mortgage rates and housing demand

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about jobs data, mortgage rates and housing demand.   Related to this episode:   Mortgage rates climb to 6.5% as global volatility builds  https://www.housingwire.com/articles/mortgage-rates-6-5/  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 Motoshami to talk about jobs data and housing

00:15demand. Before we dive in, I want to thank our sponsor, Total Expert, for making this episode

00:20possible. Logan, welcome back to the podcast. It is wonderful to be here. We missed a day because

00:26we couldn't get internet in the hotel room. I had to get on stage and I had like 15 minutes

00:33to get

00:33on stage and my bag broke and my Listerine bottle went all over my clothes and I had to hand

00:40wash my

00:41clothes air dry. It was so much drama. We did not have time for a podcast in the middle of

00:47all that.

00:47We tried, but it just was too crazy. We're here and it's Jobs Friday. By the time this podcast comes

00:55out, most people, we've already got the reports. So what do we think now? I mean, last year was so

01:02paper, rock, scissors, labor overinflation, bond yields are going to go lower and everything, but

01:07the structural dynamics have shifted now because of the conflict in Iran. But what do we think about

01:16jobs? This is my first question to you because, so we already, you've said several times, right?

01:21Even if we come up with like 30,000 jobs created, the Fed would be like, oh yeah, that's fine.

01:27But I

01:28mean, it looks like maybe we won't even do that. If you think about some of the pressure on the

01:32economy with the oil prices, do you expect that kind of thing to have had any effect yet on job

01:38created or job loss? So it's probably a little bit too early for the oil impact. Of course,

01:45you know, we've seen, you know, I would say this, one of the things I've tried to stress with the

01:52oil

01:53prices is that we had elevated oil prices from 2011 to 2014 and the labor market was softer, wage growth

02:01was lower, and we were dealing with foreclosures and short sales and bankruptcies. And through all that

02:09period, we had an expansion, right? There was a lot of, we were actually making fun of like a lot

02:16of the recession people because I mean, back then there was recession calls every day and because

02:21of oil prices were elevated, but here we have much better balance sheets for those that actually

02:27consume goods and services as a total. So I'm not worried about oil prices, creating a recession.

02:33I'm, you know, if I saw the credit markets breaking and then, you know, oil prices got worse and worse

02:39and it stayed longer with credit breaking with it and credit contraction, stuff like that, that that's

02:44a different story. So I don't believe we're going to see any of that data currently. But, you know,

02:52my thing is that the Federal Reserve really, really, really doesn't want to cut. Right. And

03:00even yesterday, Austin Goolsbee, who's going to be a voting member next year, has already said,

03:06hey, listen, I don't want anybody to think productivity is a reason we should cut rates.

03:10So he went straight after Kevin Walsh and straight after Lisa Cook. And by I just me saying that just,

03:17just like makes me smile. But wait, why does it make you smile? Because Lisa Cook and Kevin Walsh are

03:24on the same page on productivity. But Trump wants to get rid of Lisa Cook because he wants more Fed

03:29people because he wants to take over the Fed. And this is all this drama that, you know, we're not

03:33used

03:33to. But in this case, Austin Goolsbee came in, you know, who used to be a dove is now a

03:40hawk.

03:40It's funny. I wonder if they actually go back, like they have like a summer camp thing. They're

03:45going, OK, who's going to be the bad cop now? Like Beth Hammock, I always get. But Goolsbee's

03:49gone hawkish, you know, and he wasn't that way before. So to me, it's very simple. With all the little

03:56mini dissertations that the Fed has done with labor, that the population growth is slowing down,

04:01that to me, 30,000 and above is acceptable for them. If the labor force started growing

04:09and the unemployment rate went higher, then they can't come back and say, well, the unemployment

04:16rate is going higher now because the labor force is growing, because the job growth is low. You

04:21can't say that anymore. You could say that, you know, a few years back because we were still creating

04:26a good amount of jobs. So as some people might not understand this, but the labor market is

04:34stabilizing and like ADP came out. We don't really put too much weight in ADP, but ADP

04:38missed estimates, but it was over 100,000. So to me, it's like the bond market is getting

04:43cues from the Fed and it's like, OK, we're not we're not cutting rates in this environment

04:48because the conflict is going. And before the conflict was going, inflation was above target

04:53anyway. And now, you know, food prices are rising. Airlines are complaining that they're

04:59about to really get hit. So in this environment, you really need jobless claims to break out

05:04very aggressively to make the Fed shift here. And the jobless claims data hasn't broken.

05:10We're still at 200,000. Right. And the continuing claims is following. So the labor market is stabilizing.

05:16Even if you got negative revisions or anything, kind of think of it as above 30,000. The Fed is

05:22OK.

05:23You know, and it's just one of these things. It's very hard to explain to people that they see these

05:28low job numbers. They only see two sectors growing. But if you get a little bit more breath

05:33out there, you know, I think the Fed will stand pat until this conflict is over and

05:40we move on from that.

05:42OK, so that's the labor side. What about the inflation side?

05:45Yeah, I mean, the inflation side, the Iranian conflict really changed a lot of things

05:51because the Fed was basically going into this year thinking, OK, we're going to get a hit

05:56on tariffs one time only, and then they're going to roll off in the second half of the year.

06:03And which the funny part is you have some

06:06government people saying there's no inflation caused by tariffs. If that's not the case,

06:11then it's demand inflation, which makes it even difficult for the Fed that all of a sudden

06:15demand is really booming again and the Fed really has to hike rate. I mean, the whole

06:20cutting to neutral was based on the tariff inflation moving off, not that all of a sudden

06:26we have 3% of PCE and 4% PPI inflation. I know even CPI is heading toward 3%

06:35even with the rent

06:36disinflation. So there was a lot going on before the conflict, and now all of a sudden there's a lot

06:41more going on. So again, we have too many crazy things happening to get a little kind of leeway.

06:50But I can't do the labor over inflation this time around because the Fed has really set the bar low

07:00with job growth. And the growth rate of inflation was above target, but now the conflict. If the

07:07conflict wasn't here, then we could talk about, okay, the rollover in inflation, but then we go

07:13back as the economy reaccelerating again. So there's a lot. There's a lot going on here. So I'm just

07:21trying to keep it as simple as possible. Today, of course, this week, last time we talked,

07:25bond yields had gone up, oil prices got up. And then here's another headline of a possible

07:31deal, 14-point plan and everything. Oil prices fell, bond yields fell. And this morning,

07:36it's Thursday morning, oil prices are rising from the lowest bond yields. There's just a lot of

07:41movement here. And this is why closure with the conflict takes a high crazy variable out of the

07:49equation. We can work with a little bit more calmness, kind of like what we were before the

07:54conflict started. Rates were below six and a quarter, hardly any volatility. Spreads were good.

08:00We would have ran a couple hundred thousand home sales easily. Redfin's data came out this morning

08:07and they said it's a four-year high, whatever. Pending home sales are the highest in 2022.

08:14I have questions about that as well. But in any case, you could have seen how the year probably

08:20could have went. I mean, you take the snowstorm out of it, the war out of the equation, the holiday

08:24things you would have guided and had a couple hundred thousand sales growth this year. But

08:30here we are. It's Jobs Friday. So we get to see how the bond market will react to a labor

08:35report.

08:35If it's softer, if it's weaker, if it's just 60 or 70,000, what happens is really the conflict

08:42driving everything. And we'll kind of take it from there.

08:45Well, I'm telling you, if they do get a really bad jobs report on top of this other stuff,

08:50their midterms are, I mean, the midterms this year are going to be bad for the White House.

08:55I mean, midterms are always bad for whoever is in the White House, generally speaking.

09:00But as you've pointed out, doing a war at this time, driving up gas prices at this time,

09:05if we start to see job losses, that's tough messaging for any administration to get through.

09:10Well, in regards to job losses, jobless claims are still really low.

09:15And it's just not there. I mean, one of the reasons why I, back in late 2022, said,

09:22everyone do not go into the recession talk until jobless claims head toward 323,000 on the four-week

09:29moving average. Just don't do it. And what happened is 2023 recession, 2024 recession, whatever it is,

09:35every year we're supposed to be in a recession because of this one variable and that one variable.

09:40This is the same thing as in the last decade. Not a lot of people remember that, or those who

09:46did

09:46follow me, we were really breaking down the recession, people. But until jobless claims break,

09:52right? And I know this whole thing about AI, AI taking all the jobs, always remember people,

09:58death. Death is a very, very, very big economic variable for me, right? And we always use Japan.

10:06We say Japan's, 40% of Japan's population will be dead by the end of the century. They sell more

10:12adult diapers than baby diapers. Their unemployment rates are low because they simply just don't have

10:17enough people working. We have the baby boomers that are leaving the workforce every month.

10:22There's more Gen Z workers now than them. So the whole demographics, we have good replacement workers,

10:28but we're not really growing. And there's just places where it's harder to replace workers. And we got

10:33a lot of older workers kind of going through the system. So it's really hard to get very high on

10:39employment rates. Now, of course, COVID happened. That was a whole different equation. Everyone

10:43stopped living. But until claims start to break, and remember, the growth consumption of the GDP data

10:52is still, it's actually been very stable the last few years. That's also what the Fed kind of looks at.

10:57So jobless claims breaking is one thing. The job growth slowing down is another. So it's a very

11:05complicated year. Of course, the midterms are coming up. I mean, if you look at the history of

11:09human civilization, no politician or king ever survives big inflation bursts, right? No, it just

11:17doesn't. It's just because what people feel is they see the cost. And remember the whole Trinity thing

11:23we talked about, Sarah, November 7th was 2024. We said, if Trump's going to do this trade war,

11:29he's going to need lower oil prices. He's going to need lower rates. And of course, lower diesel

11:35prices. You could keep things in check. And then he needs a lower dollar. Well, the oil price thing

11:42has kind of faded. The mortgage rates are having the lowest start of the year in many years. But it's

11:48just with gas prices and these headlines, especially this day and age, two-year political cycles, it's

11:55hard, right? And we've talked about this how many years? It's very, very hard to get magnanimous

12:00changes into macroeconomic theories when you have a two-year economic or two-year political cycle,

12:07because voters come in and how Congress is set up. This is not China. This is not Iran. This is

12:13not

12:13Russia, right? They don't have to really worry about that because they're not full democratic

12:20countries. It's different here in America. So it's one of these things. And this is why I'm hoping

12:26that there's just a lot of influence on trying to get this conflict over sooner than later. And then

12:32we can just go back to normal economics, labor overinflation, Fed policy and everything. But these

12:37headlines are just moving the 10-year yield like crazy this week. And you can see it based on the

12:44oil prices. Let's talk about what we're seeing with demand as we see mortgage rates not down as far as

12:52they were. In fact, I think we had a high this week. It wasn't the yearly high, but it was

12:59the

12:59highest we had had in about a month where mortgage rates got. What did we see on the purchase apps

13:05this

13:05week? So purchase application data down 3% week to week, but up 5% year over year. So even

13:13with,

13:14I mean, our negative data has come with mortgage rates above six and a half in terms of the weekly

13:20data, but still our total pending home sales are at multi-year highs. They're not at 2022 levels,

13:26of course. As we shift through the year going lower and lower, the 2022 sales started like around

13:366 million and then it got down to 4 million. 2022 was the craziest year ever still. So a little

13:42bit

13:42crazier than this year with that. 2022 housing data was the craziest year I've ever seen. It was crazier

13:48than 2008 and it was crazier than COVID because those were clear directional changes. But you started the

13:55year at 6 million. You went all the way down to 4 million, but the crazy part was November 9th,

14:01right? You know, when we talked about, you know what, if the forward late data gets better and we

14:06hold that 4 million level, the structural dynamics of what's happening, housing is going to shift. It's

14:10going to be a few months before we see that. That all happened in one year. That's like three to

14:15four

14:15years into one year. So COVID was, you know, stop of behavior and then a rebound. 2008 was just a

14:21crash

14:22supply, foreclosures. That was a very, very tricky year for everything, right? The Fed went very

14:28aggressive. So navigating that year was nuts, but it was a lot of fun. This year-

14:35No, nobody in our industry-

14:36I know, I know, I know. Nobody knows. But I mean, you rarely get to see a Federal Reserve just

14:41go completely, you know, and it's a little bit different because we, I mean, I threw in the towel

14:46in February of 2020. I said the housing market's savagely unhealthy. This thing needs to blow up or else

14:50we're going to have another 20% home price score here. And this is getting worse than what it was

14:55in 2021. But here, housing demand's holding up. It's holding up, you know, considering. And part

15:01of that is usually housing data tends to get really softer when rates go above 6.64, then it go

15:08above

15:087. That's what we were used to the last. So far, that's not been the case. And we've had other,

15:15we, the snowstorm, the war, we've had other things that have kind of slowed. Housing doesn't move as

15:21fast as other things. So people kind of have to see that. And just remember, when did the housing

15:27market shift, Sarah?

15:28Mid-June of 2025.

15:30And during that period, that was the low in sales. We had a nine-month sales in December. And then

15:35the

15:35last two weeks of December, everyone stops because they go to Christmas and New Year's. And then

15:39the first week is, then you just got to get that New Year's data out. And then you get that

15:43rebound.

15:43If we would have just had no snowstorm, no war, the curve would have been, my forecast was 237,000

15:51more existing home sales with rates of 6.25, that we would have easily had that. So demand is holding

15:56up pretty good, but we're also having the lowest rate levels. But the most important factor for

16:04everyone, because wages are outpacing home price growth, because inventory is up, right? That has

16:12allowed affordability to get a little bit better. Nothing great, but a little bit better on its

16:16own. So when you're working from the lowest levels of sales ever, when you're adjusted to the

16:21population and households and workforce and everything, it doesn't take much to move the

16:24needle. So I think a lot of people are just shocked with Redfin's headline, the highest pending home

16:31sales in 2022. And then it was like the lowest, the other chart used to say the lowest demand ever.

16:37And so it's confusing. Just remember, the tracker has been very good since 2022 on forward-looking

16:44demands. November 9th, we talked about that, forward-looking data is getting better. Mid-2024,

16:50forward-looking data was getting better, even though purchase application data was negative

16:52year over year for a lot of that period. Kind of go with how we track things and just, it's

16:57holding

16:58up, right? It's nothing booming out there, but it's holding up. What I'd like to see is more positive

17:02week-to-week data on purchase apps. And then you get that with year over year growth, you get that

17:07growing because remember, most home sellers are buyers. That baby boomer and Gen X are holding

17:12that, selling that home needs either a mortgage buyer or cash buyer. And then when he sells his

17:18home, he then becomes a buyer and the transaction models could grow. And that's why you need mortgage

17:23demand for growth out there because mortgage buyers, not BlackRock, not Blackstone, you know,

17:29not the Russians or the Chinese or the Canadians or the Brazilians, you know, American primary

17:35resident home buyers run the show. And they've always run the show since the Peloponnesian

17:39War. And this is why we don't want to be the detective. We want to be the detective, not

17:43the troll. We don't want to take, you know, offset variables and then we just kind of go with

17:48it. So considering the drama, it's, it's, it's, it's, it's held up, you know, that's, that's

17:53how I want to see it. So it'll be interesting to see how the bond market reacts to

17:58but, you know, three years of going on CNBC, Sarah, I've said the same thing. We don't

18:03need three. We don't need four. We don't need five, but we got to get near six. Near

18:10six can work and near six now with affordability getting a little bit better. It's, it's, it's,

18:17it's, it's, it gets a little bit more firm with that. And again, there's a lot of crazy

18:24stuff that's happened this year that's impacted economic data. You just kind of have to remember

18:29all this conflict will end at some point and then we can move forward. Life finds a way.

18:34And speaking of life finds a way, the Great River people thought they, you know, had some

18:40jokes and they put Jeff Goldblum next to me, you know, and life finds a way. It's something

18:47I say at the events. And you actually, I can see the Jeff Goldblum resemblance for sure.

18:52You know, the older I get, the more Jeff Goldblum I hear, you know, and when I was younger, when

18:58I

18:58was, when I was younger, I was cleaving, clean shaven and stuff. Uh, I got a lot of Mario Lopez,

19:04AC Slater, which I have a funny story. I was in Maui one time and, um, the actor kid from

19:11home

19:12improvement. I forget his name. Okay. Uh, Jonathan Taylor, Jonathan Taylor Thomas. Yeah. And I was,

19:19I was there with my brother and he actually thought I was Mario Lopez. He had a pool party

19:24going, Hey Mario, come on in and all that stuff. And my brother and I were like, what, you know,

19:29and you know, I just had that, I had that look back then and we're like, Oh, we probably shouldn't

19:34be here, but we laughed about it. So, but now it's Jeff Goldblum because I'm 50, the chart daddy gets

19:40old. They get white hair. And we should, we showed that video of me on, uh, CMBC where, you know,

19:45back in 12 years ago was my first TV interview, national TV interview. And I was chart baby.

19:52You look like a kid. You're right. I was chart baby. I wasn't chart daddy. I was like, who is

19:57that

19:57kid? Oh my Lord. You know? Oh my gosh. Well, we appreciate you. And I was going to say,

20:04we appreciate the chart daddy, but you know, I can't say that. So, uh, you can say chart. Why are

20:09you,

20:09why are you holding back? Nope. Absolutely not. We appreciate you, Logan Motoshami, our lead

20:15analyst so much. And, uh, we will talk again soon. We'll see what that, uh, what the jobs report says.

20:20And we'll, um, we'll talk after that. Pleasure.

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