Logan Mohtashami: It’s no longer labor over inflation

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how labor and inflation influence mortgage rates. The two also discuss housing demand.   Related to this episode:   For mortgage rates, it’s not labor over inflation anymore  https://www.housingwire.com/articles/for-mortgage-rates-its-not-labor-over-inflation-anymore/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   The Top 5:   For mortgage rates, it’s not labor over inflation anymore  https://www.housingwire.com/articles/for-mortgage-rates-its-not-labor-over-inflation-anymore/  The housing markets that missed the pandemic boom are quietly outperforming  https://www.housingwire.com/articles/pandemic-housing-boom-2026/  Housing inventory just turned negative year over year  https://www.housingwire.com/articles/housing-inventory-just-turned-negative-year-over-year/  Why CoStar, Berkshire Hathaway are betting big on homebuilding  https://www.housingwire.com/articles/costar-zonda-berkshire-taylor-morrison/  Sam Valverde: Pulte’s DNI role won’t sideline GSE reform  https://www.housingwire.com/articles/markets-pulte-dni-gses/   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 Motoshami to talk about labor

00:16and inflation and how his calculus of those two elements has changed when it comes to mortgage

00:21rates. We're also going to talk about housing demand. But before we dive in, here are the top

00:26five trending stories on HousingWire.com. Logan's story on labor overinflation is in the top spot,

00:32followed by one titled The Housing Markets That Missed the Pandemic Boom Are Quietly Outperforming.

00:38Next is the latest tracker on why inventory just turned negative, followed by why co-star

00:43Berkshire Hathaway are betting big on home building. Rounding it out, we've got coverage

00:48from the IMN conference on Pulte's new role. With Sam Valverde, Pulte's DNI role won't sideline GSE

00:54reform. Logan, welcome back to the podcast. It is wonderful to be here. Again, another crazy

01:01week. We're dealing with this, but at least the market responses are a little bit less volatile,

01:08even though like we've had two nights of missiles and bases attacked and this and that. And

01:15clearly, you can see President Trump really wants this to kind of end, even so much about making sure

01:21the public knew that he ripped into Netanyahu. But we are here today. It's Wednesday morning. The

01:2810-year yield is at like 448, 449. But now we've had two pieces of jobs data in Jobs Week.

01:36And we

01:37wrote that article. It's no longer labor overinflation. And there was a reason why.

01:43Okay, this is huge. So you are the labor overinflation guy. You have a mug that says labor

01:48overinflation. People have given you merch that says labor overinflation. So tell us why that's

01:54changed. So, you know, toward the end of last year, you and I did a podcast like outlining like,

02:01you know, some positive things that can happen in 2026 that doesn't happen in 2025. And one of the

02:07things that just my experience, this is my second trade war. And in 2018, even though the trade war was

02:15much smaller, it was more condensed to a few players, business investment went to zero and

02:22hiring really slowed down that year. Because companies don't know what to do, right? Nobody

02:27knows what to do. They see all these crazy headlines day in and day out. And it just it takes

02:31the oxygen

02:32out of the mind, the thought process of leaders. However, in 2019, when things started to calm down,

02:40and you know, it looks like some deals were about to be made, things started to pick up. Now last

02:46year, we have what happened was the labor market was so slow, that hirings were the lowest levels,

02:54at least to me, just from my experience, the lowest levels ever outside of a recession,

02:59where we're averaging like 8,000 jobs a month or something, it was not something was wrong.

03:04But because you have a low base effect, and the Federal Reserve has constantly told everyone,

03:11they really, their break evens are really low. Now that the jobs data has improved,

03:19you can no longer say labor over inflation, not because I don't believe in the principle,

03:24is that I don't have the weakness in the labor market that we saw last year. And because of that,

03:29we have to be a little bit mindful of when this conflict ends, and oil prices fall down,

03:36it's we just we can't think about the labor market being what it was last year. And jobless claims

03:42never broke and jobless kids never, never, never had any breaking data line into it. But we had job

03:49openings data this week, it's a very volatile number, it's probably going to get revised next

03:54month. But it's showing things are a little bit better. And against the AI disinflation,

03:59that people thought unemployment rates are going to skyrocket, because AI is going to take all the

04:03jobs. And my myself, for those who followed me in the last decade, it's like, I'm worried about not

04:08having enough workers, let alone not technology taking it. And we had the ADP report today,

04:14slightly beat estimates, but it's over 120,000 now.

04:18So it's really interesting to think about just like, okay, I mean, it's not that jobs aren't

04:22important, but just, you know, it's shifted in your in your thinking here. So let's talk about

04:26inflation.

04:28So when we think about the growth rate of inflation, the Federal Reserve had a 2% target. In 2024,

04:34the growth rate of inflation was heading toward 2%. And then the labor data started to get softer.

04:39So the 10 year yield went all the way down to 362, it even broke the Hodor line. Oh, Games

04:46of

04:46Thrones, the dragons are coming back, that's gonna be good. You know, House of Dragons, you watch House of

04:51Dragons? No, I do not.

04:53No? Okay. That's a whole gnarly thing. And the books are crazy, you know, and stuff. But

04:57in any case, because the growth rate was slowing down, the inflation growth rate was slowing down

05:02to labor data, the bond market just went, you know, the Fed is really behind the curve. Going into this

05:08conflict, the growth rate of inflation was accelerating. And then the conflict happened.

05:15The Federal Reserve themselves said, we are going to ignore the growth rate of inflation due to

05:20tariffs, because it's a one off. And then we'll just ride out the second half of the year,

05:25then the conflict stuff. So now oil prices are up, energy prices are, you know, bringing down or

05:31impacting food prices, because diesel, everything. We had two hawkish Fed governors this week, Beth

05:38Hammock, who's always going to be hawkish. But even John Williams talked about energy prices are lifting

05:43everything up. So you're not going to get rate cuts in this environment. But now the question,

05:49are we going to get a rate hike in this year because the growth rate of inflation is keep on

05:53rising. Now, you're setting yourself up for an unbelievably low bar next year. If the conflict

05:59ends and energy prices go down, 2027, you know, you know, can't sustain itself because we're not

06:06having elevated energy prices or food prices. But conflict needs to end because stuff was getting

06:12a little bit hot before. And now it got even worse. And the labor market isn't breaking.

06:18And so far, consumption and investment are still holding up. So it makes it a very tough environment

06:24because the growth rate of inflation was picking up before the conflict.

06:28So how does the Fed see all of this?

06:31You know, when I think of the Fed, I think of number one, I'm always going to be a labor

06:34or inflation

06:35guy. But to me, just taking everything they've written, nobody reads their stuff really outside

06:42of a few nerdy people. But everything they've written, I've estimated kind of like 32 to 33,000

06:47is their break-evens. The break-evens is basically how much jobs need to be created each month for the

06:52unemployment rate not to rise. Everyone has their number. My number, I've never changed. Mine is a

06:5778,000, right? So we're almost to my break-evens. The unemployment rate is ticked down a little bit from

07:04last year. But if jobs are growing above 33,000, and they're about, you know, 76,000 a month,

07:13the Fed is like, hey, listen, the labor market isn't breaking. Inflation is not a target.

07:17So we're not, you know, everything is changing. Last year, everyone, there's a big fight between

07:22the labor markets getting softer. So it's a little bit more complicated because the Fed also doesn't

07:27want to hike rates into a supply shock to make the labor market worse. So this is a,

07:34it's a more complicated backdrop than what people think. But so far, the market has taken all the

07:39rate cuts out and priced in a hike. The conflict has to end if you're, if you want more clarity

07:47on

07:48the economy in terms of rates. So as long as this conflict keeps on going on, you're just not going

07:52to get this. And I know Kevin Walsh, now the talk is Kevin Walsh is going to kill the dots.

07:57There's

07:57going to be no more forward guidance on rates giving. Okay, wait, explain kill the dots. Not

08:01everyone knows what that means. So the dots are basically like where the Fed thinks the dot plot,

08:06where they think the Fed funds rate is going in the future. A lot of people just think that ruined

08:11the discussion. I was always in a favor of killing the dot plots for many years. So I'm happy about

08:18this. But Scott Besson made a funny comment about these Fed governors are yapping off.

08:25You know, so what they don't like, of course, because they're in power and they want low rates

08:31is that you have hawkish Fed governors saying, hey, listen, we don't want to cut rates. We want

08:36to hike rates. So they kind of want to shut that down. It's a little bit, I, you know, it's

08:42one of

08:43these things where Trump's White House really wants to overtake the Fed, like run the whole process,

08:48you know, and put their own people in. So we're going to have a whole different new Fed regime

08:53under Walsh, but look for less guidance. However, everyone kind of knows what the Fed people are

08:59thinking. They're talking loudly before Walsh comes in. So everyone knows, hey, guys, we are not voting

09:05for rate cuts in this environment. I don't care if they zip, make us zip it. You know, I want

09:12everybody to know the growth rate of inflation is too high. You need the conflict to end. You need

09:16energy prices to go down, diesel prices to come down, food to get, and then we could talk about

09:20that later. But as long as the labor data is providing over 33,000 jobs per month for as weak

09:28as the hires look like in the data lines of the job openings data, the Fed is basically saying no

09:34moths and there's more hawks than doves right now. So Walsh has no, all Kevin Walsh has is oddly enough,

09:41Lisa Cook, you know, and there's just not enough doves on the Fed to move the needle right now.

09:48Boy, how the tables have turned, how things have turned this year. It's been so interesting. I know

09:54you will keep us all up to date on the Fed and what you see there as we go. Okay,

09:59next topic is you kind

10:01of did a first half of 2026 scorecard for mortgage demand, for purchase mortgage demand. So let's go over

10:10that. So purchase application data, as always, is a funky trend survey data. I followed it for many

10:17years. And in the last decade, it was very simple. Like after the second week of January to the first

10:24week of May, we see if we see year over year growth, then housing demand is picking up a little

10:29bit. That's fine. Housing doesn't move as fast as a lot of people think. So if you get a little

10:38bit

10:39money, total volumes always fall. Happens every year. It was funny, like in the last decade,

10:43people would always take the seasonality of purchase out to go, oh my God, purchase apps

10:46are falling. Oh my God, crash. No, it's called seasonality. Oh, tumors. In any case, when we

10:55move out into post 2022, oddly enough, some of our better housing data has come with purchase

11:00application data being negative year over year. So far this year, most of the data on a year

11:06over year basis. And we had snowstorm, we had rising rates and a conflict and AI supposed to

11:13take all the jobs out and private credit was ruining everything. We had all these crazy negative

11:18headlines. People just, I'm buying homes. Millions of people buy homes every year. It doesn't matter

11:22what's going on. I mean, COVID was the greatest example. People didn't even know if they're going

11:25to be alive, you know, six weeks from now, but hey, we're filling out a purchase application.

11:31In any case, housing demand to me held up very resilient with all this. I don't see like housing

11:39demand really taking off in a big fashion. I thought we can get 237,000 more existing home

11:46sales this year if rates stayed six and a quarter under. Obviously we lost that after the conflict,

11:51but it's just held up good. And we always say, don't just look at purchase apps. Look at our weekly

11:56pending sales. Our weekly pending sales look out 30 to 60 days. Typically the NAR will come and follow

12:04us up with our data. And it's just, we get a little bit of growth. If rates come back down,

12:10you know, then you can get that growth to stick a little bit more in the second half. Cause it

12:14was

12:14last year when the housing market shifts there. Mid-June, mid-June, 2025.

12:20Mid-June, 2025. And in June of 2025 was the low in sales. And then we got a nine month

12:25high in December.

12:26So we still have time. It's just this, this conflict is taking a little bit too long and we

12:31lost all the doves, right? Everyone, most everyone outside of Warsh and Lisa Cook are pretty much hawks

12:39now, but for the most part, it held up. And part of the reason it's held up is that existing

12:44home

12:44sales, fastest crash in sales ever in 2020. We've just been holding at bay. Now for me, it's a little

12:51bit different because I don't believe in a mortgage rate lockdown. If I thought a mortgage rate

12:54lockdown was real, boy, I would see it in existing home sales. We'd be at 1.7 to 2.3

12:58million.

12:59Everyone keeps on thinking demand is, if a mortgage rate lockdown was here, demand would be so much

13:04lower than where we are right now, like a lot lower. But in any case, millions of people buy

13:09homes every single year. Most sellers are home buyers. That's what we always talk about. But

13:12mortgage demand held up a little bit better. The price affordability is such a key, especially in a

13:18qualified mortgage world, right? Because everyone's legit now. So to me, affordability got a little bit

13:25better on its own. Mortgage rates have had the lowest rate curve, meaning it's been the lowest

13:31levels of mortgage rates to start the first five months of the year, post 2020. And demand picks up

13:38a little bit more. If rates were a little bit lower, demand picks up a little bit more, inventory

13:42might go down a little bit more, but then that's kind of the housing market. It's really not anything

13:47like magnanimous, but this is the way you're supposed to look at housing because this is how

13:52housing operates. So I would just say very resilient. And it is such a positive that wages

13:59are outgrowing home prices because housing gets affordability, buys on that. Over time, dual household

14:05incomes, right? One of the things we always say, people always ask, how do you have near 5 million total

14:11home sales every year? So the last three years, well, if you add a dual household income, if you

14:16need $103,000 to buy a house, one makes $90,000, the other makes $70,000, there you go, right?

14:22So

14:22mortgage demand is always the key. So it's a positive in so many fronts. Even though inventory went

14:29negative year over year last week, it's still at multi-year highs. We don't have the savagely

14:33unhealthy housing market. This is how housing operates. And it's perfectly fine and healthy trying

14:39to get affordability back because you're not going to get pre-housing demand to the levels we saw in

14:462019 unless you get affordability better. Now, the builders are able to do this because they offer

14:51sub-6% mortgage rates, but the builders are picking off existing homebuyers left and right every single

14:57week because they can, and they're a much smaller housing market. So all in all, with all the drama,

15:04healthy. Healthy as you could imagine considering everything else we're dealing with.

15:10So I think that's so true. I'm at the National Association of Real Estate Editors

15:15Conference. It's been so much fun. I'm in Miami with all these journalists, editors. It's been

15:19great. And we've had a lot of economists come in and talk about different parts of the economy,

15:24but not just single family housing, right? We've had commercial people in, industrial,

15:31multifamily, just a whole bunch of things, looking at retail office buildings, whatever. It's been

15:36fascinating. And one of the things that everyone's talking about is that affordability and how rents

15:42play into that and how vacancies play into that. So I would love to ask you, when you look at

15:47rents,

15:47so that's been something that they've looked at a lot, rents and vacancies, because that plays into

15:53affordability. If you think about those people, hopefully we'll become homebuyers at some point,

15:58right? What do you see when it comes to rents? It's funny because so much is going on. CNBC,

16:05Fast Money asked me to go on their show and talk about the Taylor Morrison buyouts and everything.

16:10But to your question about rents, rental vacancies, the last, it got updated at the end of April,

16:187.3%, where we're close to 1% in homeownership vacancies. We had a little multifamily construction

16:28boom, wasn't anything spectacular, but it was good enough to call it a boom. It already kind of went

16:33away. So all those apartments basically came online. They took longer to build at any other time in

16:39history. And it's filtering itself into the rent growth. And so because rent growth has decelerated

16:47in some cases had deflationary factors, rents are cheaper. I don't really care about the rent versus

16:54homeownership discussion. I always thought it was meaningless because a lot of people say, well,

17:00why isn't everyone renting? Look at the cost of ownership. Homeowners make more money and they like

17:07to own a house. They do not want to be under a landlord who tells them, no, we can't fix

17:13this.

17:14No, you got to move. And that's just, and that's how it works.

17:17In my case, it would be like, no, you can't paint something. That's always the worst thing for me.

17:22I have to be able to paint something.

17:23Yeah. But I mean, it's just, it's just, I mean, on paper, people would go, there's no reason to buy

17:29a house, but homeowners just make more money and they want to own something. They want to start their

17:32life. So what's the skit I always had, you know, for what, 15 years now, we are not complicated

17:39people. We rent, we date, we mate, we get married three and a half years after marriage. We have

17:43kids. We bought, we buy single family homes. We don't live in apartments to raise families in

17:49America. It's never worked that way. So why are people shocked that people are still buying homes

17:55because they don't want to live in apartments, right? Or they don't want to live in townhouses or

18:00stuff like that. This is what Americans have done for decades and decades and decades.

18:05And it's perfectly normal. So that's why I tend not to get into the rent because I couldn't make

18:10sense of a lot of the stuff. If I did that for a very long time, because home prices have

18:15deviated,

18:16especially in the last decade, but also in COVID, but still millions of people buy homes,

18:22people aren't even selling their houses to go rent, right? In some cases, you know,

18:27you even sell your house, your rents would be higher than what your total payment would be

18:33right now for your mortgage. So it just takes me out of an area that people lose focus on what

18:40really drives housing economics. But rental vacancies are up. We're starting to see that

18:45rental vacancy slow down as those absorption rates are starting to come in, in those areas for

18:51multifamily. And then we kind of move on from there. But we're basically, rental vacancies is kind

18:56of where it was in the 1990s. So I know the Trump administration would like to emphasize that if

19:02they stop immigration and they kick people out, there'll be more rental supply or more houses.

19:07It's not home. It's like, I used to have debates with people that people thought illegal immigrants

19:12came into California and Los Angeles and outbidded BlackRock for homes out here. Come on, man.

19:17You're all crazy. What are you talking about? This is a rental story. It's not

19:22homeowners for... Some people are... People are just whacked sometimes on housing economic

19:27discussions. In any case... We know that more than anyone. Yeah. In any case,

19:32rental vacancies are up. There's disinflation and deflation in rents. And the absorption rates are

19:38starting to pick up a little bit. It'll be interesting to see how this looks 16 to 19 months

19:42from now. But for now, positive in the sense that if you're a renter, especially looking,

19:48you probably could get some deals out there. Homeownership vacancy rates are near 1%. So

19:53much different story. In fact, during the housing bubble crash, the once in a lifetime event,

19:59it never even got above 3% out there. So just always remember stock versus flow. The majority of

20:06people living in homes in America are fine. They're not these men on the internet, doomsday

20:13Ray Adalio and Peter Schiff's and the hairy dents of the world. And we talked about how we've handled

20:19doomers over the last few years. I've changed my tactic into getting them into live debates and

20:23taking their names. Because you all got to realize these people are not serious, right? They are just

20:27doom pointing because they can't get attention. If they were serious that have models and all that,

20:31they don't just make up stuff. But homeownership vacancy rates near 1%, but rental

20:35vacancies above 7% makes sense with the multifamily construction boom that we saw post COVID. It

20:43just took double the length of time to build those apartments and get them into the system.

20:50I think you did a great job on CNBC this week. I can't believe that was like two days ago.

20:54It has

20:55been a crazy news-filled week. We were going to talk about that and then other stuff happened. It's

21:00just, it has been a crazy week. So that CNBC Fast Money Show is interesting because, you know,

21:05those people are a little bit more lively. I have a little bit more time to talk. And

21:08then for some reason, they always got to talk about my shirts, right? You know, the shirts,

21:13the hair. And I'm just like, I tell people that I've been dealing with that since I was a teenager.

21:17So I'm used to it. But in any case-

21:20Well, and after, it's after you get off. So you don't know they do it. And then I,

21:23I and other people are listening to it and they're like, like this time they're like,

21:27what's that shirt made?

21:28Well, well, Guy Adami did say, hey, you're going to have a fun time in karaoke tonight.

21:32Cause I had my green, uh,

21:34No, he said tango. Didn't he say something about that?

21:36I thought it was karaoke. Tango or karaoke. They're meaning the same thing is that I was

21:40just like, y'all get, y'all can't pull off a silk shirt like I can. So I don't even

21:45get in a

21:45hair competition with me on stage. But in any case, I digress. Um, Taylor Morrison being bought

21:53out by Berkshire Hathaway. So is this a bet on the housing market? That's kind of what it was.

21:59The, the mindset that's what a lot of people, well, they wouldn't bet on the housing. So try

22:03not to think of it as a short-term housing call, but think of this in the big totality of

22:09what's

22:09happened. Beezer homes, hostile bid, uh, Zonda got bought up by Costa, you know, a week ago,

22:16Japanese home builders were buying a bunch of home builders in America. That's a different story

22:20because 40% of Japan's population will be dead at the end of the century. And Sarah,

22:26what's the line we always see? They sell more adult diapers and baby diapers. You do not want to be

22:31a

22:31home builder in that country if that's the case. So they go by us. Cause we still have millennials

22:38and Gen Z and Gen A. We still have a lot of people, a lot of young people. In fact,

22:42uh, millennials and,

22:43um, uh, Gen Z together are bigger than the total population in Japan. So don't they're buying it

22:49for a different reason, but look at rocket bought Redfin. Uh, we have mortgage service companies

22:55buying mortgage service or companies, everybody's in play. And like during that interview, uh, another

23:01apartment reit got, uh, bought out by another one for $2 billion. So the whole industry is in play,

23:07right? Because to me, when the next housing cycle comes, right, there are going to be fewer players,

23:14bigger players, but they have more, uh, war chess pieces. So everyone is in this. So that's the

23:22reason I wanted them to switch. Cause I know what they want is Berkshire Hathaway. Berkshire Hathaway

23:27has so much cash. They just finally used it on something. It was the first purchase that try not

23:31to make it as a big housing play, but there was just consolidation. There's not going to be that many

23:36players left as compared to what was seven years ago. So people are assembling. It's like the

23:41Avengers. They're assembling their own, uh, Avenger group for the next battle out here.

23:47Ooh, that would be a good, good housing concept. Ooh, who would, who would, who are the housing

23:53Avengers versus the housing doomers and Dr. Doom is going to be the next villain. Oh, we have an idea

23:58here. Wheeler. Oh, I can totally see it. We could create our own Avengers versus the Dr. Doom

24:04and everything. This is, this is where it goes. Oh my gosh. Well, thank you for giving us sort of

24:08that

24:08wrap up. I appreciate that because I knew, I know that you did have sort of a different take on

24:12that.

24:13Like, yes. You know, cause everyone was like, oh, it's a big bet on housing, which it is, but I

24:16mean,

24:17there is something, you know, there's some other factors at play. So appreciate you weighing in on

24:22that with us as well as CNBC. And tomorrow, uh, we will do a preview of, uh, jobs Friday, right?

24:30Uh, we'll do, yes. We'll preview jobs Friday and we'll have jobless claims to talk about,

24:34but then yeah, jobs Friday coming on. By the way, if we're doing team Avengers,

24:37I am Logan. Cause that's how I got my name. Logan Wolverine. It's in the government paperwork.

24:43When I became an American citizen, they said, why'd you choose the name Logan? I said,

24:47Wolverine X-Men. And it's on a government document. It's on a government thing.

24:52Bill Pulte could go check that out now. Okay. Well, we'll have to think about who I am and don't

24:58say someone. So there we go. All right. We will talk again soon, Logan. Thank you.

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