Why this was a positive week for housing, but not new construction

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about why this was a positive week for housing.  Related to this episode:  Why we can’t get more housing construction in the US https://www.housingwire.com/articles/may-2026-new-home-sales-fall/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire https://lnk.bio/housingwire  The Top 5:  Fannie Mae to expand title pilot program, Pulte says https://www.housingwire.com/articles/fannie-title-waiver-pilot/  HUD tests a new Operation Breakthrough for today’s housing crisis https://www.housingwire.com/articles/operation-breakthrough-hud-tech/  FHFA pushes GSEs to embrace chattel loans in Duty to Serve proposal https://www.housingwire.com/articles/duty-to-serve-chattel-loans-fhfa/  Why we can’t get more housing construction in the US https://www.housingwire.com/articles/may-2026-new-home-sales-fall/  Trump abruptly delays signing of 21st Century ROAD to Housing Act https://www.housingwire.com/articles/trump-housing-bill-signing/  Want more from Sarah? Don’t forget to subscribe! https://www.housingwire.com/subscribe/  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 why this was a

00:14positive week for housing, despite all that has happened. But first, let me recap the top

00:19five trending stories on housingwire.com. Leading that list is Fannie Mae to expand

00:24title pilot program, followed by HUD tests a new operation breakthrough for today's housing

00:30crisis. Then it's the FHFA pushes GSEs to embrace chattel loans and duty to serve proposal. And

00:37Logan's why we can't get more housing construction in the US. Finally, we've got our coverage of

00:42Trump's decision to delay signing of the 21st Century Act. So much going on. Okay, Logan,

00:48welcome back to the podcast. It is wonderful to be here. It's been a very interesting week.

00:53Um, yesterday, the 10 year yield had a really, really aggressive drop. And, you know,

00:59yes, sometimes you got to explain there's, you know, quarterly rebalancing, and sometimes a move

01:04might seem a little bit more aggressive to the down or upside. And mortgage rates are still not

01:10below six and a half percent. So hopefully the last podcast try to explain like, you know, how things

01:15have changed. But, you know, what as the conflict was going on, and whenever we get like these headlines

01:22that it's about to end, the 10 year yield first used to come down to 4.24, then it came

01:27back down

01:27to 4.35. And then, you know, it, the bar was kept on being raised with the 10 year yield

01:33and oil

01:34prices and everything. I just want to remind everyone, it wasn't that long ago, Brent crude was

01:40at $126. And the 10 year yield is at 4.68. And mortgage rates were at 6.75. So it

01:51could have been

01:52worse this week. And this morning, the PCE inflation came out and headline is above 4%.

01:59Core is at 3.4%. Some people looked at it as a slight miss softness. We have some chip inflation

02:06that there's nothing the federal reserve can do about that chip shortages and computer

02:10prices and stuff. But considering everything that has happened in this first six months of

02:17the year, it was a good week that the 10 year yield is lower. We're quite didn't get that

02:22first target level of 4.35 if things are improving, but it's going to be harder and harder for Austin

02:30Goolsby, Beth Hammock, Lori Logan, and Neil Kashkari. These are four governors that kind of made inflation

02:37and very hawkish stance to stay as hawkish as they were perceived. And, and I, and I, and I kid

02:45you not

02:45people, the San Francisco fed came out with their, this data line. It was the most hawkish fed press event

02:54is since COVID started, you know, they have this data where they, where they track, you know,

03:00monetary policy to the upside or downside. So there was a lot that happened and we're still here.

03:05Right. And we're not above 7% of mortgages. So consider this a positive week in that regard.

03:11Okay. So maybe explain the inflation part a little bit more to me because right, that that's very much

03:17what the fed is, is paying attention to. So I don't understand given what happened this morning with

03:23inflation, what you think the next move is. So when we started the year, the federal reserve

03:28stated that inflation data is going to look hot until like the midpoint of 2026. And then the one

03:36time price offs will wind itself off. Right. So the inflation data was a little bit hotter than what

03:42people anticipated, but if they still believe that, if they don't believe this is demand inflation,

03:48like an overheating economy, like too much, too many people making too much money and wage growth

03:52accelerating and stuff like that. If they don't believe that, then, you know, they can't be

03:58really super hawkish and take the fed funds rate back to five and a quarter. Now the conflict messed

04:06up everything. Like the conflict, if there were no tariffs and there were no conflicts, it'd be a

04:12different story, but that's not the case. The conflict messed up everything because the federal

04:16reserve then said, okay, this is another supply shock on top of another one. And, you know,

04:22there's too many supply shocks happening. We have to get aggressive. Well, Brent crude is actually back

04:27to pre-conflict era right now. So we can take that episode away. But if it is that the tariff

04:38inflation will wind itself down, then, you know, the 10-year yield being where it is this morning,

04:44I think the last time I checked was like 439, looks acceptable. But it could have been a lot worse.

04:52The conflict could have still been going on. And then we're into June and July. And boy,

04:58the oil inventories would be drawing down and stuff. So a good week in that regard, because we still have

05:04a six handle on mortgage rates. And I know mortgage rates aren't below six and a half percent, but still,

05:10it could have been much worse. So this is like a glass half full kind of stance that you're taking

05:16here. You're like, listen, is it as good as well? Well, I mean, not for me, because I'm not one

05:23of

05:23these people that think mortgage rates can go much lower than what my range is. I think a lot of

05:29people

05:29for years thought mortgage rates are going to go back to five or four or three. And, you know,

05:36even getting to five and a half percent would be abnormal. And the thing is that we don't explain

05:45this to consumers because, you know, how many people are nerdy enough to look at the 10-year

05:49yield and 30-year mortgage rates at Fed? But like, come on, that's not what they do. But if you

05:54look at

05:54the history of U.S. economics for decades, decades, even before you and I were born, Sarah,

06:02getting like to the fives, like even below 5.75 is difficult with Fed policy, just trying to get to

06:10neutral and neutral being at 3%. So, you know, housing for the most part, the existing home sale

06:17market, purchase application data, again, another positive year over year. I mean, it was only 3%,

06:22but still, compared to what we were dealing with the last few years, it's a good year in that regard,

06:29mostly because price growth is not taking off. If home prices were running at like five or 6%,

06:36I'd be having a much different conversation, but they're not. Housing is getting affordable

06:42slowly. Now, there's two ways to look at wage growth and price growth. You know, you can look at

06:47the year-over-year averages versus price growth. That's a monthly basis, or you could take the total

06:52wage growth for a year and total prices. But in any case, these are positive things that are

06:57happening. So, it's not a glass half full. A glass is full for me, just because of how I look

07:04at

07:04the housing market. If inventory was lower and price growth was picking up and wage growth,

07:092023, like 2023 wasn't good. 2023, mortgage rates went from 6% to 8%. Inventory was still low. Home

07:16prices were up 6% in a year that we had record low sales. But this, oh, man, take the

07:22variables out

07:22here. Price growth, not much is happening. Wages are still outpacing home price growth. Mortgage rates

07:29are in the sixes. You have somewhat of a more functioning marketplace than 2023, 2024, and 2025,

07:35where you get these moves above 7%, and then things slow down. And then housing moves slowly.

07:42When you get a base, housing doesn't have these really big moves. So, I love it. I love the year.

07:48But I think a lot of people just thought mortgage rates would be lower, especially this week where

07:55oil prices are at. But a lot has changed since the conflict. So, small steps, and take a look at

08:01that

08:0210-year yield. And hopefully, that's a downtrend that we're trying to create here. And get a little

08:06bit lower in rates, and you get under six and a quarter, it's workable. And that's how we should

08:11look at it. And I know a lot of people want fives and fours, but no, it's just the Fed

08:17policy is just

08:18not like that. So, you know, we've already talked about the inflation data. We also got the new home

08:22sales data yesterday, which is that story is trending in our top five because, you know, your take on the

08:29analysis was like, how come we can't get more construction in the U.S.? Because so much of the

08:34conversation is like, we just need to build more homes. You've never believed that. But what did

08:39you feel like this latest report said? You know, 100 years from now, they're going to look at all

08:44these people that said, we're going to build millions of more homes. The Road to Housing Act

08:49is going to, like, solve everything. And I just, I've not seen it for decades and decades in the data.

08:57We talk about it. We talk about it all the time for decades and decades. We need to build more

09:02housing. We need to build more housing. We're going to do this act and we're going to build more

09:05housing. And it's just that, that article, new home sales, of course, you know, had a miss of

09:11estimates. The, the last few months were revised lower. Like we, we talk about, you know, sometimes

09:18you get these really big moves on new home sales up and down. They tend to get revised, but new

09:23home

09:24sales have been in a channel just basically back and forth. And if I take the, if I take the

09:28COVID highs

09:29away and the, the lows of 20, we've, we've gone nowhere, nowhere for years. And people think in

09:36this environment, you're going to have housing construction grow in a meaningful way. That's

09:42not how it operates. So these articles are supposed to like highlight a sense of reality that even if

09:50you wanted to say, well, we're going to build a lot of apartments, people who make money and have

09:55families don't live in apartments. They, they live in single family homes. So even apartment

10:02construction, it has to make sense. The math has to make sense. So when we wrote that article in June,

10:08June of 2021, remember June in 2021, everyone was here comes the major construction boom. Here it is. We

10:15are going to build so much homes because there's no image. And I was like, homies, y'all are just

10:20cute

10:21kids. You are just so adorable. Oh, look at those cheeks. Look at those cheeks. You're so cute. As soon

10:28as

10:28rights rises, I'll get in. We're here in 2026. We're in this, we're going into the second half. And I

10:35feel

10:35that even with the bill that eventually, I, I, I'm not sure the legalities of it. I think the, the,

10:41the road to

10:41housing act has to become a law, like in a few days, even if Trump, you know, it has 10

10:46days unless he

10:47vetoes it, it will. Yeah. Unless he vetoes it. So, so there's just limits to, to, to what it is.

10:53And

10:55I, I don't, I, this is Sarah, you didn't know me in the last decade because you thought I was

10:59a loser

11:00and you didn't want to like put me in the top 40 under 40, but, but this was me back

11:04in the last

11:05decade. In the last decade, you know, I said it was going to be that weakest housing recovery ever in

11:10history. And we shouldn't have 1.5 million housing starts. God, that was like in 2013. I said that.

11:15Um, we should have 1.5 million housing starts until years 2020 to 2024 when demand requires it.

11:21Well, guess what rates were low, but it was the weakest new home sales cycle in the history of

11:26America. Y'all could go back and look at it. And just like, even with really low rates, the builders,

11:31there was too much supply of home. So there is the real world of business. And those articles are,

11:37are here designed to bring everyone back to reality and reality doesn't matter. Cause some people

11:43are just going to say the same things until they're dead. People have died talking about a

11:47housing construction boom for decades that are, because it's been going on so long, there are

11:52limits to what can happen. And it shouldn't be shocking that housing starts are low because new

11:59home sales are at the bottom end of what this range is. So one day, Sarah, before I die, I

12:05will convince

12:05people that the builders are not the march of dimes. And, um, eventually over time, like, you know,

12:11when I did a presentation about the, the, the white house believes in less immigration

12:17and kicking people out, and that's part of their disinflation game plan, you know, cause I remember

12:23somebody at an event asking me, well, if, if, if the white house is kicking people out and letting

12:30less people in who are going to buy these homes, we got 162 million people working. There's, there's not

12:36a shortage of people working. They believe that if there's less immigration and less migration, well,

12:43uh, rental supply should go up. Rental supply has gone up. So how do we think we're going to have

12:49a

12:49construction boom when rental vacancies are up and disinflation makes the math a little bit more

12:55difficult for people, unless you pay the builders or in multifamily construction, the, the loan programs,

13:04like in the late sixties, early seventies, and the tax benefit in the early, those were like

13:09multifamily construction boom. So if you really want to do this, the government and the private

13:14sector have to work together and find ways to make the math make sense. Or we're going to sit here

13:18like we are right now today, housing starts early COVID recession levels. So it's frustrating to watch

13:26this, but you know, that's why I keep on bringing that point out until one day, somebody is going to

13:31go,

13:31boy, you're really not going to get the construction boom that people want. And people are going to talk

13:35about it every single day. And they're going to say, well, you know, if I build this apartment here,

13:40this homeowner might not have enough money. He might be house, but no, they're not. This is not how it

13:44works. So the conversation has gone toxic and really stupid, but we're sitting here looking at the data

13:51and we choose to ignore it for a reason of self validation of, I believe we need to just build

13:57more

13:57homes. I think that the thing about the builders, if you think about how efficient they are and that they

14:03are

14:03here to make money, if there was demand there, they would build it like they're building to the demand.

14:09So it's not like, and so we can say, well, the demand's not there because of affordability, things like

14:14that. But like, if the demand was there, there's nothing the builders would like to do more than build

14:19more, make more money, meet the demand. But what they're not going to do is build and have it sit

14:24and have it

14:25take off their books. And so to me, I think it's interesting that people are like, they should

14:29build more. It's like, if they were going to make money, they would build more. This is why people

14:33that are waiters at Olive Garden should not tell builders how to run their business. I mean, I'm just,

14:41it's just, this is a capitalist society and people here to make money. You do not purposefully

14:51oversupply a marketplace to where if you need to start moving and selling your products,

14:57you have to reduce prices. I think there's a prominent person, I kind of forget his name,

15:03Pinto. He talked about, well, the builders are, are inflating housing by buying down mortgage rates.

15:10Homie, let me tell you something. Housing starts can be worse if they weren't doing that,

15:16where for some reason we have people who have never worked as a builder or in the construction

15:21or how, how that operates, starting to give advice and talking about it on the national stage that this

15:27is going to, and it's mind boggling to me. Like I, I've watched this for two decades. Like this

15:32doesn't work. Like we, the most housing starts we had in recent history was during the housing

15:36bubble boom was why new home sales were at 1.4 million. Home sales were booming back then.

15:42And so construction boom. And then all of a sudden inventory went vertical for the existing home

15:47sales market. The builders had to operate off of that. That's their competition. They're down here.

15:53So, so I digress, but that article was just basically designed again. We have fight club rules,

16:00Sarah. What are the fight club rules? We don't accept existing home sales and new home sales. We don't,

16:05we do not mix the existing home sales and new home sales market together. These are two separate

16:10creatures all together out there. So, so hopefully that article made sense because we are going into

16:16this second half of 2026 and we always, we still sit here. We just need to build more homes. We

16:23need

16:23to build. And I just, I feel like people are going to go to their graves still saying before they

16:28die,

16:28we just need to build more homes. And it's just, that's not going to work. And when population growth

16:34slows down and demographics, and then in time death, the baby boomers will all die. They'll

16:40give their homes off to their children. And what their children do with the home is as well. Oh my

16:44God, that's supply. So come on y'all, y'all need to like get, get back to the world of

16:50reality out

16:50here. But outside of that new home sales report, considering what's happened with oil inflation,

16:57the fed and three rate hikes talked about by it's a, it's a positive weeks. Cause you know,

17:02the 10 year yield is still here and mortgage spreads. And, and just one last thing about

17:06mortgage spreads, mortgage spreads. I think some people might not know this. If the 10 year yield

17:11has an aggressive move lower, the spreads do get worse just because they're trying to control

17:16volatility. And, uh, that kind of happened in February. So the spreads getting worse was just to

17:22compress volatility on the high and low end. So that is actually normal. So if the spreads got a

17:27little bit worse recently, the bond yields fell aggressively, like we saw, uh, on Wednesday, that's,

17:33there's nothing abnormal about that. You want to compress volatility and then the EPO risk becomes

17:39less, but considering everything that's happened this week, you know, uh, if it is true that the

17:45federal reserve might have a little bit of a less hawkish stance, eventually some of them are going to

17:50have to talk. I don't think they've done the full shutdown on conversations until the task force,

17:55the task force, that's going to be great. It's going to give their findings, but, uh, not bad,

18:02not bad with everything that, that has happened in the last, uh, uh, 110 days.

18:08Thank you as always, Logan, really appreciate you.

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