How we might avoid mortgage rate hikes this year

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about how we could avoid mortgage rate hikes this year.  Related to this episode:  Why mortgage rates haven’t followed oil prices by moving lower https://www.housingwire.com/articles/why-mortgage-rates-havent-followed-oil-prices-by-moving-lower/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire https://lnk.bio/housingwire  The Top 5:  Housing demand holds steady as regional inventory trends reshape the market https://www.housingwire.com/articles/regional-inventory-trends-housing-market/  Mamdani wins rent freeze for stabilized NYC apartments https://www.housingwire.com/articles/mamdani-rent-freeze-nyc/  Fannie Mae to expand title pilot program, Pulte says https://www.housingwire.com/articles/fannie-title-waiver-pilot/  Why we can’t get more housing construction in the US https://www.housingwire.com/articles/may-2026-new-home-sales-fall/  BOK Financial’s Michael Merritt breaks down ROAD to Housing Act impact on homebuyers https://www.housingwire.com/articles/road-housing-act-affordability/  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 the Fed and how we

00:15could avoid rate hikes this year. First, I want to recap the top five trending stories on

00:20housingwire.com. Up first is housing demand holds steady as regional inventory trends reshape the

00:26market, followed by Mamdani Wynn's rate freeze for stabilized NYC apartments and our coverage on

00:32Fannie Mae expanding its title pilot program. Logan's article, Why We Can't Get More Housing

00:38Construction in the U.S., continues to trend high, along with an interview with BOK Financial's

00:43Michael Merritt on the Road to Housing Act's impact on homebuyers. Okay, let's dive into today's topic.

00:50Logan, welcome back to the podcast. It is wonderful to be here. I'm hoping that

00:55this is the first weekend that we just really don't need to like check what's going on in the

01:03news. Wouldn't that be nice? Like your oil, you don't have to look at oil stuff all weekend?

01:08Just, you know, we don't need to like missiles and drones and this and that, you know, because we said

01:14weekends are for war, right? You know, nothing happens during the market. It's so amazing how

01:19everyone respects the market hours. But as soon as Friday comes and markets are closed, all hell just

01:24breaks loose with all these headlines and stuff. So hopefully we have moved on. You know, one of

01:30the things I do on Instagram is kind of show people these maritime charts or ships and data to show

01:37how

01:37much oil has started to come out. So small steps, we're moving at least in the right direction. So

01:44hopefully that's gone. But today's topic is now that oil prices are down, like last time I checked,

01:5068, 69. And Brent crude is pre-conflict era. Is the worst over for the Fed rate hikes? Like now

01:59that,

02:00you know, we got to the point where Bank of America thought we could have three rate hikes

02:04in 2026. That was like a bit aggressive. But, you know, I think today's discussion is,

02:12can the Fed avoid any or is it just one? And we finally had some Fed governors talking about it.

02:20And we'll just kind of review this for the second half of 2026, now that we are going to be

02:27past June

02:28soon. And this is the time last year where housing data started to improve itself. So we'll see

02:35how the second half goes with this premise.

02:37So this is something that you've set up because you're like, listen, the Fed governors who were

02:42hawkish were pointing to the fact that we had this inflation because of the war. So if the conflict's

02:47over, then you were like, you know, okay, what do they say now? It seems like we should hear from

02:52them that they're not going to go so hawkish. So what did we hear today? We had the first one,

02:57maybe. Tell us what he said.

02:59Yes. We've had two Fed governors speak recently. Yesterday was New York Fed Williams. And Williams

03:07kind of says kind of the typical market line, you know, we'll get to 2% inflation a little bit

03:13later. We'll get to 2%. And he says it's kind of the same thing all the time. But his premise

03:18was

03:19what we had talked about in the last podcast that he believes like a lot of the Federal Reserve

03:24governors believe that the tariffs are a one-time price off hit. So it'll come the first half and

03:32then it'll, it'll start winding itself off. We have this AI inflation. It's funny how we started

03:38the year with AI disinflation because all the jobs are going to be taken away. But I mean, I do

03:43believe

03:43that I saw a presentation on robots, like, like literally 30 years down the line, man, this is

03:50going to be a real thing. We saw that movie too. That didn't end well either.

03:54Like, I robots and, and, and terminator put together. It's not good for human society,

04:00but I digress. He kind of said, okay, so we're going to work off of that. And now that the

04:06oil

04:07prices are lower I'm not too worried about inflation breaking out. So I think over the next year we'll,

04:17you know, the growth rate of inflation will come down. Williams is not considered a hawk. So it doesn't

04:23really kind of matter what he says, but Neil Kashkari, one of the four. I mean, just, just to simply

04:30put

04:31Neil said, I have one rate hike priced in for 2026. So he was one of the dissenters. He was

04:39one of the

04:40people that wanted a rate hike, but he's not talking about multiple rate hikes, which is a win. I mean,

04:48we'll, we'll take it as a win. We'll take it as a win. There's also a second discussion talking point

04:55here. Some people say, well, the fed's going to hike rates, but the long end of the bond market

05:01won't go up because this is Kevin Warsh. His fight is against inflation. And because of that,

05:09the 10 year yield could go a lot. I mean, let's be all honest here. Everyone cares or should care

05:12about the 10 year yield more than the short-term pet funds rate, but nobody wants the long end

05:20to, to go so much higher that it impacts the economic data. So some people say, well,

05:26Warsh came in and he's going to hike rates and that doesn't matter because the 10 year yield won't go

05:30up. When we talked about when the 10 year yield is at 460 around there, and I said, a lot

05:36is priced

05:36in right now, you know? So it really, it's really going to take a lot to take this higher. Now,

05:43of course the conflict went on and all this inflation came out and better yet, but that's

05:47gone now. So for Kashkari to come out and say one, I thought that was a, that was a way

05:55of him saying,

05:56Hey, Bank of America, homies, where are you going? Because they said three, right? They said three,

06:01Beth Hammock, Beth Hammock would probably do six, but that Beth Hammock is just one person,

06:07right? So you had a 50, 50 split and a real good question. Somebody said on our last podcast,

06:13we said that the San Francisco fed has this data and it said it was the most hawkish fed meeting

06:19post COVID and person said, but there was other meetings where they hydrate. Yes, but they're

06:24talking about a surprise, you know, a surprise to the hawkish side, every component in their,

06:29in their tracking thing was very, very hawkish in that. So the market priced in, okay, multiple

06:36rate hikes and the fed being aggressive, but now I'm in the 10 areas, 437, 439, just hovering around

06:43here. It's still above what we saw pre-conflict. This is probably a good place to be in right now

06:52compared to let's say, uh, 13 days ago, 13 days ago. We didn't know what was happening with oil.

07:01Nobody believed that the conflict would be over and we were running into the inventory problem.

07:05Uh, uh, now ships are flowing. What are we always talking about? It's all gotta be about the ships

07:10flowing. I always put these charts down. Look at that. Ships are moving out there. We're getting

07:14supplies. So if we can take the worst case scenario off multiple rate hikes, then, um, maybe they can't

07:23hold off on any rate hikes until they'll see is the, is the AI inflationary problem going to be too

07:31much? I mean, Apple just raised costs on all their products because of chip shortages, but you know,

07:37the AI people aren't getting their public, uh, uh, popularity contest winning because there are

07:44not electricity, you know, uh, uh, rates, all these things, the capex spending is just crazy. But

07:51in any case, I think this is a good spot to be in going out for the second half because

07:56now we have

07:57a little bit of a tug of war, but we have a little bit of a tug of war to

07:59me. That is a little bit more

08:01on the dove side. Now, now that the conflict is over, you know, we still have to hear from Beth

08:07hammock. We still have to hear from Austin Goolsby, the Chicago fed with his smirk. And we still have

08:13to hear from Lori Logan, the Dallas fed. But if one of the Hawks basically said, I just got one

08:19and now oil prices are lower. You know, if the disinflation now starts from the tariff winding

08:26now, it's, it's really hard to get core inflation to really start to break out in a big way.

08:32Headline inflation is going to start falling because of oil prices. But I think

08:35it was a good way to end the, end the week with just one of the Hawks saying just one

08:42kind of priced in. Okay. So I'm always kind of confused about this because I'm not a market person

08:49because, okay, so we have, we have the fed funds rate. We have what the 10 year old does. And

08:53we have

08:53mortgage rates. When you say it's already priced in or sort of already priced in, if I'm sitting

08:59out here running a business, do I say that means that I probably won't see a rate hike for mortgage

09:04rate hike, even, even if, you know, the 10 year yield goes up or whatever. Do you feel like you

09:09could say that if it's already priced in, does that mean we are where we're going to be?

09:13When, when we were at 6.75 with where the spreads were in, that was pricing in a lot of

09:19hawkishness

09:20back then and a lot of bad scenarios with the conflict. So that had to keep going on. Now,

09:27once the conflict is over, what is it? We've gone from like 4.68 to 4.39. Okay. So the

09:34worst was

09:35to me priced in then. There's nothing in the federal reserves talking points that would be like a

09:42reacceleration of a huge rate hike cycle. And so the spreads shouldn't get worse. If yields

09:49start to head up like they did, you know, in 2022. So to me, it's, we always talk about ranges

09:55in every

09:55single year, right? You know, more last year, mortgage rates seven and a quarter to 5.75. We

10:00were seven and a quarter to a little bit close to six. This year, 6.75 to 5.75. The

10:06high was 6.75.

10:08The lowest 5.99. We're, we're just a range of back and forth. This is Fed policy. Fed policy keeps

10:15us

10:15in this range and we'd kind of work it off then. But when we were above 4.60 and tenure

10:21and mortgage

10:22rates of 6.75, a lot was priced in, like a lot of bad things happened to get us there.

10:26I don't think

10:27we have to worry about that anymore. So now we just work off the economic data, inflation data, labor

10:32data, retail sales, all these things. And the Fed's going to be a little bit mindful that the

10:37economy doesn't reaccelerate because I think the last thing they want to see is wage growth picking

10:43up. I know Kevin Warsh isn't really worried about that, but wage growth picking up makes it harder

10:48for them to get to their two, 2% inflation target. So I, I, I do think that's great because

10:53like last

10:54week it was the whole, was that last week or this week? Bank of America was like three rate hikes

10:58this

10:58year and you wrote an article about why you're like, that's not going to happen. Um, but I think,

11:03you know, if you're looking at it and going three rate hikes, if you're out there running a business,

11:06you're like, that is definitely going to affect, you know, mortgage rates at some point, but one

11:10rate hike, you're like, yeah, I mean, we could be just where we are right now because it's already

11:14priced in. That's what I'm trying to get. It is. And again, if you, if you have a few weaker

11:20jobs data,

11:21you know, then, you know, yields could go down. You know, I mean, I was surprised that the 10 year

11:26yield got below 4%, but we have to remember that we had one really negative jobs report that had a

11:32lot of one-offs in there and a lot was going on in February. So it took the 10 year

11:37yield lower and we

11:38broke that key technical level, which means bond traders are all going to go in at the same time

11:42because they run as herds and we got there and then, you know, the conflict happened and the

11:48federal reserve was all about two more rate cuts, maybe three at toward the end of the year. And then

11:55maybe we get back to what, what it was maybe a few months from now. The one difference is that

12:01the labor data has improved. That to me is the biggest story for rates this year, that if we

12:06were still running at eight to 15,000 jobs per month, uh, we'd have a whole different conversation,

12:11but because the federal reserve has told us their break-evens, the number of jobs needs to be created

12:17per month to keep the unemployment rate low is like 33,000. That's just my, that's my take on it.

12:24Having 76 or 78 or 90,000 is like, oh my God, hallelujah. We're, we, we're, we're, we're back

12:32Mortimer. We're back Mortimer. That's what we should think about. So in any case, that to me can keep

12:38rates elevated, especially with inflation up now, before then it was just that the labor market was

12:43softer and didn't matter what inflation was doing. So it's back to a fighting chance now, you know,

12:50where the conflict on top of the inflation data and the jobs that again, all that, there was so

12:56much negativity, you know, getting that 10 year yield above four 60. And it was only for a very

13:00brief amount of time, right? Because the fed is anchoring their fed funds rate really to neutral

13:05being around 3% or three and a quarter. So it's hard for the 10 year yield to go up.

13:11This is why I

13:11say rate cuts are important. You know, people always got rate cuts. Don't matter. Rate cuts are so

13:15important to the, to the scheme of things. And it's, to me, it's 65 to 75% of where the

13:21fed funds rate or where mortgage rates and the 10 year yield could range it. And then the spreads,

13:26right? The spreads are the story of the year, right? So we, we would have been well above 7%

13:31already many, many months ago if it wasn't for the spreads. So one of your famous themes is labor

13:37over inflation. You even have a mug. People make you merch for this. You, you love it. And then,

13:42you know, what was it about a month ago? You're like, actually right now it's, it's not labor

13:47over inflation. So where are we on your labor over inflation? Maybe it's always labor over

13:51inflation that, that never changes. It's just that the labor data got better. And if the labor data

13:57is above the feds target, you have no more labor over inflation argument. Now, if the federal reserve

14:03came out and said, our break-evens are 175,000. Oh, well we're, we're totally underperforming.

14:11But when the federal reserve early in the year said, this is where we think job growth should be

14:17with labor force growth. Okay. Well, if we're not doing eight to 15,000 jobs per month, then the

14:22federal reserve does not care, you know, about the labor market breaking. So because we had that one

14:29negative jobs report in February, that kind of messed things up on, on the, on the argument side.

14:37But if you take the totality of all the jobs in the first few months of it's, it's well above

14:43the

14:43feds break-even. So the labor over inflation is still 100% here, but the data got better, right? So

14:50if

14:50the data got better, then you, you lost that argument, which last year wasn't the case. Last year, the

14:57federal reserve kept on saying labor market strong, it's solid. And then all of a sudden, you know, job

15:01growth is slowing down, slow down. And then all of a sudden you had negative reports and then everyone

15:04looks at the fed and go, what are you talking about? So now it's a little bit different because

15:08they told everyone, these are our break-evens. If we're above this, we're okay. If jobless claims

15:15are low, jobless claims came out again, low, not breaking. So I always said the labor over

15:21inflation is always going to be number one, but the labor data got better and it got better above

15:25the feds break-evens so that you lose the whole 2025 argument just on that. Even if there were no

15:31tariffs and there were no conflict, we would still be talking about labor over inflation,

15:39but the labor market didn't break. So we're not going to get that next wave lower that people

15:44want. So still number one, but you lost that argument when the data started to improve.

15:50Thank you for clarifying. Cause I was like, what do we have to get new merch now? Also, everybody

15:54loved all of your references, your agenda X references from what to the podcast that came out on

16:01Thursday. Yeah. Yeah. I mean, we had Buck Rogers, color me bad, you know? Uh, so, uh, it's, uh,

16:08multiple in there yet. Like we have a lot of, listen, when we go, when we go to events and

16:11we do that

16:12whole skit about five generation of home buyers, and we always say the greatest generation of all

16:17Gen X, it's the loudest. It's the loudest because guess what? We're, there's a lot of people who take

16:24the average age of somebody in mortgage and real estate. It's a lot of Gen X people. So naturally they

16:28would get it. So, uh, uh, bringing back some nostalgia, you know, and, uh, people understand

16:35the music choices and everything. A lot of people come to my Instagram just for the music choices.

16:39I pick for the posts, you know, you do have really great music choices. I mean, first of all,

16:44you, you do it so often and then, and then it's just like perfect. Yes. Yeah. So, so we have

16:49sayings

16:49and again, the whole labor overinflation thing was to talk about, you know, why the 10 year yield

16:54could go lower last year because the labor market was showing some softness shine. So here, same

16:59thing, but the labor market got better. Right. And that's why we we've talked so much in this

17:04podcast about break evens. The federal reserve says, this is all we need. We're good. We, you're

17:09not going to change our mind and we're up here now up here to some people might not be good.

17:14It doesn't

17:14matter what you or I, or anyone else thinks they make the rules. That's their break events. They told

17:18everyone about it. We kind of go with that, but for the rest of this year though, if the labor

17:24market

17:25did get softer, if again, to me, it's always about jobless claims, the federal reserve is a big

17:30jobless claims, people in jobless claims are still historically real. And just remember the

17:33demographics of American economics are much different now. The baby boomers are leaving

17:38every single month. Right. So you need to replace them. Right. We don't have robots taking all the jobs

17:44yet or, or any of the AI stuff. So it's hard to get the unemployment rate to go up unless

17:49you,

17:50you really start to lose, uh, millions of jobs and stuff like that. And just always remember

17:54one and a half to 2 million people lose their job each month, each month, each month, they lose their

18:00jobs. This is the job creation on top of that. So we'll see. We'll see how that goes. I think,

18:05uh,

18:05it'll be more interesting to look at the jobs data after the world cup. We probably have one more job

18:10support that might have some world cup data, and then we just take it from there. But

18:15the worst, it's probably over on the rate side. Uh, uh, unless the economy really starts to

18:22accelerate, if wage growth starts to, if wage growth starts to accelerate, you might get some

18:26more hawkish Fed talk because what do we say, Sarah, if you make more money, if you're, you're

18:32going to buy more stuff and you're going to buy more stuff, the federal reserve is going to get mad

18:36because then it rises up prices. But if you look at the history of inflation post-World War II,

18:41inflation is growth. I mean, that's, we see it. I mean, we had World War II inflation. We had the

18:45stagflation of the seventies. We had COVID inflation, and now we have tariffs and wars,

18:51you know, uh, but, uh, uh, you don't, you don't have to fear like inflate, like you don't have zero

18:57inflation or deflation. That's very rare in America though, to have that. But it's good. I think it's

19:02going to be a very interesting second half now, just because the conflict is over and oil is down to,

19:07to 68. I'm going to, I'm my, my, my, my bottom end talk, like call for oil was 67, right?

19:16We used

19:16to trade between 67 and 72 a lot because that's when the U S came in and started buying oil

19:21to,

19:22to, uh, uh, uh, refuel the reserves. Uh, um, but, uh, we don't have that now. So maybe I'll be

19:28wrong.

19:29Maybe we do go below 67, but we're kind of in an area right now where it's perfectly fine,

19:35uh, uh, for everyone. And sooner, sooner over time, uh, gas prices start to come down and

19:41voila, headline inflation starts to cool down. It's the core side that we're going to focus on.

19:46Uh, uh, and, uh, uh, I know Fred Williams talked about, well, I, I believe the rent disinflation

19:52story will still be here. But, uh, uh, again, if wage growth started to pick up again, I think the

19:58fed starts to get more hawkish. We're not there yet. We will take it. I will appreciate it. And when

20:03this

20:04goes live, it'll be the week of July 4th. So the perfect time to, uh, maybe get economics,

20:09uh, getting back to it's more boring, uh, conversation, which I know you always,

20:14you always spice it up, but I'm just saying like economics done. Right. It's terrible.

20:18You're absolutely right. Economics done. Right. Should be boring. It is not designed to be this hot,

20:23fun, sexy thing. Trust me. It is just not creative for that. It can make it like, you know,

20:30entertaining in that sense, but, and always remember it's July the 4th. That means,

20:34you know, two weeks after that, the tracker data gets hit, right? Cause people go on vacation

20:39that you're not working in a full set. You know, if people will go on Christmas or new year's and

20:45July

20:46the 4th. So take the, take the, uh, tracker data a little bit, uh, uh, in the following weeks, but

20:51here we are. And so it's, we're much better spot than what we are. Hopefully I don't jinx this and

20:57something terrible happens over the weekend, but you know, shut the show 24 off right for the

21:04second half. Let's just have like, let's have the Smurfs or something or let Chloe and Jack Bauer

21:10have a break. Okay. Take Chloe and Jack out and put, uh, uh, AC Slater and Zach and

21:17saved by the bell back on and, you know, ride the last six months. Let's do it. All right,

21:23Logan. Thank you so much.

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