Existing home sales and rising home prices

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks to Lead Analyst Logan Mohtashami about existing home sales, which shows home prices have reached an all-time high.   Related to this episode:   Existing home sales decline in June as prices reach another record high  https://www.housingwire.com/articles/existing-home-sales-decline-in-june-as-prices-reach-another-record-high/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   The Top 5:   Synergy One to take over Newrez distributed retail mortgage operations  https://www.housingwire.com/articles/synergy-one-to-take-over-newrez-distributed-retail-operations/  Why aren’t mortgage rates lower?  https://www.housingwire.com/articles/mortgage-rates-fed-hawks-2026/  Why it will be hard to get mortgage rates over 7%  https://www.housingwire.com/articles/why-it-will-be-hard-to-get-mortgage-rates-over-7/  CFPB seeks input on mortgage disclosures and TRID rules  https://www.housingwire.com/articles/cfpb-mortgage-trid-disclosures/  NYC office conversions face scrutiny after Pfizer HQ incident  https://www.housingwire.com/articles/nyc-office-conversion-scrutiny/   Want more from Sarah? Don’t forget to 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

Transcript

00:10Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about existing home sales

00:16and the fact that home prices are at an all-time high. Before we jump in, here are the top

00:20five

00:21trending articles on HousingWire.com. Leading that list is Synergy One to Take Over New Res

00:26Distributed Retail Mortgage Operations, followed by two mortgage stories, both by Logan. One is

00:32Why Aren't Mortgage Rates Lower? And the second is Why It Will Be Hard for Rates to Get Over 7%.

00:38Then we have The CFPB Seeks Input on Mortgage Disclosures and Trid Rules. And finally,

00:44NYC office conversions face scrutiny after Pfizer HQ incident. So many great stories over there.

00:50Okay, let's get to today's topic. Logan, welcome back to the podcast.

00:54It is wonderful to be here. We just had a like, funny discussion about what would it look like

01:00if we had an economic Love Island show? You know, yeah, it was a funny discussion, right?

01:06And all the like, all the economist guys, and then, you know, and then we could fight over charts,

01:12you know, and which chart wins and stuff like that. Yes, lots of things happen off air. Okay,

01:19well, I want to dig right in here to the existing home sales report, because the headline for a lot

01:24of

01:24people was the fact that home prices are at their all time high, which really, you know,

01:30affordability is something everyone's thinking about. Of course, we have that that recent ICE report.

01:35So I wanted to get your high level view. What did you think about the fact that home prices are

01:41now

01:41at an all time high? You mean you mean home prices didn't crash in 2026? Like all those people talked

01:46about? You know, I'm shocked. Okay, so this discussion is going to be affordability has

01:54affordability got better. And I think the, the unsophisticated narrative focuses only on prices,

02:02right? And I think, to me, it's also a not only an unsophisticated take, it's also a lazy take,

02:09because we have these people, you know, like China's home sale, home prices are back to 2006

02:14levels. And some people are like, Oh, my God, look, China's, China's affordable, you know,

02:19people should be cheering. I go, homies, let me explain to you deflation in housing. We've had,

02:27we've had over 80 years of history on this deflation. And with how housing prices work is

02:35usually something really bad is happening. And, you know, like, like, I always try to stress if I

02:41take 2007 and 11 out of the equation from 1942 to 2026, that is a very, very long time. You

02:49know,

02:50the only time home prices fell 1% was zero, right? In 1990, it was down 0.7. In 1991,

02:58it was 0.2. And,

02:59and those, you know, we had some credit stress in there in that data line and early recession,

03:05too, but it just doesn't work that way with housing in terms of nominal home prices on a

03:13national basis falling. So China has a demographic cliff that started in 2015. That's why we say like

03:19almost in a sense of paper, paper tiger. And they're, they're, they're gone. They're never

03:25coming back. Okay. So that one child rule hit them and they completely overpushed the real estate

03:31sector and their GDP in that, in that country. We're a much different, you know, China, Japan,

03:37and Europe, their primary populations are like declining for some time. U S we still have

03:42Gen Z and millennials. So nominal home prices can't be the equation. Now I did something very

03:51informative. They said long-term affordability can come back to housing. If one of these three

03:58things happen, number one, incomes rise 19%, that's not going to happen. You know, obviously this year,

04:04you know, incomes are running three and a half in some cases for, uh, so, so that's, that's not going

04:10to occur this year. Uh, nominal home prices falling 16% nationally. That's not going to occur. Just

04:17remember in 2008, the worst, the worst housing crisis in over a hundred years, it was 12%. And you had

04:26foreclosure starting in 2005, six, seven, eight, then the job loss recession happened and active

04:33inventory was already at 4 million. The home sales, there's a whole, a lot of bad stuff happened for

04:38that. That's not always going to happen. But the third one was mortgage rates getting down to 4.99%.

04:46Now out of those three, what has the most likely chance of happening within this year?

04:53Well, it would, it would, I mean, I don't believe mortgage rates can get down, uh, below 5.75%, but

05:00technically if you had to pick the three, you know, it would be that. And that just gets you back

05:05to the

05:05long-term affordability. But Sarah Wheeler, ask me why this is happening.

05:09No, I'm very interested. Why is this happening?

05:12Because the last two years inventory has gone up. Now this, remember this equation, everyone don't

05:21just focus on prices. Inventory has gone up. Price growth has slowed down. Wages have outstripped home

05:29price growth. And then of course, any dual household income put together, housing becomes a little bit

05:35more affordable for them. Right. And because of that, for example, let's just say 2021 home prices

05:45went up 20%. That's what 19% it went up, but the next three years, home prices were roughly flat.

05:52So when you average up for four years, we get back to my affordability index model that I specifically

05:58set for years, 2020 to 2024 and said, guys, we're going to be okay in housing. As long as home

06:04prices

06:05don't grow more than 23% in this five-year period, that's 4.6% nominal on adjusted to inflation

06:12basis,

06:12a little bit lower. We'll be okay. Okay. We completely got blown out of the water. I only

06:18did that because that year's 2020 to 2024 was a unique period. But as every single year that goes

06:24on, as long as prices stay lower than wages or prices are lower than the rate of inflation,

06:32it is helping with affordability. And that can kind of explain housing demand holding up a little bit

06:38better this year, even with rates going up at 1.76 basis points. So you have to put the whole

06:44enchilada because I know what I saw too. Home prices are an all time. Gentlemen, every single year

06:52since 1942, you could have said that outside of, you know, one period in time in history where there

06:58was a calamity and a lot of chaos, but millions and millions of people buy homes. We still have

07:05near 5 million total home sales. I always say this because the peak, the peak in the last decade,

07:13when mortgage rates were three and a quarter to 5% and housing was very affordable because prices fell

07:19and rates fell and everything, the peak was around 6 million. So you're missing a million buyers from the

07:27peak of the last decade when it was like the most affordable at that point. So just remember home

07:34buyers are different. They tend to make a little bit more money. This is why I'm not the biggest fan

07:39of median income because people go, Oh, the home prices are median. No, listen, dual household incomes,

07:44people come on. Right. That's how, that's how you get a lot of these, uh, home purchases,

07:48married couples, but going out in the future, don't fall for the, well, price has just hit an all time

07:54high. And that means housing is affordable. It's not getting better because you don't have an

07:58equation variable of like declining prices in an, on a nominal basis. You could do it on a real home

08:05prices, but that's just not the way to look at affordability. So ice was correct. All these

08:11headlines about prices are at all time highs. And you know, that's, that's, that's, that's not just a

08:17working variable because we are getting things a little bit more affordable and it's going to be a

08:21benefit for not only 2027, but 2028 and 2029. The only thing I could say is that price growth is

08:28firming up a little bit. It's going to be harder for me that, uh, to get my negative 62 basis

08:35points

08:35price forecast. I know a lot of people are focusing on like list prices and how's that working out for

08:41everyone? Like what list prices are negative year over year and people keep all home prices are in

08:46every single month. Well, why are, why are the prices up here? Because you're focusing on a list price

08:51not an actual sales price. There's a difference, right? And you could see it on a, on a, on a

08:57national

08:57basis. These, these price indexes are still slightly positive on a year of year basis. I thought it would

09:02be a little bit softer on the pricing side. So we'll see how the rest of the year goes. Um,

09:07but

09:08don't, don't put all your eggs into the home price is the only thing variable because you're going to

09:12get lost every single time. And you can't explain why we have near 5 million total home sales still

09:18in the second least affordable period in history. Okay. So, but, uh, looking at that ice, um, report,

09:25I mean, they are, they are making that correlation between, um, home prices and, um, and wage growth.

09:33So you're, you're saying wage growth is only what three, three to 4%. So from your perspective,

09:38why is that okay? But I mean, it's getting better. I mean, this data line was much worse in 2022,

09:44where rates were at 7%. And because wage growth is outstripping home price growth,

09:49the last two years, affordability has gotten better. So the, the narrative that affordability

09:53is worse because prices are at all time highs is incorrect, unsophisticated. And it's also lazy.

09:59You have to put all the aggregate things that go into the, uh, affordability index, not just take

10:05one off. Um, and again, I don't believe mortgage rates could get below 5.75% with neutral policy

10:11being at three. So this has to work with possibly low sixes or high fives, unless something changes,

10:17but we have shown that it can work in the low sixes, but every year that goes by, it just

10:23gets

10:23a little bit more affordable and you chip away at that ice data, right? As long as prices don't go

10:29above a wage growth, it's a positive, right? This is why I loved last year. And this year, um, last

10:35year,

10:35the price forecast was 1.77. I think we ended like 1.3%. So it looks right to me this

10:40year.

10:41Our prices might be a little bit firmer than I, than I thought it would, but still wages are

10:45out. So every year it gets better and better and better and demand starts to form up a little bit

10:51more. I always like to refer this to the 1980s, the 1980s, the early 19th was the worst affordability

10:56in housing ever, right? Home prices escalated faster in the late seventies, then COVID and mortgage

11:02rates got up to 18%. So it's a really big gap. Um, but even back then we had two early

11:08recessions in

11:09the 1980s, both recessions drove rates lower. Both times home sales go vertical, go back and look at

11:15that existing home sales chart. The worst affordability times during two recessions with

11:20more inventory, worse credit data sales went vertical. It's really hard to get sales to go

11:25vertical in existing home sales, but it happened twice back then. So as long as prices are in check,

11:31wages grow, households forms, things get better. So don't put all your eggs into the home prices are

11:37at an all time high and nothing's getting better, uh, equation. I think the affordability conversation

11:43really splits when you're talking about first time home buyers versus people who have been homeowners

11:48this whole time, right? We've got equity, we're older, we've, we've done things, but you can see

11:54how that first time home buyer, it is hard, even as, um, wages are rising to outpace the home price

12:01growth. And now with, with that, for, for me, I feel like it's a, it's a first time home buyer

12:07affordability problem. Mostly. What do you think? And the last two months home, first time home buyer

12:13percentages has grown on a, on a, at a clip faster than any time in the last few years.

12:20Uh, from what, from what data? Just from the NER, uh, NER survey of the existing home sales report,

12:27like last year, last, not last year, last month, uh, first time home buyer percentage was up to 35%.

12:33That is a historically high number over the last 15 years. So I always say that's a denominator effect

12:38from 30%. This, this last report is up 33% from 30. So we, we kind of have a low

12:44base, but again,

12:45generally what I tell people when you have dual household incomes, we're not talking about single

12:52first time home buyers, a dual household incomes takes the affordability equation away. Why? Because

12:58if you, let's just say, let's use the NAR, you need $105,000 to buy a house in America.

13:06Well, if a single person makes 70 and their wage growth is 4%, it's going to take a while, right?

13:11You know, however, when you have a dual household income, that explains why we have near 5 million total

13:17home sales and that we're a million off from a period in time where rates were lower and affordability

13:22was better. So always remember the dual household income factor. And, and, you know, just because

13:28Gen Z is coming into their first time home buyer age, I think, uh, I Steven talked about that. It's

13:33a

13:33very, it's a high percentage of Gen Z, just the sheer demographics of that. That's why in the last

13:39decade before you knew me, because I was too much of a loser to be nominated, you know, for housing

13:44wire,

13:45rent, date, mate, get married three and a half years after marriage, kids, dual household incomes,

13:53first time home buyer, millennials who were supposed to not have enough money or student loan debt.

13:59And we're the biggest home buyers in America from like 2013, all the way on only when rates get above

14:047% that they lose that title just because of the sheer size of it. Demographics actually matter more,

14:09but that dual household income gives you that income power. And that's how you have near 5 billion

14:14total home sales again, uh, this year, but affordability is getting a little bit better

14:18and better and better. Right. And, and it just chips away time out there. Of course, if you're

14:23a baby boomer and you have like a million equity and you sell your house and you buy something with

14:27a 200,000 mortgage, it doesn't matter what rates are at eight, seven or six, your total payment.

14:32Also, as you get older, your total wages, right? Your, your peak prime age, you know,

14:37earning power is usually like 40, 45 to 54, but we have people still working longer and they're 54

14:43to 65 income ranges is, is, is even good. So of course your total wages and your total incomes

14:49are, are, are, are higher when you get older. But again, that's just a buyer that's Gen X,

14:54you know, uh, uh, are, are the move up buyers in this sense. So just kind of remember affordability

14:59works in multiple facets. So I, I know the headlines were home prices are all time highs and, you know,

15:04but it has gotten better the last two years because price growth is slow. That's what we

15:10like to see. I'm biased, right? The only time I was really ever happy about home prices. I remember

15:15this at a, at a conference in 2019 and I showed a chart and I was like, Oh my God,

15:20real home prices

15:20are negative. I am so happy. And people were like looking at me like at two devils on my shoulders.

15:25Like, what does that mean? I said, no price growth slowing down as a positive. It's just really rare to

15:29get nominal home prices, but slower price growth, wages go households for, there you go. So

15:34it is better. Of course, COVID unhealthy, very unhealthy, savagely unhealthy. Why we had more

15:41home sales, but the price we had to pay for that was just too much. I really feel like, um,

15:48when you

15:48think about household formation, right? Because you're, you're always talking about the demographics

15:52of housing, um, the people's ages, but also, you know, when, when they do get married, when they do

15:57start a household. And I feel like COVID slowed that down for many people, right? Through some people,

16:04right off the track. And so it's like, you know, we need to focus on, on those, uh, getting, getting

16:09people. We need a love Island for housing. That's what we need. Match people up based on, do you want

16:14to buy a house? What kind of house do you want? Let's just go from there. You know, let's start

16:18there and, and jumpstart the housing. It's funny. You should say that because, you know, there's these

16:23articles that, you know, like half the people under 30 are living at home. The same kind of stuff that

16:29you saw in the last decade and kind of remember that, you know, we get, we, we, we go to

16:35school

16:35longer. Um, we start our careers a little bit longer, but we also get married longer. So I have

16:41this marriage chart going back to the 1950s and sixties, all the way up to like, you know, 2018.

16:45And you could see the shift curve of people just getting married older and older. Of course there's

16:50the world war two generation, people got married much younger and it just, it takes longer. I mean,

16:55the whole years, 2020 to 2024 thing that I talked about all the way, God, back in like 2012, 2013,

17:01that household formation has to work itself, but people get married later. So the ages 32 to 35 are

17:07really your first time home buyers. So ages 28 to 35 will be your biggest demographic patch,

17:12but that's years 2020 to 2024. Right. So you could see that on the demographic. So people do things a

17:18little bit later. They still are normal people. They buy homes, you know, and, uh, uh, nothing abnormal,

17:24but affordability got really, really bad in a period of time where qualified mortgage makes you,

17:29you've got to be legit now, right? There's no more fluff anymore. This is not like the 2002 to 2005

17:35housing market where anybody can get credit. You are legit. So things, uh, move slowly. But overall

17:41the year considering everything that's happened, it's a positive because inventory is up, right? We're not

17:47quite back to normal, but we're at a level to where I've always talked about, I've written about for

17:51years. As long as the NAR inventory data is 1.52 to 1.93 and you have over four months

17:58supply,

17:58my low inventory discussion goes out the door. It does not exist in my mind. There's enough supply

18:04to keep the supply and demand equilibrium working. Uh, people will tell me, Oh my God, there's no

18:09homes to buy. And I go, homie, we had 2 million more existing home sales when inventory is at all

18:14time lows. So the functionality of housing is much different than in what's decades before we,

18:18we close transactions faster. We do things much faster now than we did in previous decades. So

18:24don't put all your eggs into the, no homes can't buy sellers or buyers that buy a home to get

18:28it.

18:29The things move faster and we go with that. Okay. What else is going on this week that you're

18:34paying attention to? Well, there's something called the Iran conflict that's, you know,

18:38still going on. Well, you know, it's interesting today that, that four 60 level that we talked about

18:43of the last podcast that kind of, it held again. Uh, um, you know, considering how many missiles that

18:49we've shot and things that we've blown up for oil last time I checked was 72, you know, so it's

18:55much

18:55different than, um, than what we have seen, uh, the, the previous time. So, so to me, again, oil traders

19:02just don't buy into this. And this was a very good test. We had back-to-back bombings. We had

19:09Trump

19:09say we're no longer wanting to deal with them. I think what, what people might misunderstand is that

19:15some people believe Iran doesn't have the leverage it thinks, and they're just trying to nick and pick

19:22and, you know, they're, they're not serious about, you know, maybe taking this to the next level.

19:26They always threaten, well, we're going to, we're going to block the other, uh, uh, uh, avenue for

19:32ships and everything. But so far we haven't gotten to that next stage, nor can the U S actually start

19:38a

19:38war without Congress, you know, uh, reauthorizing the conflict and, and, and, and getting money for

19:44it. So that might explain why oil did not really take off the, even with, I mean, we went from,

19:51you know, uh, we talked about, I thought 67 would be the low. Uh, we didn't quite test that level,

19:57but we've got a little bounce. That's nothing. Like if, if there was no firings or shooting oil,

20:03getting back up to 74, 75 would be perfectly normal. Nobody, nobody would think anything of it.

20:07But, uh, it is interesting how the 10 year yield did get the four 60. It's bounced off that level.

20:14Last time I checked was like four 53, four 54, but oil prices are down a little bit and a

20:19lot.

20:19We, this is 24. This was a 24 Wednesday night, uh, Tuesday night, and most likely Thursday,

20:25we might get another, but, uh, that that's been very interesting for me to see, uh, out there.

20:31And of course, when yields go down, you know, uh, rates get a little bit better, but, uh, that,

20:35that that's, it's, it's been a very fascinating week with the conflict and how traders are looking

20:40at this, uh, whole process. Of course, the 10 year yield is elevated compared to where oil prices were

20:46like, you know, uh, uh, when the con before oil prices took off, the 10 year yield was much lower

20:51again, and we've covered this, uh, uh, so much. It's really fed policy has shifted, but, uh, uh,

20:58I can't wait for the July fed meeting, Sarah, because I think it's going to be very interesting

21:03on, on, on many fronts, especially how the communication will go.

21:06It is going to be fascinating. And of course this, um, we're, we are recording this on Thursday

21:11morning. It'll be heard on Friday. And as we always say, you know, what is it? Weekends are

21:16for war. It wasn't last weekend, but it seems like this weekend might, might, uh, go back to that norm.

21:21You never know who knows. We'll, we'll, we'll take it one day at a time.

21:25We will. Thank you so much, Logan. Appreciate you.

Category

Transcript

Comments

Recommended