Mortgage rates hit yearly high

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about mortgage rates hitting a yearly high as the Iran conflict continues to escalate.   Related to this episode:   Mortgage rates hit yearly high as Iran conflict escalates  https://www.housingwire.com/articles/mortgage-rates-hit-yearly-highs-as-iran-conflict-escalates/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   The Top 5:   Mortgage rates hit yearly high as Iran conflict escalates  https://www.housingwire.com/articles/mortgage-rates-hit-yearly-highs-as-iran-conflict-escalates/  Voters in all parties support federal housing help beyond the ROAD  https://www.housingwire.com/articles/voters-battleground-districts-support-stronger-federal-housing-actions/  ‘Tale of two’ Miami housing markets reflects changing priorities, international demand  https://www.housingwire.com/articles/tale-of-two-miami-housing-markets-reflects-changing-priorities-international-demand/  In DFW, housing affordability slips even as builders report strength  https://www.housingwire.com/articles/dfw-housing-affordability-wall-street/  House passes bill to ease banking regulations  https://www.housingwire.com/articles/house-passes-bill-banking/   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

00:12Welcome, everyone. My guest today is lead analyst Logan Modashami to talk about mortgage rates

00:17hitting a yearly high as the Iran conflict continues to escalate. Before we dive in,

00:21here are the top five trending stories on HousingWire.com. First is Logan's article

00:26on this topic. Mortgage rates hit yearly high, followed by voters and all parties support

00:31federal housing help beyond the road act. Then we have the tale of two Miami housing markets

00:36reflects changing priorities and international demand. And another local market story. In DFW,

00:43housing affordability slips even as builders report strength. Finally, we have house passes

00:48bill to ease banking regulations. You can read all of those with the HousingWire subscription,

00:53and you can get a 20% discount with the code PODCAST20. Logan, welcome back to the podcast.

01:00Holy conflict 2.0, Batman. Sarah Wheeler, imagine if I told you late July, we'd be in a conflict in

01:12the Middle East. Brent crude oil is above 100 for the second time this year. We've had 13 straight

01:21days of bombing. The Houthis are now attacking ships in the Red Sea. And the Federal Reserve has gone

01:32completely hawkish right before the Fed meeting. And mortgage rates are still under 7%.

01:39I mean, that's pretty great. But they are at yearly highs.

01:44They are at yearly highs. And, you know, the spreads could only do so much, right? Because

01:50the 10-year yield and 30-year mortgage rates slow dance with each other. But, you know,

01:58as we've talked about in the past, the conflict was the big driver of how the bond market reacts

02:04to the news, how it reacts to oil prices going up because the labor market got better and jobless

02:10claims today, the lowest number since 1969. You know, and, you know, you've heard me talk about

02:18this at events. One of the questions that I have gotten in the last, I would say, six to nine

02:24months

02:25at events is, you know, people are saying, well, who are going to buy all these houses? Because

02:30AI is going to take all the jobs. Like something imminent was about to happen that millions and

02:36millions of Americans were going to get, you know, fired like this. And partly, the jackass AI people

02:43keep on telling people this too. You know, unemployment rates are 30 million. Men need

02:50help, Sarah. Men do need help. You don't need to tell me that. Yes. But here, jobless claims

02:57and what I've always said, and I shared with you the article going back 10 years, 10 years during

03:04this time, back then, 10 years again, you know, people said, oh my God, there's 96 million people

03:08out of work because robots were taking all the jobs back then. I was like, homies, guys, where on

03:14this chart since 1900 did all the jobs get lost to robots? You know, job openings were elevated. Job

03:21openings are even higher today than it were back then. So I'm always worried about if you have a

03:25growing economy, you know, do you have enough labor? I mean, Japan has this issue, but unemployment

03:30rates are low. Jobless claims are at the lowest level since 1969. A lot of these weekly datas do have

03:36these offset high prints and low prints. So look for a rebound on that next week. But in any case,

03:42labor data is fine. It's not breaking. Fed's hawkish. Conflict 2.0. This is not 1.0. This is 2

03:49.0.

03:50And then President Trump comes out and says, I'm ready to do the biggest attack ever.

03:56You know, the 10-year yield itself is, last time I checked, is only up three basis points,

04:02right? The spreads were a little bit worse today, but I mean, just in general,

04:05not that big of a reaction because we are here. And when we wrote that article,

04:10we try to highlight all the work going back five years on, you know, inflection points. Like when

04:15the 10-year yield is below 4%, I always say, boy, it's going to need the labor data to get

04:20weaker,

04:21you know, to justify this. And now we are above 460. And the conflict 2.0 has to get worse.

04:28Because again, the velocity of the data changes when you're up here and when you're down here.

04:33You have a lot of movement when you're in the middle. But this is why we always have

04:38ranges with the 10-year yield. Because if the 10-year yield broke over 460, something went wrong.

04:45Conflict 1.0, conflict 2.0. Both conflicts took the 10-year yield above 460.

04:52Today, I think 471, 472 was the high print. The conflict one, I think it was 468.

04:58So a very interesting week on how we should look at, you know, the conflict escalating and rates and

05:0610-year yield and how much damage something like this can do to the marketplace.

05:13I remember when we were, you know, back when this started in February and you're like,

05:16listen, it's all about the duration of how long this goes. And then as it kept going, you're like,

05:20okay, well, you know, if it goes into June, well, if it gets beyond July 4th, well, then it calmed

05:28down,

05:28right? We had a ceasefire of sorts. We had some agreements, whatever. And then the escalation

05:34has happened. And ever since that happened, like, I feel like the message has been, you know,

05:39rates are going up. We're all headed in the wrong direction, but it could be so much worse,

05:42right?

05:43It could be worse. You know, J.D. Vance off the cuff said something that, you know,

05:48I don't know if he meant to say it, but he said, well, we allowed this deal to happen so

05:53we could

05:53get oil supply outgoing again because we don't want, you know, the markets to get. But, you know,

06:00if they don't make a deal with us, we're going to go back in. Literally, that's what happened,

06:05you know, so they are mindful of the old markets, but clearly, you know, they had a little bit of

06:14time to, you know, let oil flow and oil prices came down and they just went right back into it,

06:19to it a very great. And now we're here, but the biggest concern always in these kinds of events

06:26is that somebody makes like a mistake that they didn't really mean to do. And it just escalates

06:34completely out of control.

06:35Like, like qualify that a little bit, because I mean, we've already had the Houthis jump in.

06:39So now we have it on the, on the both sides of the Red Sea trying to get things out,

06:44right? Oil.

06:45So what would, what would that mean to you? If someone makes a mistake?

06:48I mean, for example, when the Iranians, apparently, if this is true,

06:52we're about to sign the whatever deal and they just got up and left, you know, and they just,

06:57they just thought, okay, this, we're just going to go back and forth. And then they,

07:01they don't believe, you know, just from listening to some of them talk, cause I actually, I still

07:08could understand Farsi, you know, and kind of saying that we don't believe the closer you get

07:14to midterms, that Trump will keep on doing this, that they're playing that card. Okay. Well,

07:21Trump didn't taco, right? You know, he just took it to another level. And so many of us,

07:28with Trump's temperament, right? We call it New York bully ball. You know, he could do this with

07:33tariffs, right? You could say 500% increase in tariffs on Friday and take it back on Sunday.

07:39This is a conflict. And when, when missiles and drones and people are dying and things are getting

07:45blown up, it's a whole different ball game. And I'm just, I'm just very, very mindful of another

07:51mistake happening. And then it just becomes this bigger event where we're having a conflict on two

07:56fronts, whether it's the Houthis in the South and Iran. And then, you know, so, you know,

08:02eventually all things come to an end, but this is a very precarious time in this, as we are constantly

08:09day in and day out. And now the president made the threat about something even bigger than,

08:14than was. So, so you can see the bond market reaction the last two or three weeks on these

08:21negative headlines and oil prices going up. They really move off of this. Um, I was thinking that

08:27let's say no conflict, nothing happened going into the year. Can we get a range between 430 and 460

08:33on the 10 year? Well, if the labor data got better and inflation was hotter, you know, the Fed could

08:38get a little bit more hawkish. Clearly that was not the case. The reigning conflict is really running

08:43the show here. So there is a end to this madness. I just always caution people that even if this

08:49ends,

08:49this doesn't mean mortgage rates are going back down to six because the federal reserve itself.

08:55Oh, and they gotten very, very hawkish in a short amount of time. And I think the Lori Logans and

09:01the,

09:01and the Beth Hammocks of the world are, are, are, are enjoying the aspect of market pricing.

09:07A lot of things in two years, 10 years, three months. I encourage everyone go see the three

09:13month chart that's pricing in a rate hike. So, uh, uh, very interesting time, but again,

09:18this is kind of like an offset event, not something on the economic sides, but this is a conflict

09:23thing. So we'll see how this goes for the rest of the week. And especially this weekend,

09:28I can't say weekends are for war anymore. Cause we're running like two weeks straight of, uh,

09:33uh, droning and bombing now.

09:35And that's why we see the market reaction rise because they're, they're doing it during that time.

09:39So let's talk about the federal reserve because you've said like, Hey, they, they really don't like

09:44when oil prices go up, then they talk about a rate hike. It, it didn't seem to work on the

09:50way

09:50down when oil prices dropped. We didn't hear anything of them saying that now that oil prices

09:54are up again, and especially that, you know, over a hundred, is that a level that is going to spur

10:00them to do a rate hike? Sarah, you remember in 2023, I remember I went on CNBC the day the

10:06federal

10:06reserve was meeting and they asked me, what do I think Powell is going to do? I'm going to say

10:11Powell

10:12is going to go very, very hawkish, which are sending yield shooting because the labor market

10:16isn't breaking enough for that. Remember they owe it. That whole theme back then was attack the

10:20labor supply, attack the labor supply. Why federal reserve believes in this old school model. If

10:26wage growth is under 3%, productivity is 1%, that's how you target 2% inflation, right? So we have not

10:33had wage growth get below 3% at all in the COVID recovery. So he got very, very hawkish to

10:4010 year

10:41yield. You broke that key support line and shot straight to 5%. Federal reserve then were like,

10:47whoa, whoa, whoa, whoa, whoa, wait a second. What's going on here? We didn't want this. This is where

10:52playing God to the markets sometimes doesn't work out. And we've had a lot of interesting things

11:00happen. The growth rate of inflation on some of these reports have fallen more than the federal

11:05reserve was looking at. They made that a big deal. They didn't say anything positive about oil prices

11:11falling down, except Beth Hammock said, this is worse for inflation. More people could spend.

11:17Beth Hammock. In any case, so there's nothing there. And now the conflict is in 2.0 stage.

11:23So now it's like, you know, like the last podcast, you know, you know, naturally higher rates and

11:29higher oil prices, they are taxes and they are net interest costs that are designed to slow the

11:36economy or impair to a degree, not a recession, but slow. So it becomes a little bit more tricky for

11:42them because, you know, some people were surprised this morning that the 10 year yield was only up three

11:47or four basis points. There's a lot going on. But again, we are up here. When we are up here,

11:52you need a

11:52lot to get higher. When we are down here at 4%, you know, or under, you need a lot to

11:57get worse,

11:58to get lower. You can, you can have much more velocity in between the middle, but that guy is

12:05fascinating week, fascinating week with rates and everything. And we'll take it one day at a time

12:11and see how this conflict turns out, especially over the next few days. So the top of your forecast

12:17for this year, before we knew there was going to be a conflict, just looking at all the economic

12:21factors was 6.75. We're obviously above that, but you've, you've factored in now, like even with the

12:28conflict, you're like, you feel like it can't, you don't see the 30 year mortgage rates getting above

12:347.25, which again, we'd love it to be under seven. That's not as bad as it could be. How

12:40are you finding

12:40that? What is that range to you? So here it is on this day, using Mortgage News Daily, it was

12:486.85%.

12:49We've had 13 straight days of conflict. The Hooties are in, the Fed is hawkish, oil prices are above 100

12:58on crude. We're at 6.85. All these things have to continue in a negative way to push yields and

13:06rates

13:06higher because we are priced in a lot, right? If the Federal Reserve all came out and say, this isn't

13:12good enough, we need to be, you guys need to price in more rate hikes into the system, then that's

13:18different. But for right now, Neil Kashkari talked about one rate hike. Lori Logan is just kind of

13:25talking about one rate hike and we'll possibly, if inflation takes off more, we'll do more. Beth Hammock

13:31probably wants six rate hikes, but she hasn't publicly said it. The smirk of Austin Goolsby,

13:38Austin is all over the place, but this time he's kind of, he was a big conflict guy. The conflict

13:44is going to make us more hawkish. There's nothing in there to take us to that next level. Again,

13:49I believe 65 to 75% of this is Fed policy, right? A gentleman on LinkedIn was telling me,

13:57well, what happens if nobody wants to buy our boss, homies, guys? Oh, I had to tell a young

14:04realtor. I know this is one of those things for you. I'm seriously, and this goes to all young

14:09realtor men and loan officer men, young, middle, and old. Homies, you guys are listening to a bunch

14:16of doom porn jackasses for like 20 years. And for some of you old guys, it's too late, man. It's

14:23too late.

14:24The Undertaker is not that far away, so there's no help for you. But for you young guys,

14:29for you young men out there who are loan officers or who are trying to make a name for yourself

14:34by

14:34doing doom porn, if you listen to these people day in and day out, you will be a cranky old

14:39man,

14:40okay? You will spend your life on this negative doom porn loop that somehow America's broke and

14:45all that, and it's not going to go well for you. I've seen these men age. It does not get

14:50better for

14:50them, guys. You as a husband, as a father, as a loan officer, realtor should not waste too much

14:57time dwelling yourself because your constant daily posts are just these dark takes. And

15:04I'm not worried about the bond market not having our appetite. I always joke around. Why is it the

15:09US that's broke, but Canada isn't, and Mexico isn't, and Guatemala isn't, or we think of Europe as not

15:19being this strong, but why are all these countries fine, and we're the ones that are broke, and we're

15:25like a $400 trillion economy and all that stuff. So don't worry about appetite for bonds. Literally, if we

15:31had two really bad labor reports, money goes into bonds, like it has in the last few years. But here,

15:39I

15:39think it's just, when I think about how we look at the 10-year yield at this point in a

15:44two-year yield, again,

15:45so much is pricing. So we need more conflict news. If Trump really takes this to the next level

15:52in terms of big multiple attacks, then, yeah, we can get rates a little bit higher. But to me,

15:57to get above like seven and a quarter, boy, the Fed has to really get involved in this because

16:03mortgage or mortgage spreads, let's say we have a credit issue and mortgage spreads get worse. Then

16:08you could model something out. But mortgage rates being at 6.85% might seem odd to a lot of

16:16people.

16:16But again, for those of you that have listened to this for years and years, who read the tracker,

16:20the spreads were designed to compress volatility. And even when things are getting a little bit crazy,

16:26it keeps things at bay. So in your article, you talk about the odds of a Fed rate hike next

16:32week,

16:32which have been all over the place, depending on what's happening. Right now, I think there's a 36%

16:37chance. Do you think this conflict escalating like this, does it give them what they want already so

16:42they don't have to go ahead and hike a rate? How are you looking at that?

16:46So 36% chance isn't a lot of conviction, considering all the news that is here. I think

16:53traders are itchy fingers. I think there's a lot of nervousness with this conflict because the Federal

16:59Reserve made this conflict a really big hawkish point of theirs. I still don't see a July rate hike.

17:06I do see them staying very hawkish in their tone. It does look like we're going to have a press

17:11meeting. So that'll happen for sure. But I don't know. I'm still not in the rate hike camp just

17:22because I think the Beth Hammocks and the Lori Logans and everyone got what they wanted. They

17:27got the rate hikes in there. If the two-year yield was under 4% or the 10-year yield

17:33was at

17:34420, I would have a different mindset here. But the three-month, two-year and 10-year are elevated

17:41and the 10-year is near multi-year highs. The 30-year as well, I think they got what they

17:49wanted

17:49to kind of not push the needle. I mean, it doesn't in a sense really matter because they got the

17:55pricing

17:55in there. I just think some of the language that this inflation report was, if it was hot,

18:01then July is in play. Well, it wasn't. The two weren't. So this doesn't mean that rate hikes are

18:07not going to happen, but I just think the market is priced in so much already.

18:11Okay. Well, we are obviously, we're recording this on Thursday. Anything, and I do mean anything

18:16could happen between here and tomorrow, right? We could see a big escalation. We could see Trump back

18:21off and then things would come back down. But from your perspective, the conflict is what's driving

18:26rates right now. So that's the thing to watch. If you look at how the 10-year yield is traded

18:31the

18:31last few weeks, and if you look at how the 10-year yield traded when we got to 4.68

18:36beginning of the

18:37year, this is conflict related because the Federal Reserve made this conflict one of their big hawkish

18:45points. And here we are again. That's why we call it 2.0, right? And they didn't really care about

18:50oil prices falling. So there's a lot going on here. But for anybody that thought the 10-year

18:55yield should have been higher, just remember, we are up here now, right? It's a lot different up

19:00here than before. And we've had these, I mean, it's interesting how we look at the flow of the 10

19:07-year

19:07yield. We always have a period of time where we get up to a certain level, and it takes a

19:11lot to keep

19:12us going, or we go down that 4% or below. And unless the labor market's breaking, we shoot right

19:18back up.

19:18Of course, next time you see us, it's going to be Monday morning. Who knows? Who knows what could

19:25happen between now and then? But keep an eye on the conflict. Keep an eye on the bond markets. And

19:31again, the White House tends to get a little bit more nervous when the 10-year yield is above 4

19:37.60

19:37because it's one thing about oil prices, but now you've got higher mortgage rates, higher borrowing

19:42costs. So then everybody starts, you know, is this something that the American public really

19:49wanted? Probably not. Do they really care about it? Probably not. Iran, like, you know,

19:54Iran getting a nuclear weapon and shooting it at someone, probably nobody thinks that because

19:58they're going to get blown up right away. You know, North Korea has crazy characters. They've

20:02had a nuclear weapon. They're not shooting anyone out of here. So there comes a point where advantage,

20:07disadvantage. I just think Trump's in a spot he just doesn't know how to handle at this point.

20:13And he's doing his bully ball tactics, just go straight aggressive and force somebody to

20:19quit. But this is not like a tariff, right? This is not like, you know, telling California to rake

20:25your leaves because of fires or, you know, yelling at Canada for the smoke. I mean, this is conflict war.

20:32So probably a little bit unfamiliar territory at this point, but wow. The next few days,

20:40it's a hot summer around the world right now. It is. You know what? Everyone pay attention to

20:46housingwire.com. Logan's always on. My newsroom's always on. We are on top of this. Whatever's

20:52happening in the world that affects housing, especially mortgage rates, you're going to see

20:56it on housingwire first. So Logan, thank you so much. And one last thing, the tracker,

21:02becomes more useful in this kind of stage, right? When rates are lower and demand is picking up,

21:08you know, you see this trend, but what you want to do with the tracker is see any kind of

21:13inflection

21:13points to where the data is moving. I think housing is just compressed so much to a kind of a

21:20low

21:20volatility sales stage that you don't really have these big up moves or down moves. But it'll be

21:26interesting to see the weekend tracker, to see how the inventory data, new listings, everything happens,

21:31because like I've always said, like I literally went on CNBC like four months ago. I said,

21:35the housing market was poised for growth, no equivocation whatsoever, unless the Iran conflict

21:41pushes mortgage rates higher. And we had that key level. It said over 6.64, if it heads towards seven,

21:48last few years slows down all the time. Now we'll take a seat, you know, where we've just started

21:54getting above this level. And duration is key with rates on the downside and an upside. It doesn't

22:00move very, very, very fast on incremental moves. But the longer you stay at a certain area, the more

22:06you'll see it in the data. So this is why the tracker is very key right now. All right, well,

22:10Logan, thank you so much for keeping us up to date. As always, appreciate it. And we will talk again

22:14soon.

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