How to look at housing data for the rest of the year

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about what to expect when it comes to housing demand and home prices for the rest of the year.  Related to this episode:  Mortgage rates  https://www.housingwire.com/mortgage-rates/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  Buy one, get one FREE tickets to the Mortgage Banking Summit on October 1st https://events.housingwire.com/mortgage-banking-summit-2026  More info about HousingWire https://lnk.bio/housingwire  Top 5 Trending:  Foreclosure filings rise 13% year-over-year, South hit hardest https://www.housingwire.com/articles/foreclosure-filings-rise-13-year-over-year-south-hit-hardest/  Mutual of Omaha explores potential mortgage division sale https://www.housingwire.com/articles/mutual-of-omaha-explores-potential-mortgage-division-sale/  Is the housing construction cycle finally breaking?  https://www.housingwire.com/articles/is-the-housing-construction-cycle-finally-breaking/  Better board fight escalates as Vishal Garg selects 3 director candidates https://www.housingwire.com/articles/better-board-fight-garg/  NYC buyers caught in the middle of StreetEasy, Compass listing fight https://www.housingwire.com/articles/streeteasy-same-day-listing-rule/  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 of the top mortgage and real estate.

Transcript

00:11Welcome, everyone. I'm joined today by lead analyst Logan Modashami to talk about what

00:15housing demand looks like for the rest of this year. Before we dive in, here are the

00:19top five trending articles on housingmar.com. The first is foreclosure filings rise 13%

00:25year over year South hit hardest, followed by Mutual of Omaha explores potential mortgage

00:31division sale. Then we have is the housing construction cycle finally breaking and better

00:38board fight escalates as Vishal Garg selects three director candidates. Finally, we have NYC buyers

00:44caught in the middle of street easy compass listing fight. A lot going on, but we're ready to jump in.

00:50Logan, welcome back to the podcast. And let's just say I beat you on the first week of fantasy

00:56football. Can we can we just take it? I need a victory lap. Yes, yes, you did. You didn't even

01:01know you were playing here. You didn't know the score of the game. And I'm like, I'm like, Sarah,

01:05do you know what's going on right now? No, what? And I'm like, but I told you I had a

01:10time. I told

01:11I was like, I do not have time to do fantasy football. This, this, I gotta tell you, do it.

01:15But drafting in an 18 team league is different. You know, I've never done that. So, you know,

01:21you know, definitely it was a, it was a fun experience trying to draft. It was so rough at

01:26the end. I was like, how do I choose between these two terrible people that are left? Yeah. So anyway,

01:30but I did win. So we have to talk about that. Well, you know what? We survived Fed week. A

01:37very,

01:37very, very, very interesting week. When you look at the relationship with the tenure yield and

01:43everything else. And, you know, for Thursday night, Friday morning, you know, we had actually

01:51oil prices go below a hundred. The tenure yield got all the way down to, I think, 492, 493. And

01:59then oil prices started to perk up. The Japanese yen, everything, tenure yield went right back to 5%.

02:05Mortgage pricing only moved up just a smidge. I think it's 720. So again,

02:11hog a mortgage spread, but that oil, you know, oil yield story is still here. And at some point in

02:20the future, that's going to dissipate. But really after the deal broke off, it just became a very

02:28high velocity trade. And I know a lot of people might've thought, well, if they hike rates,

02:35things will get, I mean, I still think you've got issues and the bond market has told you they

02:41really care about oil prices. And if, if the straight of Hormuz was totally open and, and

02:47everybody was fine with each other, we would have a much different conversation today, but that's not

02:52the case. And the concern I have is the midterms are like early November and things are getting

03:00really dicey. Like when Europe is not going to get some of its oil now, cause the Saudi pipeline got

03:06blown up, you know, you're starting to get into tinderbox and this is always the concern with this

03:12moving along, right? That somebody does something and then it just blows up into something bigger

03:19out there. And that's, that's the concern until now, until the midterms. And, and, and I know the

03:25White House believes that, Oh, after the midterms, it'll be all over. Nothing they've said on this has

03:31worked out, you know, so, uh, I I'm skeptical of that, but, uh, uh, I'm very mindful of what's been

03:38happening the last two to three weeks. And, uh, I know we haven't shot at one of their oil tankers

03:45because Iran has shown the ability to shoot missiles at our bases. So it's just, I, it'd be

03:52better for everyone. If they find a conclusion to this, that's workable for everyone and just kind of

03:58move it forward because I don't like the direction this is going, uh, especially the last three,

04:03four weeks. Well, let's set the stage for what this now means for the rest of the year, as far

04:08as like

04:09housing demand and, and what people in the industry can expect, because I mean, it seems like we're at

04:14a rate level that is about what we should expect for the rest of the year. So as we've always

04:20talked

04:20about for many, many years here, I've not seen the housing data get better until rates get below 6.64

04:26and head towards six. And even this year's forecast was only for 237,000 more existing home

04:31sales. If rates stayed six and a quarter and under. Now I would have been wrong with that. If rates

04:35had

04:36stayed under six and a half, we probably had a little bit more than that, but here, and just to

04:41give you guys two examples, uh, purchase application data came out and pending home sales. And what do we

04:46talked about like a few weeks ago that the year over year comps are going to need, you know, some,

04:51some reference here, uh, purchase application data was down a week to week, but a down 19% year

04:58over year. And when we, when we show that in our tracker data last year at this time, rates were

05:02over 1% lower. So purchase application data had a nice swing. It actually led us to a nine month

05:07high

05:08in sales in December. Uh, so the year over year comps need context. The same thing with pending home

05:14sales, pending home sales were up a smidge month to month, but down 4.7% a year over year.

05:21So the

05:21year over year data is not going to show any growth with rates up here, but you kind of want

05:25to keep

05:25an eye on the week to week stuff because if it is the same, we just basically go nowhere. And

05:31that's

05:31the story of housing the last three years and nine months, uh, rates get near 6% housing demand grows

05:38rates go above 7% housing demand slows down the duration curve for both really matter. Uh, and we

05:47kind of take it from there. I just, the last two years, the thing that's different now is

05:51that housing by itself got a little bit more affordable just because wages have outpaced

05:56home prices. So I think the, the, the, you know, just, just a confusion on why inventory

06:03isn't growing more is that the denominator factor of getting closer to normal with stable demand

06:10at some point. It's just hard to do this, but higher rates typically with duration gives us a

06:17little bit more inventory. We're also in September. All right. We're almost in October. So the seasonal

06:23decline, uh, uh, in inventory will come soon. And this'll be just another year of a kind of a wash,

06:30uh, out there. It's really tough for, um, those in housing, right? Because we were hoping this was

06:36going to be a great year. It started off pretty good. Um, maybe it wouldn't have gotten down as,

06:42as much as people would have thought, but then we've had all these X variables. Now we are in

06:45fall. So a lot of times when I'm like, you know, talking to you about seasonality, you're like, no,

06:50sometimes falls and winter are, you know, a pretty good season for home sales. What does it look like

06:56this fall? So in the past, our lower rates always came in fall and winter. So our highest existing

07:04home sales prints are actually been in winter and not, I mean, not just the last few years,

07:09but going back in the previous, uh, decade as well. So there's a seasonally adjusted numbers.

07:15There's the, uh, uh, numbers that we show every single week. The housing's very seasoned on that.

07:20And of course, uh, hopefully by now, by the time we get to Christmas and new years,

07:25everyone could realize not a lot of people look for homes during that period of time. Last year,

07:30we had a nine month high in sales in December. And because the holidays take up so much of people's

07:37time, people just don't go look for homes. And then the data, I refuse to even write the tracker

07:43because I was like, the data is going to collapse right now. Cause it's working from an elevated

07:45level and Christmas and new years are here for two weeks. And, uh, this last, this is the last

07:52offset of the, um, labor day weekend, the second week after that. And then we just basically go normal

07:58in the past sales would be rising, but now you get to see, I want to see how the month

08:04to month

08:05and the week to week data do versus the year or the year over year to me is going to

08:09be negative,

08:10right? But I got to see how the week to week data with purchase apps and, uh, uh, uh, pending

08:15home

08:16sales and existing home sales do in this environment, because really the aggregate truth is there's not

08:21much happening in housing, right? Uh, if rates had stayed around six and a quarter for the whole year,

08:27we would have had a little bit more home sales, right? I, my forecast or pricing probably would

08:32have been wrong. Uh, prices would have been probably up a little bit more than, than, than what I

08:36forecasted, but just a little growth and that's it. And now we're here and we've done this dance

08:42every time, right? 2023, 2024, 2025, and now 2026. Uh, um, but I always harpen back to, man,

08:51if mortgage spreads didn't improve, okay, we are over eight 30 in 2023. We are 8% in 2024. We

09:00are near

09:018% last year, right? So, uh, I kind of tell people that, you know, the, a lot of the

09:08fed members in

09:092023, we're talking about housing, uh, uh, even in 2024, but I imagine they're looking at the spreads

09:17as the same way as I am, right? So the 10 year yield being at 5% where Barkin and

09:24some of the

09:24other fed people were saying, you know, 8% mortgage is really causing a problem for housing.

09:29You don't have 8% mortgage here because of the spread. So in an odd way, you don't see any

09:35fed

09:35people coming out and talking about the long end because what the long end really impacts is housing

09:40and the spreads are much better now than they were the past few years. So let's talk about, um,

09:46what housing demand can do or, or lack of housing demand right now because of higher rates,

09:51because of where inventory is like, what do you think this does to home prices? You had a home

09:57price forecast of a little bit negative and then you're like, Oh, it might, I might not get that.

10:01Where are we with home prices right now? Home price growth should, so I have a better chance

10:06now of being right. I just think I'm late in the year. Um, and you know, just to give you

10:13guys an

10:13example, uh, Redfin, Redfin itself, uh, talked about the highest seller gap versus buyers in history,

10:23right? And this has been going on for 15 months. Well, Redfin also said that this has been the

10:28highest home price growth they've had in over 12 months as well. That in itself can slow down with

10:35higher rates. Uh, the velocity of pricing isn't going to be anything too material, but it can bring

10:42price growth down. Cool. And now for me, it's a little bit different because I, I look at it as

10:46a positive for affordability, right? As long as, as long as wage growth surpasses home prices,

10:52it's a net positive in my book. I just, I'm just not one, one of those guys who go on

10:57the internet or

10:58TV and goes home prices have to fall X amount because affordability is X and that's where it

11:05should go because that's what history says. No, it doesn't. It never does that. Actually.

11:10The only time that we saw nominal home prices in a very big fashion actually declined was when we had

11:16massive amount of inventory, massive amount of distress sales and the supply and demand equilibrium

11:21broke, which means that home sales fell from 7.2 million all the way down to 3.9 million in

11:282008,

11:28but inventory went from two and a half million to 4 million. And during that 2005, six, seven,

11:34and eight foreclosures and bankruptcies were both rising together at an accelerated rate that we have

11:40not seen since the Peloponnesian war. That's not happening, but here again, pricing should cool down,

11:47which again, makes it a better base case for next year. But I don't know if I could get right

11:54because we're in September now and there's only a few months left. What was your, what was your

11:58exact? 0.62%. So just to give everyone an example, 2024 price growth was 2.3% forecast. We ended

12:06up at

12:06four mortgage rates getting down to 6% firmed up pricing toward the end of the year. That's where I

12:10lost minds last year was 1.77%. We ended up at 1.3% roughly in line because the forward

12:16looking data was going

12:17to be softer going into 2025 and then inventory growth was here. Here I thought I was surprised

12:22that rates went lower early in the year, right? And I think part of that is the AI disinflation and

12:28jobs and private credit and the 10 year yield broke that key technical support and bond traders went in

12:34with that. So it brought rates lower and the starting point was different where if that wasn't

12:38the case, we probably would have been six and a quarter to 6.625 for most of the year if

12:43you take

12:43the conflict out of the equation. So I would, I would have been wrong if that was the case,

12:48but I don't know if I have enough time in the year to get my forecast, right? But price growth

12:53should slow down, but you always want to keep an eye on the supply and demand equilibrium of wherever

12:57you are. This is why housing wire intelligence was created. And again, rates above 7% with duration

13:04is not good for demand nor pricing power in that sense. And that has been the case going back.

13:12It's just the velocity of the data. Just, it's just housing. It just doesn't traditionally move

13:17that fast. Well, and I would also say right here, this is why people should come to the mortgage

13:23banking summit. You're going on October 1st here in Dallas. And of course we usually go out to eat

13:28the night four. We have all this stuff going on. But you're going to, you're going to keynote.

13:33We have a lot of super smart people on that stage who are going to be like, okay, given the

13:37economic

13:38reality of where we are, here's how their companies are adjusting. Here's what they're

13:41doing. I mean, experts on stage, it's going to be great. And the timing, the timing could not be

13:46better. Yeah. I think, I think the main point is for me is to try to convince people like

13:53what, what, what's going on here? Because I still think a lot of people are still,

13:58they're still leaning on the fact that the jobs data isn't as bad or as bad, worse than they think.

14:04And that rates need to fall down. And I think a lot of people just put their eggs into Kevin

14:09Warsh cutting rates. And this has just not been the thing the whole year. And again, even if you,

14:16even if you didn't want to listen to me, I encourage people always listen to people who

14:21have some kind of history of following bond markets spreads and mortgage rates, because

14:25I, even today, I still see people say mortgage rates are going to be crashing down because the

14:30government's going to do a lot of these things are like gimmick stuff for attention, but there,

14:36there are ways that we can model out. And just for everyone in the mortgage industry, what to think

14:41about really for the last two, three months of the year, but also for 2027, like what can make

14:46things better? There are things that can make things better. You can't get under 5.75% mortgage

14:51rates with, with Fed policy, where it's this, unless you're in a recession, but you can get a little

14:57bit lower to get a demand picking up, but there are variables in place right now that have shown

15:02you this doesn't work. And look what happened. The Fed hiked rates, the 10 year yields at 5%.

15:08This conflict is now in the sixth month, going to go into seventh month. We're not going to

15:12supposedly end this. So there's things that should be focused on. And my job is to try to make it

15:17as

15:17easy as possible to understand. I think one of the things that's hard to understand for people is like,

15:25yes, household balance sheets look good. If you have, you know, the stock market's great. If you,

15:30if you own stock, but you know, inflation has hit people on, on the gas, on the food, on, on

15:35different

15:36things like that. But we're, you know, because of that, like, that's why rates are high for rates to

15:41go lower. Things have to do worse in the economy. We never, you and I always talk about, we don't

15:46ever

15:46want to root for a recession. That's not what we're about. At the same time, if you're in housing,

15:50you've been in a recession. And the only thing that's going to get you out of that recession is

15:54if the overall economy does a little bit worse. Am I right? Well, you could be in a channel like

16:00we've been in a channel back and forth. The 10 year yield has ranged between 380 and 5% really

16:04since

16:042023. Actually got as low as 3.62 in 2024. So policy has shifted. And I think that's the big

16:14thing

16:15because the last few years, the Fed was like, we want to get to neutral policy. We want to anchor

16:20ourselves there. And we're going to get there and it might take longer than people like, but we'll go

16:26there. That has changed, right? So, and I think some of those are the energy shock. Some of that is

16:34AI

16:35spending. But the U.S. economy, nominal growth is good. Household balance issues. And just remember,

16:40homeowners are sheltered against inflation. And that's the thing. Okay. So new week by the time

16:47this comes out, it's not going to be Fed week. It's not going to be all this crazy. What should

16:51people be paying attention to on the tracker data? Okay. So after this week, you get that rebound for

16:59the Labor Day impact. You want to go out and see how does active inventory and pending sales look?

17:06If the gap widens, right? That means housing's getting weaker, right? If pending home sales

17:10start to fall a little bit more and inventory starts to rise a little bit more, that gives you

17:14an idea to framework going into 2027 out there and what the rate variable is. The new listings data

17:20isn't doing much. So it's in its seasonal decline, but you will want to keep an eye on that supply

17:25and

17:25demand equilibrium. And that's what we've always, that's the whole reason last year we said the

17:28housing market is about to shift because rates are about to get under 6.64 soon. And then the housing

17:33supply and demand equilibrium shifts. This is the opposite way. So you want to keep an eye on that

17:37going out for the rest of the year, even in a fall and winter timeframe. And then you kind of

17:43want to

17:43prep for 2027. Okay. That's good. I'm so glad that you do this every week because every week people can

17:49see where things are going. They don't have to wait months. That's awesome. This is going to be a big

17:53week for me. My daughter's getting married in New York City, upstate New York, actually. So this week,

18:00I'll be on some, but you're going to have a solo podcast and then we have some other guest hosts.

18:05So it's going to be a big week. Logan, thank you as always. Pleasure.

Category

Transcript

Comments

Recommended