Mortgage Rates 8%, 6% or the base case?

HousingWire

On today’s episode, Lead Analyst Logan Mohtashami breaks down the latest housing market tracker, examining what it would take for mortgage rates to reach 8%, the impact of higher rates on housing demand and inventory, and his base case for rates through the rest of the year.  Related to this episode:  Will mortgage rates rise to 8% or drop to 6%? https://www.housingwire.com/articles/will-mortgage-rates-rise-to-8-or-drop-to-6/  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  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

00:10hello everyone my name is logan modashami lead analyst for housing wire my podcast partner

00:15sarah wheeler is not with us she'll be out a few days as her daughter gets married we have so

00:20much

00:21to talk about especially with rates what happened with the tracker over the weekend and also just

00:27remember for all the top news in real estate and mortgage go to housingwire.com where you can read

00:32the tracker article where i talk about uh the subject we'll talk about today will mortgage

00:37rates get to eight percent or six percent or the base case that i have and we will start right

00:42now

00:43the theme of the tracker was can mortgage rates get toward eight percent or six percent and many many

00:51uh actually uh early july we talked about what is the base case now now that the federal reserve

00:57has gotten hawkish right the hawks won this battle many many months ago and kevin warsh finally got

01:03on board their hiking rates you know the history of rate hike cycles aren't very good uh for mortgage

01:11rates but this is wasn't a rate cut cycle like we're you know cutting into a recession where rates

01:16stay lower for a longer period of time but back in july i thought you know if the conflict gets

01:22worse

01:23if something happens with the deal you know we get five percent 10-year yield you know mortgage rates

01:29where the spreads are at 7 13 7 18 i think we're somewhere around there uh uh today um but

01:36the

01:36question was what will it take to get to eight what will take it to six and then what uh

01:41what's the

01:42base case but also what happened with the tracker so we're first going to go with the tracker data um

01:47as we have talked about a lot last year every time we have a national holiday a big one uh

01:53housing

01:54weekly data gets hit you get a kind of a negative pool because not everyone's working with a full deck

02:00and then you get a rebound so two weeks ago inventory was down pending sales are down new listings down

02:07all of those things came back up again uh you know so if you if you didn't know how the

02:12two-week

02:12operations work around holidays you go well why did pending home sales snap right back well it snapped

02:17right back to the trend right and what we've always talked about for years is housing data tends to slow

02:23down when mortgage rates get above 6.64 percent but this year we're kind of just hovering around there

02:28until the conflict got worse and it got us above seven uh housing data will slow down like it does

02:34and

02:34because the year over year comps are going to be uh much more difficult it's going to be extremely

02:39hard to show any growth for the rest of the year because the comps are higher because last year

02:44mortgage rates were lower the year before mortgage rates were lower during this period of time so this

02:48is the one time where mortgage rates are going up the last time this happened was actually in 2023

02:53when the fed got hawkish until they cried uncle but back then five percent was the 10-year peak

03:00here so far so far 10-year yields five percent has has around here 50.04 was the peak uh

03:08mortgage rates

03:09i think the peak recently was 7.27 uh not like we haven't been here we've been here for the

03:15last

03:15three years and nine months uh this is something we're accustomed to but what did the data show

03:20you know inventory growth is up 3.16 using harder comps right it's going to be much easier to show

03:26inventory growth for the rest uh of this year and uh going into next year because the comps are uh

03:33easier where earlier this year going all the way to mid-june we said the comps are going to be

03:38difficult to show growth when we could possibly have some negative year over year prints and inventory

03:42toward mid mid-june that's what exactly happened but even with higher rates even with harder comps

03:503.16 doesn't seem a lot i've always talked about this as kind of like a denominator impact

03:56when we're working from the lowest levels ever recorded in history it's much easier to show

04:00inventory growth per the new listings data per mortgage rates being elevated and mortgage demand

04:06being suppressed but it gets a little bit harder the closer you get to normal so normal for us

04:11is about 1 million active listings we track inventory a little bit different than everyone else we don't

04:17have any pending contracts at ours uh where the nar and everyone else does have contracts uh um so a

04:23million active listings are going to be you know normal like it was in the pre-covid era uh we're

04:30quite

04:31not even back to 900 000 yet so we're not quite back to normal but the growth is slowing down

04:36so if you

04:37just look at it in that context it makes a little bit of sense uh a state like florida has

04:42been down year

04:43over year pretty much all year a state like florida was also more elevated than the national data so

04:48there's again not much happening in the aggregate data uh and i've always stressed this i don't know

04:55how many people can talk about housing this way because it's not very exciting uh but you this is

05:00where our tracker becomes a little bit more prolific and efficient compared to maybe some narrative

05:05discussions out here uh housing demand uh perked right back up but you know we're down slightly year

05:12over year when mortgage rates were lower right sub 6.64 or six and a quarter to six and a

05:17half we look

05:17at february 19th all the way to may 15th we were showing year over year growth on our weeklies that

05:22catched up to our total pendings uh so all that growth that we had started to fade once mortgage rates

05:29get above 6.64 and now they're above seven percent so pretty consistent in that regard new listings data

05:35took a big dive two weeks ago took a big increase you average it out not much is happening so

05:40when you

05:41take the total data in aggregate now for three years and nine months when rates get above 6.64

05:48demand picks up when it goes down to six and it just stays there demand gets good if we actually

05:54had near six percent rates for the whole year we would have more than my forecast of 237 000

05:59more existing home sales and that is the tracker for right now the price cut percentage uh uh is

06:07slightly higher than last year a few weeks ago we talked about as long as rates stay elevated

06:12that should catch up to on par and go higher and get a year over year comp story last year

06:17rates were

06:18going lower demand was picking up we had a nine month high in sales uh the existing home sales reported

06:23in december uh so it looks it looks normal to me considering what has happened but in the aggregate

06:29total of the data there's really not much i don't know if i'm going to get my forecast my forecast

06:35was for negative uh 0.62 percent national nominal home prices uh we're still like one to two percent

06:41i don't know if i have enough time in the year uh to get that correct but it's roughly going

06:46to be

06:46what i thought not much is happening with prices and when you look at the history of u.s housing

06:50markets going from 1942 all the way to 2026 you know that whenever there were times where home prices

06:57escalated uh out of control 1943 to 1947 that was the hottest home price growth period post world war ii

07:03uh average 18 percent for five years uh then typically not much really happens for a period of

07:10time uh 1954 to 1967 nothing was going on with home prices we saw in the late uh mid to

07:18late 1970s

07:19home prices were hotter than uh whether we saw during covet for a longer duration and then prices

07:24started to cool down uh for a period of time 1990 to 1996 the prices were nothing happened really for

07:31prices in 1990 was i think down 0.7 1991 was down 0.2 and nothing happened until 1996 so

07:39what's

07:39happening right now with prices i'm just modeling out to the history of housing economics using our

07:44tracker data uh and the slope of the curve so that's that part but now we get to the nitty

07:50-gritty

07:51what will it take to get to eight what will it take to get to six and what's the base

07:55case

07:56so eight percent mortgage rates is the same thing we talked about in july going up to 713 and 718

08:03the

08:03conflict has to get worse right back then we're talking about the mou deal it's over and then all

08:09of a sudden oil prices came down down to 68 i kind of have like 67 to 82 is like

08:15trading range where i

08:16think oil can trade out with a conflict over with we had that we didn't break under 67 but as

08:23the

08:23conflict escalated the second time around the oil 10-year yield trade really merged on a one-to-one

08:30basis and you could see that with the 10-year yield escalating and you can see that with oil prices

08:34right that downtrend we had in oil i always tell people if you go look at charted oil prices it

08:39was

08:39every single rally was sold off and we're heading lower but then that thing broke and once that thing

08:44broke you go with oil traders on this one right it the ability to escalate to yearly highs is there

08:50and and we almost got back to yearly highs but the last few days things have calmed down so you

08:56just

08:56keep an eye on that you break above let's say the conflict gets worse the economy stays firm

09:02540 is basically the next level where to me to be support but it would need a multiple variable

09:08events right it needs the oil it needs oil trade to get worse it needs the conflict uh uh uh

09:14to get

09:15more chaotic especially now we saw with the houthis involved right the pirates are back in it they're

09:20blowing up saudi iranian airports and pipelines president trump wanted to come in and uh take

09:25them out but at the very last minute he kind of pulled back remember this is an escalation uh at

09:31this

09:31stage the midterms is early november and the marketing for the midterms are starting to happen so

09:36the iranians want to make us uh this is as painful as possible for president trump but also for the

09:43republican party because if something happens in the midterms and you know this conflict ends for

09:48itself they want to make this known that if you guys ever come back here this is what can happen

09:53right so i think that that's their game plan i think the white house kind of said listen there's

09:57not too much we can do so it gets a little bit more chaotic uh over the next six to

10:03eight weeks uh we'll

10:05see what happens again every day we have a different headline so that's what you would need to have for

10:09the 10-year yield to get up to that next stage so far we've held that five percent uh level

10:15we haven't

10:15broken above it oil prices have come down a little bit uh uh there's more oil flowing and i know

10:22a lot

10:22of people are looking at the hormones straight of tracker data but there's there's stuff that's getting

10:26through that you don't see in that uh uh so if there's anything with the conflict just coming to an

10:32end uh in a legitimate end where both parties say okay no moss this is not going anywhere this is

10:39we're impacting the world because there's one thing with oil prices but diesel prices now

10:44uh and diesel prices and oil prices and nothing was happening until we started this conflict so

10:48this isn't all just uh russia and ukraine and and and refinery so right now we're just dealing with

10:56that so you keep an eye on that of course the economy has to stay firm nominal growth still has

11:00to

11:00stay the labor market still has to stay and just remember with the labor market

11:06with the federal reserve they've changed their parameters they really believe that if we just

11:11create 33 000 jobs or less or around there the unemployment rate could stay low and jobless claims

11:17stay low that has been correct my break evens the number of jobs you need to be created to keep

11:22the

11:22unemployment rate is is 78 000 uh the last three months we've been around 82 000 so jobless claims are

11:29low nominal growth consumption is still there ai investment cap all these things are here

11:34so the economy has to stay firm that would be the next tech that would be eight percent but six

11:40percent is basically the same thing over the last few years 2023 2024 2025 2026 what had happened when

11:48the when bond markets are afraid of economic growth slowing down all get rallies uh below four percent

11:54if you look at technically speaking if you look at the 10-year yield the bottom we saw during the

11:59gandolph hold my uh use on that pass line uh the hoarder line was broken for a little bit but

12:05395

12:06that uptrend is still intact on the 10-year yield so it gets a little bit harder now because the

12:12fed is

12:12now hiking rates uh so you really need to see authentic weakness that's kind of what we saw uh in

12:182023

12:19the silicon valley banking crisis people are talking about recessions credits are going to be deteriorating

12:24the federal reserve cleaned it up pretty quick uh and they got things back going so we just shot up

12:29from 3.37 all the way to five percent uh that year so uh keep in mind that if you're

12:35thinking

12:36going back down to six you need economic weakness because policy doesn't take us there this is why

12:42i've always said that you have to get to neutral policy at three percent just to make it easier to

12:47get between 3.80 and four and a quarter uh or 4.20 without the data getting weaker but we

12:52never quite

12:53got back there and now we've hiked rigs so the whole parameter changed because of that out there so

12:58getting back to six percent really takes more weakness it does need oil their conflict to end

13:04that's that's the other side of the equation but the base case to me is the same thing i said

13:10on july

13:118th if the conflict is over and oil is flowing we should think about 650 to 6.75 as the

13:19base case

13:20for rates and then we just work off of the data off of that that 10-year yield at you

13:25know 448 446

13:27that that'll be the base level but again we're in month seven of the conflict we're going into

13:32midterms we got the houthis coming involved right uh ai all these headlines about ai this ai slow down

13:39whatever it is there's still a lot of money being pushed pushed in there diesel price is being

13:44elevated and bets itself a differentiation for food costs harvesting storage transportation all

13:49these things not a good things we're talking about banning diesel i mean there's a lot of things

13:54politicians talk about banning diesel 10 credit cards it's midterms man they're gonna see a lot of

14:01stuff being thrown your way so i would just say the base case is that that's the conflict ending

14:07and oil going lower uh that's kind of what we saw when that first happened so i'm not quite you

14:14know

14:14it gets much harder to get towards six percent but you know eight percent does need a lot of work

14:19mortgage spreads have done their best they can to keep rates but if you get a if you even if

14:23you get

14:23just this 18 to 26 percent worse than mortgage spreads and you get the 10-year yield to 540 that

14:29gives

14:30you your eight percent remember we don't want to throw up and make up stuff on rates we want to

14:34show a

14:34pathway right connect the dots be the detective not the troll on this one so that was the tracker

14:41um a lot happened over the weekend uh bombers were flying out of the uk and you know people were

14:49skipping plans and going to the white house and i think the houthis you know attacking saudi arabia

14:55multiple times uh uh but the president pulled back you know if the stories are all true uh again if

15:02you're

15:02starting another conflict on another front that's more weapons we have to use logistics resources

15:08you know it just becomes more uh problematic you know and like i've always said i thought this whole

15:14thing was in the works for years there was a reason why they went into iran when the 10-year

15:20yield was

15:20under four percent and oil was under 60 because if you're going to think it's four to six weeks that's

15:25the time you want to do it you don't do it when rates are seven and a quarter and oils

15:29over a hundred

15:29right so uh obviously that plan didn't work out so we have to take it one day at a time

15:34we have to take

15:35all the economic data but that tracker gave you kind of both sides of the equation and then the

15:41base case if the conflict just ends where it could go and we just kind of have to work off

15:47of that

15:48if you see economic weakness if you see the labor data deteriorating just kind of like we saw in 2025

15:54just remember the labor data deteriorating in 2025 is what we've always talked about here

16:00on housing wire for the last two years whenever manufacturing and residential construction workers

16:05lose their jobs at the same same time it's never good but we had godzilla tariffs and this is my

16:11second trade war godzilla tariffs government shutdown all these crazy headlines people don't sit there and

16:17go oh i'm really going to start pushing the hirings out there but the second year tends to get better

16:22when the drama dissipates that's kind of what we're seeing here uh so everyone's keeping an eye on all

16:28the macro data it's one thing for oil prices i think we can handle oil prices here we did in

16:332011 to 2014

16:34we did it in 2022 but diesel prices the longer it stays up it's really problematic problematic truckers

16:42farmers everything out there going into the midterm so it could be pretty crazy until after the midterms so

16:49i don't know the white house really believes that after the midterms the whole thing is going to come

16:53to an end but whatever it is this if this is going to be the worst case scenario we just

16:58have probably

16:59six or seven more weeks or this escalates into something and my fear is somebody makes a mistake

17:05and now you go into an all-out big war you get multiple countries involved and things could get

17:11protractively worse so uh at least the fact that we didn't attack the houthis was one of these things where

17:18we know where we are at this stage uh um and that's how we should kind of look at mortgage

17:24rates

17:24again we we will keep a track on the housing demand equilibrium that's what we've always done uh so you

17:30keep your eye on the tracker higher rates especially seven percent and higher with duration demand slows

17:36down inventory can slowly pick up we are almost in october right so the seasonal decline uh in inventory

17:44uh uh in the last few you know pre pre-covid it would already be starting to decline so we'll

17:49see

17:50what happens new listings data not too much is happening but it actually has been the healthiest

17:54year of new listings uh since 2022 you want to see most sellers are home buyers you want to see

18:00people

18:00put their homes onto the market sellers are waiting for somebody to buy then they sell and they buy you

18:05get

18:05that uh housing demand traction going uh so it has been encouraging to see that even with rates rising new

18:11listings data even though it's not really growing in a big fashion has stayed healthy enough and

18:17that's something you could think about in 2027 but as always the tracker was designed to take both sides

18:22eight percent six percent base case take the rebounds into context of labor day and then we'll just go on

18:29for the rest of the year remember thanksgiving holidays and just please everyone don't forget when

18:34it's christmas and new years and especially if demand was rising it's going to see a significant

18:40slowdown because everybody retraces back for the holidays out here uh it'll be another interesting

18:45week we have a lot of fed speeches coming out austin goolsby gave his uh take today that you know

18:51oil shocks you don't usually follow oil shocks but we can't let demand get bad always kind of remember

18:57this mindset whenever you have a shortage of something uh and you try to do oil tax cuts or anything

19:03like that all that does is make the shortage thing worse right so you kind of don't want to push

19:08it

19:08this was the whole team higher rates in 2021 early uh when inventory broke to all-time lows and we

19:15were

19:15at three percent mortgage rates and inventory was here the whole concept of team higher rates is like

19:20this is the time where you can't have you know rates this low because you know the escalation of

19:25prices in 2021 which wasn't the forbearance crash it was one of the hottest home price growth years

19:31post-world war ii and 19 so this is why the fed is trying to talk about we can't make

19:36this problem

19:36worse i don't know how a few rate hikes changes everything but on the long end side you can see

19:42it uh impacting housing so get ready for another crazy week we'll be here uh every single day and

19:50uh i hope you guys all enjoyed the tracker see you soon

19:54you

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