Why home prices are still positive

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about oil pricing, mortgage rates and home prices.  Related to this episode:  Are 9% mortgage rates possible? https://www.housingwire.com/articles/are-9-mortgage-rates-possible/  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:  UWM’s Mat Ishbia backs VantageScore 4.0, says Underwriting+ results are ‘off the charts’ https://www.housingwire.com/articles/uwm-ishbia-vantagescore-4-mortgages/  Rocket Mortgage will make VantageScore 4.0 its default credit model https://www.housingwire.com/articles/rocket-mortgage-vantagescore-model/  Are 9% mortgage rates possible? https://www.housingwire.com/articles/are-9-mortgage-rates-possible/  From policy to a path forward https://www.housingwire.com/articles/california-disaster-rebuilding-portal/  Pulte pushes mortgage insurance cuts as FHFA opens door to servicer outreach https://www.housingwire.com/articles/fhfa-fannie-mae-freddie-mac-servicer-outreach-pmi-cancellation/  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

00:10Welcome, everyone. I'm joined today by lead analyst Logan Motoshami to talk about mortgage

00:15rates and home prices. Before we dive in, here are the top five trending stories on HousingWire.com.

00:21First is UWM's Matt Ishbia backs VantageScore 4.0, followed by news that Rocket Mortgage

00:27will make VantageScore 4.0 its default credit model. Then we have our 9% mortgage rates possible

00:33and from policy to a path forward. Finally, we have Pulte Push's mortgage insurance cuts.

00:40Lots of good stuff over there, but we want to get into our topic. So Logan, welcome back to the

00:45podcast. It is wonderful to be here. And I kind of, one really, really smart commodity trader has

00:54figured out a little trick I've done over the last 10 years. When the housing doomers get very

01:00lippy with me, I always like really push back a week before the Case Shiller Index, because I already

01:05know what the Case Shiller Index is going to do, but they don't because they don't read books. They

01:11burn them. And when they talk about these big nominal home prices happening two years ago, one year ago,

01:17or now, I already know what it's going to show because we're always three to six months ahead

01:22of Case Shiller with our tracker. And then all of a sudden we come out this morning and FHFA home

01:29price index is up 2.6%. Case Shiller is up 1.9%. Now these are lagging pricing indicators. Our tracker

01:36is better in tracking forward and what's currently happening today. So we're always ahead. But then

01:43all of a sudden it's like, what happened? What are we doing? So we're going to talk about that today

01:47and kind of explain that a little bit with more details, but mortgage rates, 10-year yield, oil.

01:53Sarah, what do you got for me?

01:55No, that's my question to you is like, what is happening this morning?

01:59So I had a very, very, very interesting talk. I was showing everybody today that I said,

02:05when oil was at 112 earlier this year, where do you think the 10-year yield was?

02:10And they couldn't answer. They forgot. I said, 10-year yield was at 4.30.

02:16And that's like 1% lower than where we are. Or the high today was 5.29. I said, yeah,

02:22we're around 4.30 when oil prices hit a high level. So what's occurring right now is oil is $22

02:33below what the highs were currently. We're getting more oil into the system. So some people are like,

02:40what's going on here with the 10-year yield? Why is it the 10-year yield falling with oil prices?

02:45Well, I said, homies, y'all remember when oil prices were here, the 10-year yield was 1% lower.

02:49There are things which happen into an economic cycle. And again, 65% to 75% where the 10-year

02:57yield

02:57goes Fed policy. This is why we always like to explain this from many, many months ago.

03:03The labor data getting better was number one, right? That was the most important thing in terms

03:10of getting the Fed to like, okay, hey, I didn't really want to cut rates last year, but we were

03:14forced to. But now, okay, guess what happened? A conflict happened. Well, inflation was already

03:19growing hotter before the conflict even started. But the conflict started. People thought it would be

03:2546 weeks. It's now lasted a lot longer. And it's embedded inflation more entrenched into the economy

03:34on top of everything else. Nominal growth is very high. The unemployment rate is low. Jobless claims

03:39have... We've had a couple of prints of under 200,000. I was trying to... Mark Zandy, who's a very

03:45well-known economist, has been very, very cautious on the economy for a year. And he says, I don't

03:51understand the 10-year yield. I go, homie, listen, let's take a look at your cautious takes. You've

03:55been very, very cautious on the US economy for a year now. Now, Mark might not be a Trump fan,

04:01but

04:02I said, look, nominal growth is up. Jobless claims are low. Unemployment rate is low. Okay,

04:06the Fed is now... Their job is to guide the market higher. And they have. Now, the volatility has

04:11gotten a lot crazy with the 10-year yield and oil trade after the MOU deal. But there's more in

04:16play

04:16here. So 10-year yield has got up to 5.29%. The base case that we had for 8%

04:23mortgage rates needs

04:24a 540 10-year yield and spreads to get worse. We're, I think, $7.58 pricing. I don't think

04:31my... That call is going to work out. But a lot has been priced in on this side, even with

04:38oil prices,

04:40$20, $22 lower. I just think that the bond market just does not care about where oil is.

04:46In a sense, because they believe the MOU deal, they took the 10-year yield down to 450. And then

04:53the thing just broke out and we created even more chaos. So I think the bond market is 100%

05:00correct here not to buy into anything until you get something closed. But it does look a little

05:07bit off. But I remind people that we were 1% lower with oil prices at very high levels earlier

05:14in the

05:14year. I think the oil prices has been one of the big wild cards this year because early on in

05:19the

05:19conflict, you were trying to find out, you were trying to figure out what that correlation was

05:24between the 10-year yield and oil prices. And for a while, it really didn't seem to have any effect.

05:29Then it started to. And in the last couple of weeks, you've said that oil prices are one of the

05:36things that are driving this right now. So it is super confusing when then they drop and then the 10

05:41-year

05:41yield does nothing. Yes. And in the last few weeks, one of the things we've talked about is that

05:49the oil bond yield correlation in terms of what's happening intraday, in terms of what's happening

05:56with the headlines, has been at the highest levels I've seen in a very long time. But I'd have to

06:01go

06:01back, way back. And that doesn't account for where the price is on that day versus the previous six

06:09months. It's just we're running off of these headlines. And again, it's just two things that

06:14changed. The MOU deal broke. We started fighting this conflict during market hours. And then President

06:20Trump told the entire world nothing's going to be done until after the midterm. So people are still

06:27surprised that the bond market is like, OK, you know. So sometimes, just saying, sometimes saying less

06:40might achieve more, you know. But the president, he talks a lot. You know, he tweets images about,

06:47you know, certain oceans being renamed and all that stuff. That's who he is. But in this case,

06:54if I had to give some constructive criticism to the White House economic team, tell homie to

07:01up sometimes. OK, it just if you are crying about wanting lower rates, man, you don't like get into

07:10this thing. OK, you if you accept the higher rate things like, listen, we're in war rates are going

07:15to be higher. They're fine. But don't say I want lower rates. We want the Fed fund. No, no, no,

07:21no,

07:21no, no, no. It's a bad look. You say, listen, I'm accepting responsibility for this. And, you know,

07:28the 10 year yield is higher and nothing's going to happen, you know, until this resolves itself.

07:32But don't sit there and say, I want lower rates. And then, oh, by the way, the conflict's not going

07:36to end until after the midterm. Oh, of course, you know, the bond market is. So I think there's

07:40some confusion with that, with the recent trading. But but yeah, I think the last time I checked,

07:46we're at five twenty nine on the 10 year yield. But oil prices were down a little bit. But oil

07:52prices are about twenty two dollars off the the highs of the year. And I would tell our listeners

07:58and housing our intelligence. Logan offers his insights daily, sometimes more than once a day

08:04about what's happening exactly right then in the market. So become a member, sign up there and you

08:09can see Logan all day long and what he thinks the market's doing on these kind of days. It's not

08:14just

08:15a standard morning. Hey, guess what? These are all the economic data. We had job openings today.

08:19Kind of a mayor report, not not going anywhere. But throughout the day, things change. Right. I

08:27mean, you get the volatility on these headlines. And this is not how it normally is or how it should

08:32be. But this is the market that we're dealing with. So you've got to you've got to like take

08:36advantage of that. We've said this before, like when I think about doing the podcast,

08:41you know, in the last, you know, before the pandemic, we couldn't have had you. I mean,

08:45what would you have said every single day, you know, for four days a week on economics? And now

08:50it's like, not only do we need you on four days a week, we need you your insights on housing

08:55our intelligence multiple times a day because things are crazy.

08:59It is. I mean, we had some crazy stuff in the last decade on the economic side. It was a

09:05very

09:05slow recovery. So the velocity of data wasn't as extreme. Inflation growth was tame. The 10

09:14year yield had a base channel that in the last decade, every year I forecasted the same thing,

09:18one six to three percent 10 year yield range. That's basically where we are. Every year's

09:23forecast was literally the same because we had zero interest rate policy, even though the Fed

09:27started raising rates. So it was very boring back then.

09:31Not anymore. OK, well, let's talk about home prices, because you alluded to them a little

09:35bit earlier. But this is a big story in the sense of like a lot of people would be surprised.

09:40They would be surprised if they listen to one group of people, whether they be American,

09:46Russian, Chinese or Iranians. There's one group of people that just, you know,

09:53Kay Schiller and FHFA are lagging. My forecast would have been 100 percent wrong if mortgage

09:59rates were under 6.75 percent the entire year. Remind us of your forecast.

10:04Negative 0.62 percent. OK, so 2024 forecast was 2.33 percent. We ended up at four. Last year was

10:121.77. We ended up like 1.3 percent. I never revised my forecast because we provide a live weekly

10:17tracker with all the data. We believe in our slope with the curve economics more than anything else in

10:21history. This is why we challenge people to live debates. But this, on top of what Redfin said,

10:28was the hottest home price growth in 12 months. It looks weird. I'm not a median sales price. I'm

10:33a Kay Schiller person. But just know that the price growth is cooling down. This is why we tell people

10:38to follow our tracker. Our weekly data's price cut percentages, when rates started to get above 6.75

10:45percent and started hitting higher, that was on a decline year over year earlier in the year. But now

10:51it's slightly higher. So the pricing curve has gone even more negative. And that should bring the growth

10:57rate of pricing down. I have a better chance of being right now, maybe by the end. I don't think

11:04I have enough time by the end of the year, but better chance of being correct than I would have

11:07been earlier. And this is why we do our weekly tracker data so everyone can realize what's really

11:12happening today and going out two to three months rather than waiting on something I already know

11:18that the pricing is going to be best before everybody says the home prices are falling 10,

11:2315, 20% nationally already. That's not the case. Because Sarah Whaler, you and I read books. We

11:29don't burn them. Indiana Jones. Indiana Jones, right? Sean Connery. Go back and anybody see that scene

11:39between Sean Connery and the Nazi in the tank. Then you all get to realize why I use that line

11:44a lot.

11:45Okay. So last week when we were on, I believe it was last week, we talked about The Terminator and

11:50our podcast producer, producer Emilio, who was on said, he's a young guy. He had never seen the

11:56original Terminator. And I was like, you have to see this. And he saw it over the weekend. He told

12:00me he really liked it. Like, like he was like, no, I really liked it. And I was like, yes,

12:04quality movie.

12:06Yeah. Oh boy. 1980. I don't even remember when I watched that movie along. It was like 1984,

12:1285. It was 1984. That was boy, Voltron and He-Man and Pac-Man. And oh, those were Saturday morning

12:19cartoons. Oh, those were the days. Obviously. Zelda. Oh my God. Donkey Kong. Oh Lord. Dig Dug. Oh,

12:27oh, the 1980s. In any case. So yeah. So the price of growth will cool down. And just remember,

12:34it's very, very sticky. The velocity, what happened in 2022, the second half, the second half of 2022

12:41authentically had price declines, like, like legitimately, the sales price always declines

12:46in the second half, but we, we like legitimately had year over year declines because the first

12:51six months home prices were up 18% year over year. So we had about, we had a, we had

12:57an enough

12:57decline in the second half to average out the year at 6% growth in home prices. It's crazy. 2022

13:05home

13:05prices were up 6%. 2023 home prices were up 6%. If those two years were just flat,

13:12we'd be in a better affordability place, but we just didn't have enough active inventory. Now we

13:16do. Now there's no shortages. It's a supply and demand equilibrium game. The buyers in the games

13:20concessions are up these. It's a much healthier home price market there. And there is no 15 to 20%

13:27nominal national home price. Hopefully by now, after what I've done since 2012 to 2026, my job is to

13:32educate and teach, right? And I want to teach why something's happening rather than the final answer.

13:37So that's why we created the podcast. That's why we created the tracker and the chart daddies here

13:4224 seven, trying to make economics fun and easy to understand.

13:46I love it. I love it. And in the tracker, you know, we always look at the price cut percentages

13:51because that does tell us something. It is national course with housing wire intelligence. You can go in

13:55and see what the price cut percentages are in your, whatever area you want to look at, but we, we

14:01look at it

14:02and it's really important because normal, and you say this every week is about a third of homes. So

14:0733% of homes are going to take a price cut before they sell because, you know, buyer, uh, sellers

14:14want

14:14to get as much as they can. I've sold lots of homes in the last couple of years, what three

14:17or four homes.

14:18And it's like, you want to get as much as you can. So you might be aggressive on the pricing.

14:22And then, you know, about normal, a third of the homes, um, are, are going to take a price cut.

14:28If people

14:29don't know that, and then they're like, Oh, 40% of homes. So it looks like you're going from 0

14:34% to 40%,

14:34but you're really just going from 33% normal to 42%.

14:38So one of the most unhealthiest aspects of housing during COVID was our price cut percentage levels were

14:45at a teenager stage. That's not good. That's that, that was not good. I mean, the whole concept of team

14:50higher rates in February of 2021 was like, this is, this is no good. Right. Cause I don't trust

14:56Sarah Wheeler to sell her house in a way to say that. No, no, no, no. I don't want seven

15:02bids on

15:02my home. Uh, uh, I only want to, cause I want to keep home prices stable. You, Sarah Wheeler are

15:08a

15:08great example of what I've talked about that. I don't trust home sellers to do the righteous thing.

15:13They're going to try to make as much money as possible. That's what human beings do. So we needed

15:18higher rates to, to change the equilibrium. So hopefully I could get my price forecast because

15:24I think it's healthier. Anytime, anytime I see wages outpacing home price growth, it's a positive year

15:29for me after what we saw. And if you look at the history of housing economy, this is actually very

15:34common for, for many, many, many years, actually. Uh, uh, you could even have six to, uh, 13 years of

15:41home prices, not doing anything on a nominal and being down negative, uh, on a real basis. But that's,

15:47that's how we kind of work it. And, uh, I I'm happy on that side. Uh, um, but, uh, I

15:52could clearly see

15:53I was wrong. Now I, I, I didn't believe the reason was valid for mortgage rates to go lower earlier

15:59in

15:59the year and the 10 year yield to get under 4%, but it did. And every year we get down

16:03to sub 4% rates

16:06because of the economy, the scare of the economy, but now whole different ball game, whole different

16:10paradigm. And only one person is going to be able to talk about it realistically and logistically,

16:15uh, every single day. And that's why we're here. And that's why housing wire intelligence

16:19is very important because what I talk about is the national data. You guys all need it for your

16:24city, state, uh, locals because every area is different. Uh, but what drives national economics

16:29does drive mostly what can happen in your local area. Okay. So we just have to do a quick follow

16:35-up

16:35on the 9% rate story. As, as I said, in the opening, it's getting lots of traffic. You've gotten

16:39a ton

16:40of questions about it. People are bombarding you with like, you know, it, it kind of threw everybody

16:45to see that headline. Um, I think yesterday's, um, uh, podcast was really good. Then you wrote an

16:51article about it that I thought was also really good that came out, uh, after the podcast. So

16:55anything you want to say to that? To me is every, every, every rate level needs an equation,

17:02right? Uh, um, we had, we had a good conversation on our, uh, uh, YouTube page about that, you know,

17:07where a gentleman says, I think, I believe the 10 year yield goes to 7%. Okay. So how do you

17:12get

17:12a 7% 10 year yield with a fed funds rate under 5%? You know, in 1996, the fed

17:18funds rate was five

17:18and a quarter nominal growth was higher. Uh, uh, you had a 7% 10 year, but, uh, you really,

17:25really need this conflict to stay on for a very long time. You also need nominal growth to stay

17:31elevated. That's what the article, and you need the unemployment rate to stay low and you need,

17:35uh, jobless claims, uh, uh, to, to stay very stable with wage growth, probably picking up.

17:42Uh, and then the duration of all these things for some time can get you, get you up there,

17:47but that that's a lot of ifs, right? So this is what we'll take it one day at a time,

17:51but,

17:51but as of now, as of today, since the end of February, all the way to, uh, uh, where we

17:58are

17:58going to be the first week of October, there was only one brief time where supposedly the deal was

18:04done. Oil started to flow. Oil prices fell down to 68. The 10 year yield was around 450 around there.

18:13So 453, I think. Uh, so we only have one bit of recent history to show you what it looks

18:19like

18:19when the conflict ends. So to me, it's just very, very hard to get up to a certain level to

18:25where

18:25the, where you could get 9% if the, if the conflict is not keep on going up, we're going

18:29to have easier

18:30comps on a year over year basis for inflation next year, uh, because of headline data. So

18:35again, if you're a higher rate person, you really need to be bullish on the economy. You really,

18:41really, really have to be a super. And this is why I kind of like mock people that are like

18:45really big doomers. They think rates going up is because the economy's bad or something. This is,

18:50we're not a third world country. Like that's not how it operates. So I always, I'm trying,

18:56I'm trying to teach people, go look at the 10 year yield and how nominal growth is. That's it.

18:59So they don't even know the difference that rising yields typically is like,

19:03you know, uh, the, the data is good, not bad. It's when the data gets softer and the economy

19:10weakens, that's when the 10 year yield goes lower. And I was like, this is kind of how it's worked

19:15for a long time. What are y'all looking at? But, um, uh, again, as long as somebody has a

19:20premise,

19:21everyone has to have their own way of doing something. So you just got to calculate to where you

19:25to get there. Uh, it's just that we have one event this year. That's not normal and it's still going

19:31on and we have midterms and everything. So it's kind of like, we're all kind of working with a new

19:37paradigm just for dealing with this. And then after that, we could go to it. Cause I don't think

19:41it's going to be just so easy to get rates back down to levels that people want. If oil prices

19:46fall

19:46down, there's other factors, the economy is still growing good job data. Unemployment rate is low and

19:51jobless claims are low. And the federal reserve told homie, Kevin Warsh even went on TV. He said,

19:56we follow the four week moving average of jobless claims. And he was right. I was like, uh, how many

20:02times have we said this for the last four years? I said, these people are jobless claims, four week

20:08moving average, four week MA people, but guys, come on, this thing, it needs to get to 323,000 on

20:13the

20:13four week before they just go. So that's, that's the world we live in. We just, our job is just

20:19to try

20:19to make sense of it all on a daily basis in a very quick amount of time.

20:24Well, I appreciate it. Uh, listeners go, uh, read that, um, article that Logan wrote, um,

20:29our, our 9% mortgage rates possible. It's really great. He lays out the case,

20:34the three things that would have to happen, why he doesn't think they're likely. Um, and Logan,

20:38we will talk again tomorrow when we will do a jobs preview.

20:42We'll do a jobs preview. And just one last thing on home prices, just remember the year over year

20:46inventory growth has been slow this year. Uh, we've documented this every single week. Um, uh,

20:52and you know, higher rates with duration can bring that growth up higher, but the velocity of that

20:57is just not as extreme. So if people are looking for big national home, you need, you need a lot

21:02more velocity in the data. You need to stress sellers and anything. This is why the tracker is

21:07key. Cause we do new listings. We do active inventory. We do weekly pending sales. We do price

21:11cut percentages. We do 10 year yield spreads and demand with purchase apps. We incorporate that

21:16all every single week. You all could be like 99.999% ahead of everyone else. You know, you just

21:23have to do a spend five minutes, just looking at it. And hopefully at one time, you don't even have

21:27to read the things. You just see the charts and visually incorporate it in heads and you all

21:31become chart daddies and chart mommies yourself. I love it. Okay. Logan, we will talk soon.

21:41Thanks.

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