Pending home sales, purchase apps and mortgage rates

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about pending home sales, purchase apps and mortgage rates.  Related to this episode:  Mortgage applications drop 5.3% despite rate decline https://www.housingwire.com/articles/mba-applications-drop-53/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire https://lnk.bio/housingwire  Top 5 Trending:  Mortgage rates cool down in response to AI stock sell-off, lower Treasury yields https://www.housingwire.com/articles/mortgage-rates-dip-treasury-yield/  Real-REMAX CEO says AI will take over housing systems https://www.housingwire.com/articles/real-remax-ceo-says-ai-will-take-over-housing-systems/  Elevated rates just made it harder to build more homes in America https://www.housingwire.com/articles/builder-sentiment-2012-levels/  Northpointe to sell distributed retail, consumer direct channels to CMG https://www.housingwire.com/articles/northpointe-mortgage-channels-sale-cmg-financial/  2026 governor races put housing affordability on the line https://www.housingwire.com/articles/governor-races-housing-policy-2026/  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 my podcast partner, lead analyst Logan Modashami,

00:15to talk about purchase apps, pending home sales, and mortgage rates. Before we dive in,

00:20hear the top five trending stories on housingwire.com. First, we have mortgage rates cool

00:25down in response to AI stock sell-off lower treasury yields, followed by Real Remax CEO

00:32says AI will take over housing systems. Then we have elevated rates just made it harder to build

00:38more homes in America, and North Point to sell distributed retail consumer direct channels to

00:43CMG. Finally, we have 2026 governor races put housing affordability on the line. Okay, we're

00:51ready to go. Logan, welcome back to the podcast. And we have some amazing news to announce. This

00:58is a big deal. Housing Wire Daily, you and me, we won the best from the Signal Awards. We won

01:05best daily podcast. This is such a big deal. You know, I for a second there, I looked at everyone

01:11that won. Bloomberg won. Scott Galloway's market won. And then there was like all these, the Middle East

01:22podcast, you know, won. And there we are, you know, and for a lot of people don't know this,

01:29most of our audiences is audio, but we are the number one business news real estate mortgage podcast

01:35in America for like many years. But to get an award like this with a scale. Sarah Wheeler,

01:42much props. I'd give you another fist bump right now. But no props to you too. I mean,

01:48this is such a big deal. Of course, we have to mention Rebecca Black, who is our podcast producer,

01:54Emilio Diaz, who helps produce. And Logan Motoshami, thank you so much. You have made this such an

02:00amazing daily podcast. So the Signal Awards, this is like international, thousands of people,

02:07you know, enter, I think in this category, there were six winners for daily podcasts. And that's

02:12across everything. That's not just news. That's everything. So pretty amazing.

02:16Awesome. Like the legend, Rob Bay says it takes two to make a thing go right. So it's not just

02:22me,

02:22it's both of us together.

02:23I love it. Okay. Well, taking that moment of self-congratulatory and thank you everybody who

02:29listens. That's amazing. Now we get to, we have a lot to unpack. I think it's, what is it?

02:35Purchase apps, mortgage rates, everything going on. So where do you want to start?

02:38So let's start with pending home sales. Pending home sales took a big dive and then everybody just

02:45flips out about it. And I'm not the biggest fan of the NAR's pending home sales. I like our weekly

02:51pendings to get attraction data and all the growth that we had in the first part of the year.

02:58Obviously when mortgage rates got above 6.64% and then slowly started to move up to seven,

03:03but that move from like seven to 760, especially with the year over year comps is really showing

03:09a decline the last few weeks with our tracker data. So pending home sales, no surprise to anyone,

03:15it's showing a bigger year over year decline. Same thing with purchase application data

03:20where we had a 7% decline week to week and an 18% decline where we started the year

03:27with 20,

03:2825%, 18%. We had a lot of a positive double digit year over year growth. So basically what it means,

03:35it's another wash. It is the fourth calendar year of home sales. Now, when I talk about adjusting to

03:43population, I'll always remember, I'm not the biggest fan of using population data with housing data

03:48in a sense, because we have so many people living in America, but only a small amount of people

03:54actually buy or sell homes throughout a year. So you can see the traction in some of our data lines

04:00if it's anything more than that. That's why we always say our new listings data is very key.

04:07But it's been very consistent. Rates get below 6.64, head towards six, demand grows. Rates get above 6.64.

04:15And then especially when it heads above seven, housing data shows, and we go nowhere. And that's

04:20going to be, again, 2026. I mean, it started out so good. But I guess it's a good thing we

04:28got in some

04:29of that growth at the beginning of the year, because it's going to be all canceled by the end.

04:36Yeah. I mean, there's a very, very slim chance that we could be slightly positive. But again,

04:42it would have been still okay if it was 6.75 to 7%, because what we saw in our weekly

04:48data,

04:48it was basically the growth slowed down to flat. So you basically kept those months of growth,

04:55and then you just slow down after it. But this is a decline on a year-over-year basis. And

05:00this is

05:00traditionally what happens in the last three years and 10 months. So it is very, very consistent. But

05:07again, this is another year of inventory up, price growth slowing down, wages outpacing home prices,

05:14and record low levels. It's nothing like home sales are crashing like we saw in 2022. So again,

05:21you're building a better and better base. And it doesn't take much, right? Because as affordability

05:27gets a little bit better, when rates just get below 7, especially go to even 6.5, that can make

05:33it work as well. So we're not that far. It's less than 1% now with mortgage rates where they

05:39are right

05:39now. So far, that 10-year yield is held, but not shocking to us. And this is why we always

05:44like the

05:45tracker data, because it's looking out 30 to 60 days, and you get to see things live and fresh weekly

05:50rather than wait for a monthly report out there. Okay. So mortgage rates have cooled off a little

05:56bit today, at least. What do you think that's due to? I mean, right now, the whole month of October

06:02was one thing. We have to hold the line at 5.35%. On the 10-year yield, right? On the

06:1010-year yield,

06:10yeah. If we don't hold the line on 5.35%, then whatever is breaking us, because the term premium

06:16is higher now than it has in recent years, which means that the bond market is priced a little bit

06:22more than it normally should be. So if something actually broke to that level, that means something

06:28got worse, right? But for now, the month of October, because the midterms are coming up,

06:33right? And everyone is just assuming that the conflict can end. The conflict can end. Oil prices

06:41go down. Diesel prices go down. You don't make trade war 2.0 worse. And if the AI market is

06:47slowing

06:48down, right? Not crashing, but slowing down, all of these things are good just to get the 10-year

06:53yield lower. Just get down to 6.5% out there. And then it's workable. But what we saw after

07:00the MOU

07:00deal broke off was just the bond market chose violence at that point. The 10-year yield started

07:06escalating. And you get these crazy headlines. And the bond market is just not working normal

07:10off of this. And then Trump said, we're not going to get a deal until after the midterms. And that

07:15added another layer of that. And the economic data has been good and firm. So it's been a fascinating

07:23year. I mean, we think about when we were on stage with Mitt Romney in January. That seemed like three

07:29years ago with the mortgage spread jar that we had and thinking, okay, rates are going to get. Now

07:36we're in an area of housing data was growing. We had a nine-month high in sales in December. We're

07:41first positive year. And that just hasn't been the case. It just did not happen. Okay. So where

07:47oil prices? It feels like that's calmed down a little bit, right? Oil prices are under 100. It's about

07:5397, 98. But that has not escalated anymore. It's just at a level that is not workable.

08:02For those on video, we just saw Logan's cat walk through. Always a pleasure to see that beautiful cat.

08:10Puffy hasn't seen me because we just got back from, we've spoken Dallas and then we spoke in

08:17Seattle, Washington. So he gets a little bit, he gets greedy with my time. You know,

08:23he's like, hey, you're home. Doesn't like me talking to you, Sarah, on the podcast without

08:26giving him a question. Okay. So you were saying that it's not workable with the oil prices?

08:32Oil prices here, even though the oil flow is much better now in the Middle East. But here's one of

08:38my concerns on something that can go out in the next few weeks. Everyone's getting their oil out there.

08:45And my concern is that Trump and Israel, it just does another massive attack before Congress could

08:53do anything to kind of shut this down. So that's a variable that, you know, it's something we have

09:02to think about. But as long as we can get through October, and then again, it's us. It's our choice

09:08in the sense we chose to escalate it, right? This means that it's our responsibility because we live

09:14with those consequences. But if that doesn't happen, oil prices go down lower because the

09:22only time I saw the 10-year yield move noticeably lower was the MOU deal. And then oil was trading

09:27between $68 and $82, perfectly workable, right? Diesel prices were down. That, you know, if we had

09:35just let it go there or something would have been done, you could have had a much different second

09:41half of 2010. But that obviously isn't the case. So I'm just a little bit mindful. Everyone's getting

09:45as much oil as they can out there. I'm just hoping that it's not like, okay, let's get it out

09:50and here

09:50we go another round because it's just not working in terms of getting this finally done. But after the

09:58midterms, obviously, the Iran conflict is not popular. The trade war is not popular. The AI boom is

10:04not popular. These are three things that the Republican Party has put themselves front and

10:10center with. So we'll see. We'll see what happens. But to me, still, as long as we don't break about

10:165.35%, it's still like it could be a workable thing. And then those variables can get better and

10:22the Federal Reserve can get less hawkish out there. Well, let's talk about the Federal Reserve, right? We

10:28have their meeting, but we don't expect them to do anything at this meeting as far as rates.

10:33Anything that you think in between here and there could change that?

10:36I mean, again, we got a little bit of a reprieve because the AI stocks are, you know, there's some

10:45question on the slowdown. But, you know, to me, I thought Kevin Warsh wanted to buy some time

10:54and hopefully the conflict could end. And then if the conflict could end, they can really talk into

10:58this. But the problem is that's not been the case. And some of the diesel inflation is starting

11:03to embed itself into the service inflation data of the Fed. That's what the Fed always wanted to

11:07fight against. So it would be a very, very hawkish hold. But again, I'm hoping by December,

11:16that final Fed meeting of the year, we get a little bit more clarity because then you've got to start

11:21getting ready for spring 2027. And if you could just, because mortgage spreads are better now,

11:27it doesn't take much, doesn't take much to get back down to six and a half. And then under there,

11:33we could maybe have a better setup. But again, those, the reason we had that podcast seven,

11:39eight weeks ago about a, this can get worse with a 10 year yield is these variables were still in

11:43play.

11:44So we just, it's crazy. We just got to focus one day at a time and see, but there is

11:50a pathway

11:50to get there to something workable toward the end of the year or in early 2027. But some of these

11:59variables have to go away or else, you know, there are consequences with actions.

12:05We're what, about three weeks away from the midterm elections. I know I keep saying this, but

12:10you know, in my, in my mind, I'm like, maybe we will see something happen after that, that will,

12:15you know, we'll bring rates down a little bit again, if the conflict, you know, if, if Iran is

12:20really just waiting till after that, just to punish President Trump and the Republicans, maybe we see

12:26something happen afterwards. I don't know the logistics. This is not my wheelhouse in terms of

12:31like what, I know the, the, the house has been trying to stop the conflict, but the Senate takes away.

12:37So I, I don't know how long that needs to happen if, if there's more seats in, but, but again,

12:43that's just one. I mean, I mean, the, the other things that are really important is that the labor

12:47data got better. Nominal growth is still growing. So the economy is still growing. It's just that if

12:52you can get the economy to grow and some of these variables go down, then you get what we had

12:57kind

12:58of early 2026, you know, oil prices were down, mortgage rates were down. The economy was still

13:04growing, right? The labor data got better. Of course, labor data getting better can push rates

13:08up higher. That's a good reason for rates to go up higher, but some of these other things just

13:13threw a grenade right in the middle of this year. And it just, everything just kind of went into chaos

13:19right after that. So, you know, we talked about mortgage spreads and one of the things that really

13:24strikes me about the chart right now is mortgage spreads in 2026. Now it's touching the,

13:30the bottom levels I think of, of 2025. Right. So are we at a, are we, has that spread gotten

13:37worse?

13:37I mean, it's gotten, it's gotten a little bit worse, but we're, we're, we have to remember at

13:42this time last year was one of the lowest levels in, in many years for spreads. So the spreads are

13:48still low enough to make a huge benefit. If you're getting back up to the high levels of 2025, 2024,

13:55and 2023, that's a problem, but there's nothing, anything that I've seen in the spreads that

14:00reverses the big move. Cause usually when this happens, this stays in a low base for a very long

14:05time until something breaks it. There's nothing out there to, to, to show me that it's breaking

14:11in that regard. So that again, the worst levels of 2025 mortgage rates would have been above 8%.

14:19It would have been much higher, but we're not there at that time yet. Returning to purchase

14:25application data for just a second. That chart that, you know, you already talked about that,

14:30that chart doesn't look good. It's heading in the wrong direction is part of that though. You know,

14:34where we are in the, in the seasonality of it. So normally I would say, yes. In the old days,

14:41it was very simple. A purchase application data starts its rise from the second week of January to the

14:47first week of May. And typically after May volumes falls, but in the last few years,

14:52purchase application data has gotten better toward the end of the year. Of course, toward the end of

14:56the year, rates are lower and you're working from a very low percentage. So I know some people can say,

15:01well, this is the seasonality. All, all your data lines are going lower. It didn't matter where

15:06rates are. This is true, but this is a survey, right? So the survey is taking the actions that are

15:12happening right now. And the actions right now, our rates are near seven and a half percent that

15:17hits demand, right? We don't have any data that looks good. So I wouldn't put all my eggs into

15:22the seasonality basket, but that that's, that's always been the normal case. But we've had times

15:27in the last few years when rates are lower, demand picks up, you start going into the spring and then

15:34we get sales to grow and then rates shoot up. It's really remarkably consistent the last three years

15:39and 10 months. So I wouldn't put too much into the seasonality factor here. This is just a pure

15:45rate story. If rates were 5.75%, demand would be rising, but that isn't the case right now.

15:53That's what we need. We need rates to go down a little bit. Come on, man.

15:57Logan, thanks as always for being on and congratulations.

16:00Congratulations. Who would have thought, you know, who would have thought us too?

16:04I know. It's like that Paul Rudd meme where they, where he's just looking at himself. Who would

16:10have thought, who would have thought, you know, that we could be saying that.

16:14I'm proud of us. This is a big deal and love all the listeners out there. We're going to keep

16:18doing this. We're just getting started. We love talking about this every day. Logan, thanks again.

16:24Pleasure.

16:34Pleasure.

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