The economic battle for 2027: AI vs housing

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the battle brewing between AI and housing for 2027. The two also discuss bitcoin.   Related to this episode:   Today's Mortgage Rates  https://www.housingwire.com/mortgage-rates/   HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q   More info about HousingWire  https://lnk.bio/housingwire   Top 5 Trending:   Zillow Home Loans launches FHA down payment assistance loan  https://www.housingwire.com/articles/zillow-fha-down-payment-loan/   Exclusive: Dark Matter acquires House Numbers’ agentic AI platform  https://www.housingwire.com/articles/exclusive-dark-matter-acquires-house-numbers-agentic-ai-platform/   Rocket posts $709M profit in Q3 despite tougher mortgage market  https://www.housingwire.com/articles/rocket-q3-profit-tougher-market/   FICO weighs subscription model for mortgage scores in 2027  https://www.housingwire.com/articles/fico-pricing-mortgage-scores-2027/   $711 million is sitting in the commission suit settlement fund, so when do payouts start?  https://www.housingwire.com/articles/nar-settlement-payout-timing/   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

00:00Welcome, everyone. I'm joined today by my podcast partner, lead analyst Logan Motoshami,

00:05to talk about AI versus housing. We'll also discuss Bitcoin. Before we dive in,

00:11here are the top five trending articles on HousingWire.com. First, we have Zillow Home

00:16Loans launches FHA down payment assistant program, followed by our exclusive on Dark Matter acquires

00:22house numbers agentic AI. Then we have Rocket posts $709 million profit in Q3, despite tougher

00:29mortgage market, and FICO Ways subscription model for mortgage scores in 2027. Finally,

00:36we have $711 million is sitting in the commission lawsuit settlement fund. So when do payouts start?

00:43Okay, we are ready to dive in. Super interesting. Logan, welcome back to the podcast.

00:48It is great to be here without a lipstick and a wig.

00:53Listen, I appreciate your commitment to, you know, to giving our fans something to look at. That was

01:00very funny. Also very hard for me to concentrate while you had the lipstick on, not going to lie.

01:06You know, it's Friday morning. And one of the things I try to explain to people how we're like

01:13in a head and shoulders formation on the 10-year yield where you see the shoulder and then the 10

01:20-year

01:20yield went up to 535. It bounced off and came down. And now we're at this 4.94 level. And

01:26it does look

01:27like it's going to hold right now. But a lot of this is, in a sense, AI driven. And one

01:36of the Federal

01:36Reserve, who might be a voting member next year, if the St. Louis, if the Atlanta Fed can't get a

01:42president named, he talked about, well, you know, I have two views. Number one, we're going to have

01:48to raise rates a lot more to cool this economy down, to bring inflation in line. Or number two,

01:55the conflict ends, oil prices go lower, but then the AI boom starts to fade out and the wealth

02:04effect and spending gets less. And that would, you know, help our fight against inflation. And

02:12we might not need to hike. He said the second one is not plausible. But one of the things that

02:20I always

02:21reference to is that 65% to 75% of what drives a 10-year yield and 30-year mortgage

02:28rate, which we

02:28call the slow dance, is Fed policy. Now, the Federal Reserve has made oil prices and diesel prices a big

02:34thing early on, that the conflict lasting long is not good. And we're still here. The 10-year yield

02:39is 4.94% above my peak range of my forecast, you know. But in the last, I would say,

02:48six, seven weeks,

02:49a lot of them have been talking about AI, that AI is inflationary, AI is inflationary, AI is creating

02:55inflation. And then all of a sudden, the AI god kings were bleeding. And now the 10-year yield is

03:01lower.

03:02It's not because federal debt. I always love it how people, whenever the 10-year yield rises,

03:06it goes, federal debt. And then whenever it falls down, they keep their mouth shut. But here,

03:12the 10-year yield falling is in a sense AI related or related to tech stocks or the NASDAQ.

03:19So going out in the future, it's like, you know, is it now just these two fighting it off where

03:26the data

03:27centers are being built out? They've got all the construction workers they need for all their

03:32stuff. Not a problem there, but housing construction for all the hype about, you know, we need to build

03:37more homes, everything. That's not going there. That's been declining for years. So now it's this

03:42really good battle, you know, going into 2027, you know, with moratoriums and, you know, debt,

03:50you know, being priced differently and fed his hiking rates and trying to slow the AI down.

03:56If AI slows down, what can offset that slowdown, when in a sense would have to be housing. So you've,

04:04now you've pitted these two against each other. And this could be a story theme going out into

04:102027 now.

04:12So interesting how fast the AI story has turned to your point where it felt like just a couple of

04:18weeks ago, we found, we saw the first, the first little, in your, in your words, bloodletting,

04:23right from a core weave and then everything that's happened since then. And wow, I mean,

04:29pretty big difference in how the markets are looking at it.

04:32You know, Intel stock price is down almost 30% today. You know, again, if it, if it bleeds,

04:38we could all kill it. Arnold Schwarzenegger, right. You know, and Kevin Warsh, in a sense,

04:46talked about it in his own way that, you know, you know, you can get restrictive policy to cool

04:51down a sector of the economy. Now, you know, this doesn't mean like the whole AI thing is going to

04:57blow up soon. And that's, that's going to take the growth. Cause if, if the AI, if the AI, in

05:02a sense,

05:03bubble blew up and you, you don't need any more data centers and, you know, instead of the,

05:08the $10 trillion we're spending, it'd be like two or 3 trillion, whatever, whatever that is,

05:13that that's a whole different subject. But for now it is, it is, it's an interesting trade-off

05:19since the federal reserve made the AI so prominent in their speeches and talking points.

05:25And now it bled a little bit, you know, the 10 year yield is rolled over just a little bit,

05:30nothing, nothing drastic, but it does say that, you know, you have limits on how much higher the

05:3610 year yield can go. But if, if that fades, what's the one sector that isn't really providing

05:43too much growth through the economy, residential construction, a big ticket item purchases,

05:51these things have the potential to grow where if, if AI did fade out and that's the battle for 2027

06:00with the 10 year yield and rates and construction and construction workers and where, where's money

06:06going? It's a good setup because I think everyone now understands that the Fed where early in the

06:12year, people were talking about disinflation, that AI was going to take all the jobs and we had to cut

06:16rates because, you know, there was going to be mass unemployment. Now it's like unemployment rates

06:21still low, jobless claims still low. And we just have to take this data point, which means

06:28following the NASDAQ and AI at this point. And this, again, we're still, the 10 year yield is

06:34still 4.94%. Mortgage rates are still above seven. But you could, if you could just get down below 6

06:41.64

06:42and head toward six. I was going to say, I mean, I feel like, you know, obviously we don't ever

06:47want

06:47to root for a recession or things to go bad, but if AI is, is having this turn, that could

06:53be a lifeline

06:53for the mortgage industry. I mean, and that would be very welcome. It is. I just want to caution

06:59people to, you know, he, you hear these people like Ryan Serhan, bless his soul. I still have

07:08better hair than that guy, but Ryan Serhan did something on LinkedIn where he was like, oh my

07:13God, existing home sales are under 4 million credit card debt. Nobody could pay it off. And I was just

07:17like, guys, if I had a penny for every man in America for the last 13 years, I said credit

07:25card

07:25debt was going to create a recession. I'd have over $21 million. It never worked out. Credit card

07:32utilization rates are low. Household payments to credit cards as a form of percentage of disposable

07:38income are low. Majority of consumer debt are in the hands of homeowners, whether it's mortgages,

07:45HELOCs, and credit card, and they're doing fine. And think about this. Literally, if it wasn't for

07:52COVID, we'd have the longest economic and job expansion ever in history, right? Because consumption

07:57and growth is still here. Investment, investment is definitely picked up for AI in a very big fashion,

08:03maybe the biggest, the biggest fashion we've seen in the 21st century. But if that's slowed down,

08:09it doesn't necessarily mean that AI is going to like burst out and we're going to have a big recession

08:13or anything of that. But it does pit these two against each other on the macro sense.

08:21That is more a, that's a more valid premise than this. Keep on saying what men say in America,

08:26credit card debt, credit card debt, delinquencies. I mean, it's been going on for four or five years

08:31now. Come on, y'all. Take some pride in this. Let's talk about credit card debt and the effect

08:37that that could have on someone who otherwise could be a first-time home buyer. We do have a lot

08:42of

08:42affordability pressure right now. And so from my perspective, if things are more expensive and

08:47those, you know, of course, I know homeowners are in a great spot for people who would otherwise

08:52potentially be ready to buy their first house. And now they've got the credit card debt. Do you not

08:58see that as a factor? Okay. So the credit card utilization rates, which nobody ever shows that

09:03chart, because that's another chart. If you show that you're going to go, Hey, it's not that bad.

09:07The amount of credit card debt being used to the capacity it could be borrowed is nothing out of

09:12the norm. It hasn't been out of the norm for 13 or 14 years, but you can't, you can't doom

09:18porn

09:18that, right? Ryan Serhan can't go on LinkedIn and say, Oh, credit card debt, you know? So I don't

09:25think Ryan wants to doom porn anything. I mean, he's trying to sell. Oh, no, no, no. If you, if

09:29you

09:29are going on LinkedIn and putting that post on your doom pointing and the chart daddy says, no man or

09:33woman gets off free clear off of that. Okay. Well, I'm going to, I'm going to stand up for Ryan

09:38and his hair. Cause I don't think that's doing important. If you're saying credit card debt is

09:43X and nobody could pay it off. That's doom porn. One-on-one credit card debt going down is,

09:49is it would be a negative because it always grows in an expansionary timeframe. It's the utilization

09:55and credit card stress. So right now you see, you see stress in renter households that I don't think

10:01those are home buyers, right? And everybody keeps on saying so many people are stressed that they

10:06have to rush to sell their house. New listings data has been the lowest ever, you know? So

10:12there are data lines to track. There are things to talk about with economic cycles and that that's

10:17not one of them, right? Because it's been, we've had delinquencies rise and credit card rise for the

10:21last five years. And people keep on saying rates are going to go lower because we're going to go on

10:25a

10:25river. It never happened people. There are other things to look at. So if the AI growth

10:31slows down, kind of like what the federal reserve, St. Louis, Alberto said, if that slows down and

10:38energy prices slow down and the tariff goes, then you can get rates a little bit lower. And that's

10:43kind of it, right? It's really hard to forecast mortgage rates under 5.75% with neutral policy,

10:50which was at 3%. And now it's, we don't even have neutral policy anymore because they're not even

10:55talking about it. So know the limits to what you can do within a cycle. But if you're, if you're

11:02going to highlight like kind of these big end of the world things, man, there are people who are

11:08tracked, who are trained to talk about economic cycle works. I question the validity of using the

11:13credit card debt because it's been here since 2012 and credit card debts rising and there's delinquents.

11:19There's, there's one to 4% of all credit debt is in form of delinquencies. It's when growth and

11:25investment and consumption slows down, industrial production and retail. So the least, and when

11:30they start to pay corporate profits fall, layoffs start to happen because why? A really good example,

11:36Sarah, somebody said, is Microsoft 60,000 layoffs? Is that the canary in the coal mines? Guys,

11:43one and a half to 2 million people lose their jobs every single month. We have over 162 million

11:48people working out there. That's 60,000, which is a lot of that's just buyouts. It's not even all in

11:54America. It's like 0.00347%. Okay. That's not going to do it. And we see these headlines over and

12:03over again for the last 10 years. That's not economic cycle work. Companies fire people. They

12:08reform, they balance it out on what they need. Meta has been doing that. Their corporate profits are up,

12:15but that doesn't mean the economic cycle is breaking out here. Their growth and investment

12:21slows down. There are a few sectors that tend to break first. When that happens, we can go there.

12:26So y'all don't have to do the credit card debt thing. Thank you for that rant, but it was

12:31informative.

12:32Okay. So let's talk again about you. You were like, it's really hard to get to 575% mortgage rates.

12:39Let's not talk about that. You have laid out a case for, can we get to below seven or eight

12:45or nine?

12:46So let's talk about that seven or under scenario. We're not talking about 575. Can we just get back

12:52to seven or 64, given what you're talking about right now? So when we wrote that article, can we

12:58get under 7% by the holidays, right? Either Halloween, which is not going to happen, Thanksgiving,

13:05Christmas, or New Year's. All right. So number one, the 5.35% had to hold. If that breaks,

13:11forget about it, man. You're going to have issues with the bond market. So that happened.

13:15Number two, the conflict has to end in oil prices. That hasn't happened. Okay. So that's a negative on

13:22that. Number three, any kind of growth scare. We haven't really had a growth. We've actually had

13:27pretty good economic data. By the way, we've had really good economic data on credit card debt rising

13:31every single year with delinquencies for years now. I'm just going to harp on that for the rest

13:35of this podcast. That's not going to do it. But the AI story to me matches what the Federal Reserve

13:41has been talking about for the last 68 weeks. They purposefully went out there and their speeches,

13:47AI, AI, AI, all of them. And now the AI did bleed a little bit. So to me, it's like

13:52maybe some of them

13:54knew things were somewhat slowing down beforehand. Talk to the bond market. The bond trader is like,

14:01Skynet has a glitch. All right. Let's not sell bonds above a certain level. So if we can get the

14:10conflict over with and oil goes down, the last time we got the MOU deal, the 10-year yield went

14:14down to

14:15like 650. Or excuse me, it went to 450. Mortgage rates were 6.53%. I don't think we're going to

14:21get

14:21that same response now. But boy, you get that and the AI slowdown and you don't make trade war 2

14:28.0 worse,

14:29the three things the Federal Reserve has harping on that they've told the marketplace. Remember,

14:3565% to 75% of this is Fed policy. That's what matters. So in that context, you can start

14:40to get

14:42a little bit more traction and you could get maybe down below 7% and get maybe down below 6

14:48.64%. But

14:49there's limits to what you can do on mortgage rates going lower in this environment. As long as growth,

14:54GDP was above 3.4%. Jobless claims are low. The ECI wage growth at the Fed tracks is that pretty

15:03much

15:04cycle lows, but compensation is being pushed up by healthcare benefits going up higher. But

15:09still, the cycle is intact. We get to that little bit lower level out there when you take those three

15:16variables and put them together. I think that's the best case scenario for 2027. And we have to start

15:22thinking about that. Or the conflict never ends. Trump just goes, I'm going to do as many tariffs

15:28as I can the last two years of my presidency. Those things would not be a positive. But for now,

15:35we got a glimpse. That's all it is. We're still finding this head and shoulders. We just got a

15:39glimpse of what can happen. And because of that, I think it's beneficial.

15:45Well, let me ask you this. So you laid out three things there. But I do think the conflict

15:49is really the hardest one to solve, seemingly. So if you have two out of three, do you think we

15:55get

15:55to 7%? Or do you think the conflict has to end? We just need to break this head and

16:00shoulder

16:01pattern and we can get down to under 4.85%. We just get spreads. Even if the conflict doesn't end?

16:07Even if the conflict doesn't end, it's not that hard to get a lower when the spreads get a little

16:17bit better. Remember, when bond yields move down in fast fashion, spreads get a little bit worse. So

16:21that's not abnormal. But the conflict ending does take away one key variable that everyone hates.

16:28Nobody likes oil prices here. Nobody likes diesel prices here. Farmers need constant bailouts. Truckers

16:33have problems. That can make the whole mood. But that is something that the Federal Reserve would be

16:37like, OK, that's gone. OK. And then if the trade war 2.0, we deal with Canada. We announce that.

16:44We're all good. Whatever. There we go. Yep. Oh, there we go. That's two. And then if the AI thing

16:48just slows down a little bit, there you go. So, I mean, the three things that the Federal Reserve harps

16:54on, they're in play. And that's even Alberto from the St. Louis Fed says, hey, we're waiting to see what

17:01happens. Right. So that whole theme about we're going to wait to see, because after the midterms,

17:07things can change, and then maybe some of this goes out. And just remember, if these moratoriums do

17:12stick, you know, the whole AI story doesn't go away, but still, it just slows it down just a

17:19little bit. I think that's just what the Federal Reserve wants. Federal Reserve is not trying to

17:24create a massive recession, you know, just to get rates lower. But they can't do anything about the

17:31trade war, and they can't do anything about the Iran conflict. But the AI story, they're

17:37very happy to see that. I saw the thing bleed. Because if you bleed, you can kill it. If you

17:43need to kill it, you can. Are we ever going to get a kill switch for all of AI around

17:47the

17:47world?

17:48I don't know, but we need some regulation around AI. Okay. So this leads into our next topic,

17:53which is the incredible heist that happened on Bitcoin. Let's talk about that.

18:02I don't really talk much about Bitcoin, because I just don't see the utilization rates of that being

18:07very impactful for the economy. I know some people think that when Bitcoin falls, you know,

18:12consumption will fall. I just don't think a lot of people own enough Bitcoin for it to matter

18:16in the general consumption sense.

18:18So you feel like it's concentrated among certain users?

18:21I think majority, like 4,000 people around the world own majority of the Bitcoin. I just,

18:26so it's just, I don't, I've not seen any data of utilization rates being used on Bitcoin's

18:34consumption, right, or distribution. They used to try to push it off as a currency, but

18:38that didn't work. So it's a financial asset. So I'd look at it more like a tech stock,

18:44right? So how many shares do people own that they could sell if they want,

18:48they transfer it, they have to put it into dollars. Okay, that's fine. But I just don't

18:52see that as, as a, now the, the, the 6 billion, I mean, if you can get, if some guy

18:59that works

19:00there gets his 6 billion taken off his laptop, that's a security issue, right? So does that

19:07create a spiraling effect where people start pulling out their Bitcoins from these places?

19:12You know, if that was a bank, that's a whole different story, right? Silicon Valley bank

19:18crisis, the Federal Reserve had to come in and clean up. Bitcoin happened, it doesn't really

19:24have that effect. So in the banking industry, that would be a big deal because we had a run on

19:29the

19:29bank. It was done on Slack and people just pulled money out and the Federal Reserve had to come in

19:35and

19:35clean up all the mess over a weekend. And we lost a few banks. So the banking system,

19:40if that happened in a, for dollars deposits, yeah, that's a big thing. But, you know, here we are,

19:466 billion was taken out. There's no real market stress. There's nothing talked about, you know,

19:51it's just, it's not, it's not a big deal in my big economic sense, nor will Bitcoin ever be in,

19:59in terms of what it means to the macro economy. It's a financial asset. It trades like financial

20:03assets, trades like a tech stock. And, you know, it is what it is, but clearly there's a difference

20:11between a run on a bank and Silicon Valley banking crisis, and then Bitcoin being 6 billion, stole

20:17it off. I feel like every time something like this happens, it just sets Bitcoin back. You know, like

20:22if you're, if you're, if you currently don't have any, but you're looking at, you're like,

20:26yeah, I don't want all my stuff to get stolen. And then anyone who's talking about it as a currency,

20:31it just sets the whole movement back. I just think people that want to buy Bitcoin want to make

20:36a lot of money and they're, they've been sold on this thing that it's the best hedge against

20:41inflation. And it's just, to me, it just trades like a tech stock. So that, that's how, that's how

20:46I look at it. I just, I don't know how many people really care about like Bitcoin being stolen.

20:50Cause I just don't think a lot of Americans own it. And there's not a, there's not enough of them

20:54to

20:54like a bank though. If 6 billion was taken off of X, okay, now that's a problem. There, there's,

21:01there's, but you know, 6 billion off of Bitcoin. I mean, you, you think about how big the asset is

21:07right now, you know, you know, it's, it's, it's, it's a, it's, it's a small duck in a small pond,

21:13but it does make it interesting for the security apparatus of this world and how this world can

21:19change and how AI can just create swarms and go into financial institutions and stuff like,

21:26you know, so that's why the kill switch, right. You know, you know, uh, uh, Skynet might not like

21:32it, you know, and we know how that movie ends, but eventually, you know, at some point there has

21:37to be some, uh, uh, some control system out there. Absolutely. Well, Logan, thank you so much for

21:42joining us with or without, uh, makeup, lipstick, whatever wig. I appreciate it. And, um, I hope you

21:48have a great weekend. Pleasure.

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