What the new Congress can do to lower mortgage rates

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about what a new Congress can do to lower mortgage rates.  Related to this episode:  Can the new Congress help lower mortgage rates? https://www.housingwire.com/articles/can-the-new-congress-help-lower-mortgage-rates/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire https://lnk.bio/housingwire  Top 5 Trending:  Can the new Congress help lower mortgage rates? https://www.housingwire.com/articles/can-the-new-congress-help-lower-mortgage-rates/  The midterms are shaping the housing policy landscape. What real estate pros should watch https://www.housingwire.com/articles/2026-midterms-housing-policy/  CCM’s non-solicitation push tests limits of lender control https://www.housingwire.com/articles/ccm-enforcement-action-non-solicitation/  Florida’s Amendment 3 could give housing market a ‘sugar high’ through year-end https://www.housingwire.com/articles/florida-amendment-3-cutoff/  CFPB narrows enforcement practices, closes 86% of supervisory actions https://www.housingwire.com/articles/cfpb-closes-supervisory-actions/  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 what a

00:15new Congress can do to lower mortgage rates. Before we dive in, here are the top five trending

00:20articles on HousingWire.com. Many of them are our midterm follow-up coverage. First is Logan's

00:26latest, which we're talking about today. Can Congress help lower mortgage rates? Followed

00:31by the midterms are shaping the housing policy landscape, what real estate pros should watch.

00:36Then we have mortgage policy faces tight runway in Split, Washington. And Vantage Score 4.0 can

00:42create more homebuyers. Now we need more homes. Finally, we have Zillow pushes preferred agent

00:47program toward 100% of buyer connections. Okay, we are ready to dive in. Logan, welcome back to

00:54the podcast. It is wonderful to be here. I was out dancing with Uma Thurman. You know,

01:00we did the whole Pulp Fiction remake, you know, so, you know. Wait, was that before or after you were

01:07sitting with Mariah Carey? I can't keep him straight. I know, I know, I know. Everybody

01:13wants a piece of the truck daddy's economic mindset. But wow. You know, it's going to be

01:20jobs Friday when this comes out. And what a week. What a crazy. We said it was going to be

01:28like the

01:28craziest week of the year. And I don't think we had any idea how crazy that election was going to

01:35be.

01:35Hey, you know what? It's we're not going to talk about 24, the show anymore. It's going to 2027. But

01:43you know, if that was a theme for 2026, then this is it. Obviously, you know, it was a big

01:50day for the

01:51Democrats. And I think the question going out now is, what can Congress actually do? Like,

02:01I mean, realistically, you know, because I mean, I'm a guy that just believes economics is

02:07demographics and productivity and, you know, the rest is stamp collecting. But regarding mortgage rates,

02:13because obviously this is a thing, right? This is now, you know, there are a lot of state initiatives

02:17that are trying to help housing, you know, and the kind of the theme that we talked about was like

02:23two months ago, Skynet versus people. And now we made it AI versus housing. So you could kind of see

02:29the turn here where AI stocks are getting crushed, but housing stocks are starting to do better.

02:37Right. So this is why we kept the 2027 theme, AI versus housing. And then now, you know, with the

02:46Democrats victory, you know, we're going to just go over what is what's realistically or what

02:54realistically can be done on the congressional side of things. And if President Trump wants to

03:00cooperate with that in the future, going into 2027.

03:04Okay, so let's start at the top with like oil prices, right? Because that's been, you know,

03:08just the inflationary part of this war. What can Congress do there, if anything, to to change

03:15something that the president's already started?

03:17You know, Chuck Schumer said, they're going to create legislation to end this conflict. I know the

03:25Republicans in the House have tried something like that, but the Senate, you know, knocks it off. So

03:32not my wheelhouse. I don't know how that's going to operate. But what it is, the issue now is the

03:41president doesn't have a lot of good choices now with the conflict. If he goes into, you know, war

03:47again, you know, things get messy. Oil prices aren't, you know, at $60 anymore. Does he do a deal that

03:55he

03:55doesn't like with Iran? And that makes Iran look like they won? Or does he just basically sit and

04:01wait it out? Just keep on doing the blockades until Iran gets a deal? That might be the most likely

04:07outcome. But in any case, the conflict, trying to get that over with, right? Because Iran's economy is

04:15getting hit, you know, they don't, they don't want to sit there as longer than they need to. But now

04:21that,

04:22you know, voters came in and made that an issue, I think what what they wanted to do is to

04:29make sure

04:30that, hey, listen, if you guys come back in here again, this is what's going to be and look what

04:34it

04:34does politically to yourself. You know, so I think that might hypothetically be a deterrent enough for

04:41the future. And to get a deal to get to to relieve some of their economic suffering. But that is

04:50something

04:50that the Federal Reserve has talked about. They don't like the conflict, they don't like diesel

04:56prices, and they're starting to see diesel prices and some of those inputs come into some of the

05:01inflation data. So what whatever Congress can do to end the conflict, that would be a positive for

05:10rates, especially going out into 2027. Now that we're in November, it's no fair, it's gonna be

05:15Thanksgiving. Before we know it. I know before we know it. So that, that is something that's

05:23plausible. That is something that Congress and can can can do to to help and that that will be

05:29beneficial for mortgage rates going out of the future. I mean, yeah, I think that's something

05:35to watch, right? It's not clear what that path is. But there could be a path there. Let's talk now

05:39about the AI, AI boom, right? Because this has been a changing story from the beginning of this

05:45year to now, starting to see the cracks, but what can Congress do to help or hurt that AI boom?

05:52You know, before we go into that question, I just want to say that the labor productivity data was

05:57so good today. And that the unit labor costs was that might be one of the greatest reports I've ever

06:03seen in my lifetime. And I almost don't want to believe it because I'm such a productivity guy.

06:10If this is true, because I always say that you remember that lady that was in the airport or in

06:16the airplane, she says she was, she made herself famous by telling that one person, she thought that

06:22guy was a lizard. And she said, that is not real. Whenever I see good productivity data, I just put

06:29the gif of her and I go, that is not real. If it is true, and this is for everyone

06:36in the mortgage

06:37and real estate industry, this is gets really, really geeky. But if it is true that the productivity

06:42growth is about to take off and unit labor costs go down, the Federal Reserve, especially Kevin Warsh,

06:48Lisa Cook will join in with him as well, can start talking about, hey, this productivity will start to

06:54keep a lid on inflationary concerns. Once you get the conflict and a trade war under control, they can start

07:02focusing on that. So that is something to think about in 2027, which I know nobody's, nobody's even read the

07:08labor productivity report. But I was like, oh, damn, that was that was really, really good. So that's that and

07:17that

07:17relates to the AI boom. That relates to the AI. So it's one of these things where, of course,

07:24construction labor is at whatever all time high because the data center boom and, you know, the Fed

07:30has made the AI, they've talked about AI being so inflationary the last six to nine weeks, that whenever

07:39you see AI stocks get hit, it brings, you know, the 10 year yield gets, you know, you get people

07:46buying

07:46bonds, not selling bonds. So we, the God King bled. And if you look at core, we've stock price there,

07:53it's blood on the streets, but you know, whatever can slow this down can be beneficial. I don't know

08:03how much velocity we can have into 2027, but if the bond market is going to be concerned about the

08:09AI

08:10growth going out in the future, that in a sense can be positive for rates. There's a lot of things

08:16that

08:16are already in the pipeline that aren't, I don't think they can do the moratorium on yet. But Congress

08:22definitely is going to try to slow that down. Okay. So regardless of what you think about AI or don't

08:30think about AI, the Federal Reserve says that the economy gets a boom. I mean, if you look at

08:35data centers and, and, and, and everything that goes into the AI, the amount of domestic investment

08:42in this is bigger than the housing bubble, right? So anything slowing that down can make growth slow

08:51down and the Federal Reserve will be mindful of that. But a very interesting time today that we're

08:57talking about this with the productivity numbers as good as it was, but it is something that Congress

09:02is going to do because that's what they're mandated. I think it was on 41 ballots and it got,

09:07AI got crushed in 40 of them. I think there was only one that, you know, didn't want to,

09:12they didn't want to kill it. So, um, but with all that said, guys, I just not kidding you.

09:19Skynet's response. I'm telling you when Skynet figures out we're going to destroy its energy

09:26capacity or slow it down. You know, if you see robots with skull faces out there with guns,

09:33run away, you know, but, uh, we have to start building the army now, Logan. Okay. I know I've got

09:39my army. I'll, I'll, I'll get my army out there, but, um, it, it is interesting to see how they,

09:45how, how that plays out going out in the future into 2027, you know, the moratoriums and everything

09:50you could clearly see core weave stock price and Intel stock price. These things are getting crushed.

09:56Um, and the fed made it so much now, normally the 10 year yield would be much lower than what

10:02it is

10:02right now, but you've seen that clear top at 5.35%. Now, one of the things that the federal

10:08reserve was so worried about inflationary pressures is that risk of slowing down. So that, that is a

10:14positive that Congress can actually do. If we're just talking about mortgage rates, uh, uh, in that

10:20regard. I do, I do think that they, um, people who were just elected could feel like of all the

10:27mandates they have AI is that, I mean, that was just bipartisan hate for like data centers, which

10:33I still think is interesting because I use AI every day. I think a lot of people use AI every

10:38day,

10:38even if they don't think of it that way. So it is funny, but I do think you're going to

10:42see

10:42regulation, right? And regulation will slow things down. And so at the state level, um, at the federal

10:49level. So I do think that's really interesting. I can't remember another time where people

10:54rallied around, like, we want to slow down tech in any way. Well, rates go higher, you know,

11:02people are going to hate it, you know? So, I mean, I mean, what was the whole Trinity thing we

11:07talked

11:07about the day after president Trump won? I said, if he's going to try to do this, he needs lower

11:12mortgage

11:12rates and lower energy prices and a lower dollar. And the AI boom gave him the cover, which he didn't

11:18really have the cover in the first trade war. He thought, you know, doing the corporate tax cuts,

11:23that business investment will be strong. And it wasn't in 2018. Now it's massive, man. That last

11:29GDP print business investment from AI is just unbelievable. So, so it's still going to be a

11:34Titanic story going out, but you know, it'll be more interesting if you actually see more of a

11:39slowdown in the data and how that responds to the 10 year yield, because the federal reserve has not

11:44flinched. We've had two, three fed governors talking today and they're like, oh, we're,

11:48we need to still hike rates. And, you know, you know, so if the federal reserve starts to change

11:54their tune verbally, that's a game changer, right? Cause we have other things, we have things in play

12:00now that were not the case before. And, you know, so going into 2027, yeah, you know, that this is

12:07definitely in the ball game now. Speaking of trade war, uh, you've talked about if, if trade war 2.0

12:15just can't, just doesn't get any worse. If it just, if we just don't levy new taxes or, or, you

12:21know,

12:22uh, things on other people, like if we can just keep that where it is, that will be a positive

12:27for

12:27rates, right? So what can Congress do there? Because, you know, the, uh, Trump does have some

12:33power to do that. Um, I guess they would, they could override it in some ways, but I'm not

12:39completely familiar with how they can really be a check on that. You know, the president has this

12:46new tool about, you know, trying to, to create some type of tariff that wasn't, uh, uh, given to him

12:53a few months ago. Um, he loves tariffs, right? The trade war is just not popular, right? You know,

13:00especially in red States. Um, and I don't know how much Congress is going to push back on this.

13:08I mean, of course the Supreme court said, you know, you, you can't do this, but I would imagine

13:14that there is some pressure now to get a deal done with Canada. And I think when, when you lose

13:22the

13:22house and the Senate together checks and balances, um, clearly the trade war is not going to get worse.

13:29Godzilla tariffs, you know, is, is not going to happen, uh, uh, maybe ever again, you know,

13:35and I think, um, uh, it is, it is interesting. We always talk about, you know, you need to put

13:41both hands on the stove to get burned by it. Um, I, the going out in the future, as long

13:48as you can get

13:49deals in and not make it worse and not add anything else to it, that that'll be a positive. I

13:56mean,

13:57the, the, the federal reserve said trade war, one-time price inflation hit. Well, you can't

14:02make the one-time price inflation hit worse, right? So the conflict gets over. There's two things,

14:07right? And then there's the three, the AI, right? So they've, they've, they've highlighted three

14:12things in the last 12 months to change or they flip, right? We went from two to three rate cuts

14:16to two to three rate hikes to now possibly five to six rate hikes to now. Okay. Now we're slowing

14:22it

14:22down. Maybe just two women. We'll see, but there are things in play that Congress actually can,

14:28can, uh, uh, temper. And I just, I, I, I don't know the president's, how he's going to react

14:34going out of the future, knowing that this was not very popular and, you know, uh, we'll see if a

14:39deal

14:40with Canada gets done and, you know, and how the, how that goes on. So that that's kind of a

14:45wild card

14:46because I just, I just can't see Trump living without using tariffs. I mean, he would just be

14:51bored, you know? Um, so, um, I just, that, that's still a toss up for me, but at least it

14:58can't get

14:59worse, right? We always said it can't get worse. Right. And, uh, uh, clearly if we want to see

15:04rates go down, if you want to see rates go down, you can't make the trade war worse. And now

15:08with,

15:09with the Supreme court, what they said in the election, you know, is a really good case. It can't

15:13get worse and maybe you could get some closure and move on from this, uh, time in our economic

15:19history. I think that, you know, a hallmark of, uh, president Trump's term so far has been like,

15:25uh, using executive power and, and really pushing the bounds of that, whether it's going to the

15:30Supreme court and saying, Hey, don't I, don't you think I have this power? Um, but then he also had

15:35a Congress that just was not going to push back. Right. So he now has a Congress that's going to

15:39push

15:39back. So it'll be interesting to see what is the checks and balances in the,

15:43and, you know, given some of the power that the Supreme court gave the president and what it said

15:48the executive could do. Um, so I don't think we know that yet. You know,

15:56the world changed over the last few weeks. Okay. And first hold the line at 5.35%.

16:05The God King bled, you know, AI stocks and that, you know, the rate hike, you know,

16:12at least Kevin Warsh believes that financial conditions got tight enough to wear their debt.

16:17And now you have a change in Congress or the both houses Senate. So the backdrop is better.

16:24Now, the thing is that you have to get the federal reserve on board, right? Again, 65 to 75%

16:30of where

16:30I see the 10 year yields and, uh, uh, mortgage rates can range. It is still fed policy. And the

16:36fed is still very hawkish. Um, and you know, I got a question like, why isn't the 10 year yield

16:42much

16:42lower? Right. Why, you know, why are we still up here with all these things? And I said, the fed

16:47is

16:47still hawkish. They, they still, Beth Hammock came out today. We need rate hikes, rate hikes, rate hikes,

16:52you know, and, uh, um, other fed governors were talking about that, but if you can get all those

16:58three things and then the fed, right. Cause I, I put so much on fed policy. If the fed starts

17:05sounding dovish, you got something to work with, right. You know, and it's, it doesn't take much

17:12down to get under 7% mortgage rates you talk about for the holidays, but you know, you want it

17:18to go

17:18lower and stick, right? That's the thing we don't want. We, you know, we had such a good start to

17:23the

17:23year because mortgage rates were in the sixes and it was hard to get above 6.75 spreads were getting

17:28better, but all this, Oh Lord. Oh, you had AI, you had trade war with Canada, you had conflict. I

17:36mean,

17:36but now flip the switch, you know? Um, and we'll, we'll see how that works out. But those, I mean,

17:44those are realistically things that Congress can kind of get themselves involved in, which, you

17:51know, um, it'll, it'll be, it'll, it'll definitely be interesting on how much they can, uh, uh, move

17:58that boat, but you still need the federal reserve to get on board. Right. So speaking of the federal

18:04reserve, okay. These, uh, these other three things we're taught, we've talked about, I can see how

18:08Congress has something. There is something that's, that's, uh, percolating in the background though,

18:13and that's jobs, right? Which we know that the federal reserve bases so much of its, um, its

18:19decisions on what the jobs data looks like. It is jobs Friday in this very eventful week. So far,

18:26um, what do we see on jobs and what do you think Congress can do about jobs?

18:30I, I, I, I see that the, the, the jobs variable is not something Congress can do anything about.

18:35So that's just the labor market. Now, um, job openings was fine. Whatever the jobs data is,

18:41uh, uh, it's actually going to be the, the, the, the lower scale story of the week because of

18:47everything else that happened, but job opening is still healthy. Jobless claims is still good.

18:53You know, um, ADP report was fine. So whatever the BLS jobs report is, but the interesting aspect

19:00about the jobs data is does AI actually really slow down enough to hit the construction employment?

19:09Because with rates elevated, it's not like housing starts and housing permits are taking off,

19:15right? That thing has been slowly moving lower for years, but without the data center,

19:20you know, do you get that employment kick from construction? Now, some of the manufacturing data

19:26has, uh, has come back. So you get some employment rebound from there, but, but manufacturing is just

19:31such a slow moving, uh, uh, uh, uh, labor force. It's not, there's really not much going on for,

19:37for, for some time here, but I think going out to think about jobs is that if AI does slow

19:42down and

19:44those, you don't need workers for that. What does that do to the, uh, overall unemployment? Because

19:50in a sense, if you're trying to slow down the economy, that's creating jobs in that manner,

19:56that can be a problem as I don't know if construction is going to be big enough to move the

20:00needle with the unemployment report, but it is something to think about in 2027. If growth does

20:06slow down, uh, um, and rates don't go down low enough to get housing going again, do we see that

20:13construction employment fade out with the moratoriums? And that's the labor market. See, last year was,

20:18last year was different in the sense that the trade war created so much chaos and companies didn't want

20:25to hire companies to know what's going on. And really only two sectors of the economy grew,

20:30um, healthcare and social services. Without that, we would have lost 800,000 jobs. That's,

20:35that's not a good, that's not a labor market that's tight or anything. Now you've got some of that

20:40rebound in manufacturing and in construction and mining, but you know, does a slowdown impact that,

20:47you know, so it's going to be a, a touch and go with the labor data going out in the

20:51future. But

20:52if you did see a slowdown labor over inflation over everything, right? The bond market has shown us

20:59in 2023, 2024, 2025, even in 2026, early 2026, which I didn't even agree with why, why is the

21:0610 year yield down here? It has shown you every single year, they will push yields lower if there's

21:12a growth scare. Um, but then things just rebound back up. It doesn't do you any good. It just gives

21:18you a very short blip. So we'll see if that happens, but you have three, possibly four things

21:24in play that can help bring yields a little bit lower. Just remember, it's very, very rare in our

21:30history to have mortgage rates under 5.75% with fed neutral policy at 3%. This is why you just

21:37base,

21:37you're just basically up here. This isn't, this is not abnormal with what fed policies, but the federal

21:42reserve is in a rate hike cycle. That's never a good thing for mortgage rates, but all they want to

21:46do

21:47those insurance rate cuts from last year. Just want to take that back. So you got a lot of things

21:52in play that Congress could do. We just got to take it one day at a time and see how

21:56the market

21:57responses. But the last time I checked, the 10 year yield was at 4.87. Well, well away from 5

22:03.35%. And

22:04we're getting closer to getting a sub 7% mortgage rates and hopefully before Thanksgiving.

22:10That would be something to be very thankful for. Logan, thank you so much for breaking this all down

22:15for us. Appreciate you. Pleasure.

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