On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the surprisingly resilient spring housing market and the ongoing chances of a recession.
Related to this episode:
Why purchase mortgage applications have been positive all year | HousingWire
https://www.housingwire.com/articles/why-mortgage-purchase-applications-have-been-positive-all-year/
Enjoy the episode!
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 stories. Hosted and produced by the HousingWire Content Studio.
Related to this episode:
Why purchase mortgage applications have been positive all year | HousingWire
https://www.housingwire.com/articles/why-mortgage-purchase-applications-have-been-positive-all-year/
Enjoy the episode!
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 stories. Hosted and produced by the HousingWire Content Studio.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the surprisingly
00:11strong spring housing market and the ongoing chances of a recession. First, I want to thank
00:16our sponsor, Rocket Close, for making this episode possible. Logan, welcome back to the
00:22podcast.
00:23It is wonderful to be here, Sarah.
00:25I am so excited about this episode because we're looking, now that we are in the second
00:31week of May, let's take a look back at the spring housing market. How do you grade this
00:37spring housing market?
00:38So generally, just for how I look at housing, this kind of gets an A, only in the sense that,
00:48of course, sales aren't booming or anything in that nature. But what I wanted to see
00:53in the 2025 year was similar to what I saw in 2024 in terms of, and we're going to list
01:02them off. Number one, inventory growing at a healthy pace. That's a positive, right? Price
01:07growth is cooling down. That's a positive. Number three, we see more concessions being
01:13done. You know, when you have an affordability crisis, whenever you get more inventory, more
01:19choices, you get, you know, we're not getting mortgage rates back to 3%. So the affordability
01:26has to work through wages, household formation, price growth slowing down. And in that context,
01:32I never liked the housing market in 2020, 2021, and early 2022 because inventory is too low. So
01:38the inventory side is a total A plus. Again, new listings data. It's not quite back to normal,
01:46but we're going to get the 80,000 plus by the time this podcast comes out, the tracker will be out
01:52here. So that is a positive. Number two is basically the 10-year yield falling at the start
01:59of the year has facilitated 14 weeks of positive year-over-year growth data. It's nothing spectacular.
02:06We're working off a very low base, but you can see that the demand curve is there. You can see that
02:13we're not breaking under 4 million, which is a key level for me. And that just mortgage rates going
02:19a little bit lower this year has created positive demand on that set. So because I've wanted to see
02:25more choices, price growth cooling down, and, you know, a minimal response to just the 10-year yield
02:32going down just a little bit, we never got down to the 6 to 6.64% level yet, where we could,
02:39where we've seen much better data. It's as good as you could hope for considering everything that's
02:46going on, not just here in America, but around the world. I love that. I do think it's sort of like
02:51surprisingly positive. We've talked about this before that, you know, when you look at it and
02:57you're like, actually, housing has been pretty positive this whole, the last four months. It's
03:02like, that's pretty surprising to everyone. Cause it's like, there's a lot of things going on
03:06and the consumers being hit by a lot of different things.
03:10You know, no one's talking about purchase application data being up 14 weeks in a row,
03:16not one person. Inventory being up positive in that sense. We have a few eight to nine states
03:24are back to 2019 inventory levels. When the entire country is back to 2019 inventory levels,
03:30I am, you'll never hear me say low inventory ever again. That's just goes back to my work in the last
03:36decade. I think again, the, the, the disagreement I have with people is that people said, well,
03:42consumer confidence is down. Housing confidence is down. There's trade war tariffs. The stock market
03:49was down. It was in a bear market recently. All these variables, you know, will not allow people to
03:56apply for a mortgage to buy a house. And that did not happen with elevated rates. And again, for me,
04:04I was always the 10 year yield rules, everything. So even the 10 year yield, just going down from
04:10four 81 to 4%, you know, and, and, and really rates just from seven and a quarter to six 60,
04:18that created some, a little bit of, a little bit of demand, which I, I, I would not have taken that bet.
04:25Somebody told me that Logan, you would have 14 straight weeks of positive year over year growth
04:30data running into may. Where do you think rates are? I said, rates have to be between 5.75 and 6.64.
04:37I would have never said that. So it's a healing process. And that's not the most sexiest thing
04:44in the world to talk about because it's just, you know, you, you want price growth to slow down.
04:48You want more insurance. You want things to create a better atmosphere because when rates do fall
04:53towards 6%, you have a better backdrop for all buyers and sellers in that regard. And that was
05:01the whole concept of team higher rates in February of 2021. Like it was a bad, we were in a really bad
05:08spot and nobody knew it, you know, and you know, so many people didn't believe in the COVID recovery
05:14and so many people thought we were going to have a forbearance crash or all these things, but it was
05:19really an unhealthy backdrop. Now we're getting something back to normal. And again, a lot of this
05:26reminds me of the 1980s. So and in the 1980s, a lot of people said there's two recessions, you know,
05:35inventory, inventory was almost twice as much back then as we are here. And, you know, unemployment rates
05:43were still high and all that stuff. And mortgage rates went down just two and a half percent. Sales
05:49started to grow. It eventually went down 5% from 18 to 13%. And sales almost looked vertically up. So we're
05:55getting there, right? We're getting there. That was part of the presentation we did in Florida to
06:01kind of show people the history of housing cycles and how they operate. But it wouldn't work if
06:07inventory didn't grow or new listings did as it didn't grow. And we didn't get any positive response
06:15from the 10-year yield dropping in the early part of the year. So you mentioned two recessions in the
06:201980s. The word recession right now. It's so interesting, right? You always say we don't say the R word
06:27until certain things happen. We've talked on this podcast about what that is for you, as far as what
06:34happens with jobless claims. Is there any sense when you look at things that like could could we even
06:39avoid a recession? And what would that do to housing?
06:42Regarding a recession, so many people were 100% in because they saw the Godzilla tariffs and they
06:51said, no way, you know, there's no way we can't avoid a recession. So we'll have to look at it as
06:56that we're starting the process of doing deals. Can we get them done fast enough to prevent all these
07:04shocks happening at once? Again, we still have 162 million people employed. Household balance sheets
07:13in terms of homeowners are still in a good spot. I think going out for the next few months, it's,
07:19you know, this Monday morning, we don't know. Maybe we did a deal with China. Maybe we didn't. Maybe
07:24we did. We're going to sign deals with India, Japan, whatever it is. It's going to be a day by day
07:31process because the faster we get into this deal work, the better it would be for the long term.
07:37So it's a timing thing. If there were no tariff, Godzilla tariffs or any tariffs, you know, we'd be
07:43sitting here debating if rates are low enough to prevent the builders from laying off people. But
07:49clearly the first four months of the year, we were expanding. Some people could say, well, there's a lot
07:55of people buying ahead of tariffs and it messes up the data. I believe that's a valid theory. But
08:01for now, try to hold this together, you know, and not prevent recession, which is interesting
08:09because so many people at the start of the year says, we're trying to create a recession because
08:14we can't refinance our debt. We need to get rates lower. That was such a cockamamie lying
08:22theory, you know, that was spread around the internet. You know, that that's not we, if the bond
08:29market couldn't handle any of the short term or long term supply coming to a 10 year yield and
08:34short term rates would be so much higher. But but we can handle that stuff. I think that was just a
08:40kind of a teamwork huddle. Hey, tell everybody we want to create a recession because we need to
08:44refinance the debt. Not not not not the case. We were able to handle that at some point. So I'm
08:50hoping that deals could be made faster, quicker. And one good thing about, you know,
08:56the market acting better is the spreads are acting better. Right on days when the 10 year
09:01yield has gone up. Even noticeably, the spreads have compressed, and it limits the damage. That's
09:08what we saw earlier in the year. So hopefully that continues. But again, it's a wild card. Every
09:13weekend, every day, we don't know what's going to happen, what's going to be said. So we have to take
09:18it one day at a time. But I'm hopefully we can get through this stage without so much damage from
09:24the trade war. Okay, well, I have to note your use of the word cockamamie, which is, you know,
09:31an A plus word and one that I feel like is an old word. So I love the old school world. I got
09:37probably millennials and Gen Z are like, what did he just say? I don't think I've used that word
09:44since the sixth grade. So I was like, pull it out of nowhere. I don't know. That's great. It does
09:50really explain a lot. It's a good word for this for this timeframe. The volatility is what we keep
09:56talking about. So I think it's interesting that you're talking about the spreads because we know
09:59that the spreads have been reacting to so much of all the other headlines going on. And that's not
10:05something any of us can control. It's not something the housing market can control, but they are
10:09directly impacted by it. You know, it's, it's, it's a, it's a healthy thing because I don't think
10:14I know, not a lot of people know what mortgage spreads are, you know, and it's just, you know,
10:20because we really didn't have to deal with it much in the last decade. And now it's, it's been a
10:25prolonged issue. And I think it's, it's healthy that people are, especially in the real estate and
10:30mortgage industry, understand what that is. Because if the spreads are normal, we're under 6% today,
10:36you know, so, but there are times going back to the 1970s where we have elevated spreads. I know
10:42in the early 1980s, it was five to 6%. Like, you know, we wouldn't have got to 18% mortgage rates
10:48if the spreads weren't that bad. Or even recently, you know, we wouldn't have got to 8% mortgage rates
10:54if the spreads didn't blow up in 2023. So the spreads improving is, is, is a positive. We lost it a
11:01little bit to market volatility, but hopefully we can get it back to a lower end. And again,
11:06then, then it goes into the, what's the Fed going to do? How we're going to react to trade wars,
11:10all this stuff, but take that all aside. Housing. Okay. You know, not great. The builders are still
11:18dealing with supply and margin pressure issues. But if, if you would have taken every single person
11:24and said, Hey, listen, you have trade wars, recession talk, you know, mortgage rates near 7%,
11:30nobody would have said positive 14% for positive 14 weeks of year over year growth,
11:37healthy inventory growth, uh, price, uh, price, uh, growth cooling down. All these things to me
11:43are positive, which, you know, 20, late 2020, all 2021 and early 2022, uh, weren't the case in terms
11:51of the ability for prices to escalate out of control. Surprisingly resilient is what we could say.
11:57And, you know, that that's positive. That's what we can hope for. Um, you know, in the last decade,
12:02total home sales, the peak peak was about near 6 million toward the end of the decade. Uh, and we're,
12:09we're roughly near 5 million. So again, to me is we're missing a million mortgage buyers. Um,
12:15and rates are elevated. Prices are elevated taxes, insurance, everything to get near 5 million home
12:22sales just shows you that, you know, the easy answer is, well, if mortgage rates go sub 6%,
12:27we can grow sales and people will feel better. I wish I had, you know, an easy way of saying, yeah,
12:35that could happen, but I can't, I haven't been able to forecast, uh, under 5.75% rates in a while,
12:41uh, for all the reasons, the spreads, the fed policy, everything. So, uh, but, but considering this year,
12:48all the things that the country's had to deal with and all the crazy headlines and, and people
12:53say, nobody's going to buy a house and everything. And just, just to see that kind of resilience and
12:58inventory growing and price cuts, uh, percentage growing enough to where price growth is cooling
13:04out. These things are all positives. We will take it. We will take it where it comes. And I know we're,
13:09we're just going to be looking at the data every day. So, uh, Logan, thank you so much for being
13:14on. I would encourage everyone to look at the tracker. That's where we, uh, you break down
13:19nine or 10 different data points every week. And, uh, that's the most up to date.
13:24And speaking of which a lot of people ask about the tracker. So when we, when we, um, uh, brought
13:29this up in Florida, I said, listen, what we want to do is give you the active inventory, give you the
13:33new listings data, give you the price cut percentages. And one third of all homes in America have price
13:39cuts. Not a lot of people know that that's very normal. Um, then we always want to
13:44analyze the 10 year yield and then what's going on with the mortgage spreads. So a lot of people
13:48ask, where can you find the mortgage spreads, the tracker updates at every weekend for everyone.
13:53So you can sit there and take a look at it and you'll be fine, uh, with that. And we try to give,
13:57we try to verse people on, you know, what our forecast was and what's happening year round. So
14:02we hold everyone's hands 24 seven and we, uh, uh, move it forward. But then we also add the purchase
14:09application data. We count it a little bit differently than others. And then we have our
14:13total, uh, pending contracts. You know, I, I show kind of the monthly version of it. And
14:18Mike Simon said, he does the, the, the weekly version on his podcast. And this way you get
14:23the total picture, right? This way, everyone think about it. Everyone is going to be so versed
14:28with the freshest data that you don't have to wait two months to look at old stale data. You're
14:34always on the current and forward. And this way, nobody gets surprised.
14:38Nobody gets surprised. So go to housingwire.com, look up housing market tracker. Everything's
14:43there for the last, actually two and a half years now we've been doing this. You've been
14:48doing this. Yeah. That's a lot. Great data. And, um, Logan, thank you again so much. We'll
14:53talk soon. Pleasure.