Logan Mohtashami: How Trump can influence Powell on mortgage rates

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about Trump’s full-court press on Fed chair Jerome Powell and what might move mortgage rates this summer.   Related to this episode:   ⁠FHFA Director Bill Pulte calls on Fed Chair Powell to resign | HousingWire⁠  https://www.housingwire.com/articles/fhfa-director-bill-pulte-calls-on-fed-chair-powell-to-resign/  ⁠Trump wants Powell to lower rates. Here’s how to do that | HousingWire⁠  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.housingwire.com/articles/trump-wants-powell-to-lower-rates-heres-how-to-do-that/   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.

Transcript

00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about Trump's full court

00:11press on Fed Chair Jerome Powell and what might move mortgage rates this summer. Logan, welcome

00:16back to the podcast. Welcome back to the award winning podcast. That's how we should start it

00:22off from now on. Yeah, that's what we're going to say every single time. I love it. That was great.

00:29Okay, we had quite a bit happen on Juneteenth. So we're recording this on Friday. So on Thursday,

00:35we had all sorts of things. And really, it comes down to can President Trump convince Powell to

00:40lower rates, right? And you wrote two stories for us on Thursday. Talk about what those stories were on.

00:47So number one, Trump talked about cutting rates two and a half percent. And immediately, I just

00:57thought that's, that's more of a budget thing. You know, many months ago, we talked about, you know,

01:03if Trump takes like a different angle toward, you know, than his president, his first presidency,

01:11where he waited to get some stuff done, got the tax cut done, got all this stuff done before he went

01:16into, you know, trade war tap dance. Here, you know, because he's got to do a budget, he's got a tax cut.

01:23And, you know, I was pondering, like, how are they going to handle the interest payments

01:29going out for 10 years? Because, you know, Trump would probably want lower rates just to add more

01:34tax cuts into the plan. What we're dealing with now is that, you know, it's getting, it's a little

01:39bit harder to pass the budget and the tax cut now than before. And one of the things is Trump wants

01:49lower Fed funds rate just to give him more wiggle room for the, for the deficit. And this is something

01:55that the Federal Reserve does not care at all about that. That's not part of their dual mandate.

02:01And in the article, I wrote that Trump really, if he really wanted to talk Powell down, and I, again,

02:08obviously Powell's not going to listen to him, but if you wanted to play the ref to, or, you know,

02:14be the high school basketball coach, 10 cents, wink, wink, you want to talk the ref down for

02:20another call later in the game. And the labor market is a better way to do it. I know a lot

02:27of like conservative media types, or like late last year, early, we're talking about, oh, we have to

02:32create a recession because we have to refinance the debt and all this stuff. And that the Fed has to

02:36cut rates. A lot of people for years have said the Fed has to cut rates because the interest,

02:39no, they don't. And they have it. And that's, that's never been a thing. That's not. And oddly

02:47enough, Fed President Waller this morning says, our job is employment and inflation. We don't cut rates

02:54to give cheap financing for the federal government. So that article was more or less, there are things

03:00about the labor market you can talk about and highlight. And things that Powell left himself open

03:08to for criticism, but cutting the Fed funds rate to make the budget work is just that that's not a

03:15thing. That's never going to be a thing. And, uh, it probably doesn't resonate to people as much as

03:20more as the labor market or the economy. I thought that was a great point that she made was like,

03:26listen, if you want to make this, one of the things that Powell said that we talked about right

03:30afterwards was like, he was like, yeah, it's really hard for people to find a job right now. It's

03:34like, okay, well that should be a, uh, you know, an indication that labor is weakening, right? If it's

03:40so hard to find a job. And he said that himself. So that would be something to talk about.

03:45Well, I mean, I would frame it as what is neutral policy for the Fed. And the reason I say labor

03:52over inflation is that before any of the tariffs happened, they were talking about neutral policy

03:58is almost here. Maybe we're here. You know, they were saying stuff like that, which means they were

04:03not in rate cutting mode until they see the labor market break. So I think there, there is a more

04:08clever way to kind of go after Powell. And if you're looking for Fed rate cuts, then to say,

04:15oh, cut two and a half percent interest payments, you know, let it, let me get my tax, you know,

04:20that that's just not something they look at. And, and I've been talking about this for, for some time

04:26that people just assume that the Fed has to cut rates because of the interest expense. No,

04:31that's not, that's not even part of their mandate. So that's a whole different subject,

04:37a different part of government out there. So hopefully now people could understand

04:41why that was, you know, something that I've talked about, but for Fed president Waller to

04:46basically make that a statement who he's very open to rate cuts happening, but not because,

04:51you know, we want interest expense to go down.

04:55So I think that's the other thing is like, we're not just, it's not just what the internal,

04:59what our national audience thinks. It's what international does, right? I mean,

05:03this is our central bank. We need to, it needs to act in a way that continues to inspire confidence,

05:11right? Throughout the world. And so you could make this move, but you have to be careful about

05:15how you, how you present this. Well, I just don't think the Fed's ever going to like go that route.

05:22So that's just, I mean, literally they would like lose all credibility if they did anything like

05:29that. Well, we have to make the interest payments work for the budget for the tech, you know? So

05:34it's, it's not even, it's, it's not a, it's not a talking point and, and just mind, we are the most

05:40powerful economy in the world. We run the show. So all the other banks, federal reserves are just

05:47little tiny, little puppy dogs compared to us. So in this regard, the Fed has very kept it clear,

05:55at least for me since 2022, it's about the labor market. And until the labor market shows some

06:00deterioration, the Fed isn't going to do anything. They played catch up last year because the labor

06:05market was softer. You have to remember that the Fed hid behind the 2024 labor market as saying,

06:12remember, remember 2024, they said, we need confidence. We need confidence. We need confidence.

06:17No, you don't. You just didn't have, you need, you need a labor market. So all of a sudden they're

06:21like, Oh my God, the revisions are really bad. Oh, wait a second. Wait a second. Wait a second.

06:26So, and then the job data stopped getting as weaker as it did the pace, the pace of it. And now

06:32the hell, Oh, hold it, hold it, hold it. We're going to hold it. No rate cuts. Oh, tariffs. Let's

06:38hide behind that. Yeah. Yeah. Tariffs. We're going to, we're going to, we're going to wait on that

06:42one. So they're doing what was perfectly normal to me. But again, the, the net interest thing is,

06:51is just a waste of time. That's just not, not, not going to be a valid thing. The Fed even works

06:56off of. And, and for people to say that we were going to purposely go into a recession to refinance.

07:01No, no. Thankfully, I think I haven't seen that gimmick, by the way, conservatives are very good

07:07when they do this little, they do the summer camp, um, media blitz and everybody gets the same thing.

07:12The only problem is, is everybody says the same sentence. You're all going to do this. Tell

07:16people to talk differently. You can just tell that this was like a code, like all these other

07:21Tik TOK and Instagram, all these sites, they're all saying the same thing. So be a little bit more

07:25clever out there. It's like, it's like the one guy that trolls you to creates 27 different fake

07:30accounts, but he writes the same way, you know, it's him. They're just like, come on,

07:35show a little effort. But, uh, that, that was not a thing. Labor market. You can go after the

07:39economy trying to get ahead of it. That's perfectly fine. Perfectly normal, but the net interest payments.

07:44Okay. So the shadow, the potential shadow fed president. Interesting. We had, uh, the FHFA director,

07:52Bill Pulte call on Powell on Thursday to resign. Obviously the FHFA director doesn't get to tell the,

08:00uh, you know, fed chair to resign, but he can say that. Um, but it does bring up the fact that

08:07what you've said is that that shadow fed presidency just becomes more and more of an option as we go

08:12seemingly. So do you feel like Waller has now is now in first place there?

08:17No, I, I actually, I, I don't think Waller is in first place. I would rather have, uh, uh, fed

08:26president Waller be nominated or Michelle Bowman. I do not want Kevin Walsh to be the next fed chair

08:33because Kevin Walsh almost looks like a puppet now, you know, and I don't know if he did a deal

08:39with Trump. Hey, name me the fed president. I'll cut rates right away. And I'll do the shadow fed thing

08:45if you want. Yeah. But I just think if you, if you have an institution, it's really hard to have

08:51a guy come out. Who's just basically been bashing. He's done a little, little tour about bashing the

08:56fed for like two years and that, Oh, I want to be the president of this. And it rubs a lot of people

09:02the wrong way. Even if people, people who agree with him, just like, there's just something about

09:07that. It's ready. It's like, it's like a rat, you know, out there. So it's just not, I would rather

09:14have Waller or Bowman be nominated and you have some fed credit. Now, of course, you know, that's

09:22not the shadow fed president that Bessent and them were talking about. That's the thing that if you're

09:28going to a shadow fed president, you're talking to the person and say, Hey, listen, I get you in,

09:32you do this for me, right? You go on TV and you tell everybody you're going to cut rates,

09:38bond traders, get your head out of, you know what? And, uh, uh, uh, forward guidance is coming

09:43down here. That was the whole concept of the shadow fed. It wasn't like a lot of people don't

09:47understand the shadow. It sounds like very sinister, but it's just telling the marketplace,

09:51this is our guy. And the guy just basically telling the market, Hey, listen, rates are going down,

09:56you know, but Bowman and Waller at least are, you know, uh, are, are in the system and they would

10:06be respected. And, and I'm not saying that, that both of those two just, you know, turn from,

10:11you know, being inflation hawks to labor over inflation, but they're, they, they both can

10:17actually, you know, coherently give a better example of why, you know, like Waller does a good

10:24job of explaining why he doesn't want to wait for the labor market to break before cutting.

10:29He could say, well, cut rates of inflation takes off again, we'll hike it, but let's be a little

10:34bit more careful. I think that's a little bit more coherent than saying, Hey, Warsh, you, you work for

10:41me, you do this stuff. I'll get you in because then when, when Trump leaves, he, that guy's still

10:45there. Then you just don't know what, what, what you have with that. So, uh, I, I would be much

10:53happier if Waller or Bowman, two conservatives that conservatives do like, uh, in the house

11:00and Senate, them to be nominated and then go there. But again, that's somewhat defeats the

11:06shadow fed, uh, um, president purpose. So, uh, obviously here, what I'd want to see probably

11:12is not going to be the case, but again, it's something we all think about. I mean, it, it

11:16isn't shocking to me that both Trump and Pulte went after Powell, uh, uh, uh, after the fed

11:23meeting, but, uh, we're just, again, it's going to be a very, very interesting second

11:28half of 2025 with this backdrop in place, especially if the labor market, if the labor data starts

11:35to get weaker and weaker, there's a series of economic data lines tied to the labor market

11:40that shows the softening. But again, my premise is they need, they need something breaking,

11:45right? The only reason they started cutting last year is like, Oh boy, those revisions

11:49are negative. We've got to get with it. Now it's, it's the argument for me is what is neutral

11:54policy? Because don't you want to be in a neutral policy stance if something bad happens rather

11:59than be modestly restrictive. So there are, there are ways to go after Powell and the fed and,

12:04and, and, and, you know, make it a little bit more coherent. I think, but I just believe

12:09Waller and Bowman are a little bit better suited for that, uh, uh, chairman role.

12:14Interesting. So interesting. Okay. So you're sitting out there, you are a mortgage loan officer,

12:19you're in real estate, you're in part of this industry. Do you have hope for between here and

12:25the end of the summer that we're going to see a pickup in sales, uh, for different reasons?

12:30Well, number one, we're going to have year over year growth in sales. Uh, it isn't, it isn't

12:36going to be a problem just because last year's comps are going to be very low. So I I'm prepping

12:43people for in July to November for the months of June and October, we're going to have year over

12:47year growth. That's assuming even if sales just stay flat, if you get any kind of better, like

12:51purchase application data has shown double digit year over year growth the last seven weeks.

12:57So, um, the year over year, you get more mortgage buyers. Now if cash buyers are falling at,

13:02at a, at a, on pace or faster rate, they can offset each other only to a degree because majority of

13:07all buyers are mortgage buyers. But, um, again, the only two times that mortgage rates headed down

13:13towards 6%, the economy was really showing weaker data, uh, out here. Mortgage rates have been very

13:20calm. I mean, just very calm lately. Not, we've had a lot of data fed for all this drama. We don't see

13:28the, the, the wild movements anymore. The spreads have gotten better. They've limit the downs of the

13:34limited damage to the upside and to 10 year yield is not falling because it doesn't whiff a recession

13:39yet. So not like, you know, what happened with Godzilla tariffs. So the, the market is calm. I think

13:45this is a, a, a better place to work off of without the crazy volatility. But if you're looking for

13:52lower rates, it's the same thing we've always said. This is why we do channel forecasting. You're going to

13:56need weaker data, weaker labor data. And the labor data again, for me, for the first time in many

14:01years is underperforming. So it just, we don't have a lot of wiggle room anymore. And that's part of the,

14:08you know, uh, those articles I wrote about Trump and Pulte, you know, there's not a lot of wiggle

14:14room. You could go for something like that to get yourself to neutral, but that's all you're going to

14:18get to is neutral. Maybe neutral is three and a half percent, you know, find a way to get there,

14:22but no tariffs. If there were no tariffs, we're only going to get two rate cuts this year.

14:28They're still talking about two rate cuts. Nothing is materially changed except the Fed has

14:32raised us that inflation expectations. And now there's a, almost a civil war in between the Fed

14:38presidents, those who want to get that two rate cuts and those who don't want to do that. So

14:43we'll, we'll take it from there, but it does. There's a lot of moving parts in the second half of

14:492025, um, that can create some volatility in the economy and in rates. So we'll, we'll see that

14:56this is not even counting what president Trump does with the shadow fed president. I think if

15:01he goes that route, uh, but you could clearly see the frustration by the white house and the economic

15:06team on the, uh, the lack of Ford guidance, I think, uh, on Powell's part.

15:12So last year in August is when we saw rates dip a little bit, right? End of August, September,

15:20ahead of the September rate cut that ended up not being a, uh, uh, cut for mortgage rates actually

15:26went up because they'd already come down. So how do you explain something like that? Like, do you,

15:30do you think something like that could happen again?

15:32You, you, you and I had this discussion. I remember last year where I said, man, mortgage rates are well

15:37ahead of the Fed, right? It's just like, you know, the hoarder line. That's why we created the

15:41hoarder line for those. I know you don't, nobody likes Hodor, Hodor, whatever. Okay. So we create,

15:49you know, kind of choke points to where we don't think the 10 year yield can go lower in 2023. It

15:54was the Gandalf line around three 30. You said that you, you're breaking this as you're basically

15:57saying recession. Okay. It held eight times, uh, in 2024, uh, hoarder line was created around three

16:0480. So like, I think it was December 28th in 2023. That line was first checked. It didn't break,

16:10but what happened in 2024 is authentically the bond market was really forecasting like the labor data

16:18to really start breaking. So we had a 2% move lower in mortgage rates with no rate cuts. And that's why

16:25you and I, when we had that podcast, I said, no, my God, this is, this, uh, this has to be it,

16:30you know, because we're well ahead of what fed policy is. Um, uh, uh, so the hoarder line has it.

16:38Now we broke that line and then all of a sudden we got the rate cut and then the economic data started

16:42getting better and the 10 year yield went up. So where we are right now between 435, 470 on the 10

16:49year yield per the forecast looks good. Looks normal to me. Unless the fed wants a guide more dovish or the

16:56labor data gets weaker. Um, we won't see a similar type of move from last year, just because

17:04the volatility isn't there. We saw something like that already early in the year when the market saw

17:12Godzilla tariffs and everyone went into recession mode. The 10 year yield got below 4%. And even myself

17:19was like, we don't belong here. We're not there yet. Fed policy isn't there yet. The market got ahead of

17:24itself. So to answer your question, we already had that this year, April 4th, 2025. I remember

17:31cause it was jobs Friday and the 10 year old is a 4% and I tweeted out, we should not be here.

17:37The labor data is not breaking enough for the fed to like get all where we're getting ahead of the

17:43curve. And then 10 year old shot right back up. I think today we're at 439 right now. So, uh,

17:50we already had that wild move. Now, if we have a series of really bad data lines, jobless claims,

17:56jobless claims, Prince, 289,000. We have one jobs report at 60. You can get that kind of traction,

18:02but that's the only thing that really creates that volatility. It created in 2023, created in 2024,

18:10and created in 2025, the perceived notion of the economy getting weaker and the labor data breaking

18:16has been the reason why the 10 year yield has, has made those big moves lower headed towards 6%. This,

18:23this year, the move was so fast that it rates didn't even have a time to catch up. I think we got

18:27650 was like the low 655. Uh, so, uh, different kind of setup, but it is something to keep an eye on for

18:34the next six and a half months. If the data gets weaker, what happens with a trade war? What deals are

18:40made? What happens with a shadow of head? We have tons of stuff packed in, uh, uh, for the second

18:47half of 2025 where their first half was Godzilla tariffs, Godzilla tariffs came all hell broke loose.

18:53Right. Uh, uh, so we, we don't have that kind of backdrop unless something else happens. We, we take

19:00baby Godzilla off and keep Godzilla tariffs on. So we'll see. But again, all that for the second half

19:05of 2025 is in play. Listen, we cannot count out that something big is going to happen that we,

19:11we can't even see right now. This, these things happen. I think one of the surprises to me when

19:16we look back at, like, I remember we had a special issue, a special podcast when Russia declared war on

19:22Ukraine and what that did to mortgage spreads and just kind of that, that uncertainty in the market.

19:28We haven't really seen that even though there was talk about the United States joining in the war

19:33against Iran. And I don't know if that's because, you know, Trump pulled back and said, Hey, I'll

19:38decide in two weeks if we're doing that. But have you seen anything? So there's, there, there is no,

19:43there is what happens in the middle East is very short term oriented. Um, so it wouldn't have that

19:50kind of impacts. Cause we we've, we've been here before and traders are like, okay, we've, we've seen

19:56this. This is not going to be anything. What it's done is the volatility is in oil prices. I'm such a

20:02nerd. I sit there and I show oil prices on my Instagram stories. I go, look, look what happens

20:06when the headline happens, you know? Um, but, uh, uh, in this case, Godzilla tariffs were

20:12recessionary. Like if Godzilla tariffs stayed, though, everyone was in 100% of the recession

20:18cap. People were just like the stock market, you know, every conservative bullish economists

20:23were like, Oh, this is going to take us into recession. So that was material because that can

20:27impact corporate earnings, right? That's the whole game. If corporate earnings start to fall,

20:32you've got a lower numbers and equity prices are so high. So the volatility came through that

20:38middle East, not as much the Ukraine, uh, uh, Russia, you know, uh, incident, it shot oil prices,

20:47uh, a higher and it shot wheat prices. That's very boy wheat and oil prices, both shooting up.

20:53And I know nobody wants to look at wheat and oil prices, but if you, if you could see it, boy,

20:57it just, you could see how they, the Russian invasion really impacted that. And then, you

21:02know, a lot of people went into recession in 2022, that didn't happen in stocks and everything

21:07rebounded. So, uh, Godzilla tariffs were material enough to make the spreads. And let's remember

21:14that the mortgage spreads got worse by 20 to 25 basis points. So it's nothing like what we saw

21:20in 2023. So the spreads are naturally getting better, which typically is the case at this

21:25point of the economic cycle, working from an elevated level. But, uh, it has to be something

21:30to really impact the domestic economy to, uh, to get the stock market to act up really wild and,

21:36and, uh, possibly, uh, get the spreads to be worse. But it is the spreads are doing its thing,

21:42which is, I can, I stress to everybody mortgage rates would be like 7.75 today if the spreads

21:48didn't improve. So it is a positive that that's happening. And our job is to teach how mortgage

21:53spreads work and how it's going, because I could clearly see this is not a topic that not a lot of

21:59people in real estate and mortgage, God knows consumers don't know, don't know, don't care.

22:03But, uh, this is something that we've incorporated into the tracker every single weekend. So people

22:09could get a visual, but again, it's always, I don't care about the answer. I care about the why,

22:13right? As soon as one, when people understand the why, then the answer makes more sense.

22:18But I think that's, that's more important when you talk about economics.

22:22Totally agree. Logan, thank you so much for being on, giving us the why in this award-winning

22:27podcast, as you say. Yes. Thank you very much, Sarah Wheeler. And, uh, make sure to, uh, put that,

22:33uh, uh, uh, award-winning, uh, certificate somewhere nice.

22:37Ah, absolutely. I will. All right. We'll talk to you again soon. Thanks, Logan.

22:48Thanks, Logan.

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