Logan Mohtashami on lower rates stabilizing the housing market

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the stabilization of the housing market over the last few weeks and what that means for home sales and home prices.   Related to this episode:   Have slightly lower mortgage rates stabilized the housing market?  https://www.housingwire.com/articles/have-slightly-lower-mortgage-rates-stabilized-the-housing-market/  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q   ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠More info about HousingWire⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://lnk.bio/housingwire   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 the

00:10stabilization of the housing market over the last few weeks and what that means for home sales and

00:15home prices. Logan, welcome back to the podcast. It is wonderful to be here. Sarah, we did not

00:23have so much of a crazy weekend. I know. Nothing crazy happened on Sunday afternoon or Sunday night.

00:30Now, I would say this. Last night, because of all the budget talks and tax cuts and the deficit's

00:38going to really grow over the next 10 years. By the way, all 10-year budgets do not assume a

00:43recession. This is why all 10-year budgets tend to not work in the long run. In any case, a lot of

00:51talk last night that the bond market, Sarah Wheeler, those bond vigilantes, they're going to see this

00:58tax bill and this deficit and they're going to punish us in the morning. I'm like, okay,

01:02all right. I'll see you guys all tomorrow morning. And we sit here right now. The last I looked at the

01:0810-year yield was 4.24, 4.25. They came out again. They're really punishing us. They punished us because

01:15of the Moody's downgrade of debt and now the tax cuts. And once again, the bond vigilantes are nowhere

01:22to be seen. What was that character in McDonald's, the one that steal burgers or whatever? It was like

01:30a Zorro? Hamburglar, yeah. Yeah, that has more legitimate case than the bond vigilantes over the

01:38last 100 years. I love it, Logan. Only you could tie in the Hamburglar to what's happening in the bond

01:44market. So, yeah. So, let's talk about the tracker. It's been really interesting the last couple of

01:50weeks. I mean, the tracker is always interesting. But what you brought up here was like, are we seeing

01:55a stabilization of the housing market? So, maybe let's talk through that, what you mean by that.

02:03So, again, we have an unfair advantage because we're like months ahead of everyone.

02:08And one of the things I've noticed is people who are not data scientists or not trained to read data,

02:14they take other companies' data lines and they don't read it correctly. So, one of the things

02:20we always wanted to highlight with the tracker is that we have what we call slope of the curve

02:25economics. We take our active inventory, price cut percentages, new listings data, then we incorporate

02:30the 10-year yield and mortgage rates and purchase app and everything. And when the slope of the curve

02:36slows down, usually that means something has changed. Of course, my structural bias is that I'm loving this

02:45inventory. This big old grid of mine gets bigger when we get closer to 2019 inventory levels and we

02:51were able to hit the bottom part of that this year. But the last two weeks, what do we know as a fact?

02:59Mortgage rates have been slowly moving lower and we are not far away from the technical levels to where

03:07we've seen the data get better. And that's when mortgage rates go from 6.64% down to 6%.

03:14But what's different about this year than the last two years is that purchase application data,

03:20at least on the year-over-year data, has that 21 straight weeks of positive growth. The last eight

03:25weeks have been double-digit year-over-year growth. So, I'm waiting to see if we do breach under 6.64,

03:34do we have a similar aspect of what we saw last year? And last year, mortgage rates went from 7.5%

03:40all the way down to near 6%. And it changed our forward-looking data so much that we were like,

03:47oh, God, we're going to have a couple hundred thousand more home sales. My price forecast is going to be wrong.

03:51I'm going to be too low. I knew when that happened because our data months ahead of everyone else

03:56was telling us this. But for the last two weeks, the slope of the curve has slowed down,

04:04meaning that active inventory has slowed down. The price cut percentages have slowed down.

04:11The year-over-year growth actually has fallen down a little bit. And our weekly pending home sales data

04:19has hit a year-to-date high last week. Now, I'm throwing caution into this data line because

04:26over the next two weeks, July the 4th always causes havoc on weekly data. It really causes

04:31havoc on ours. But since it's going to be on a Friday, we're going to get a two-week period where

04:35we don't have the normal traction of data. But going out in the future, if, because it's jobs week,

04:43right, if there was ever a time where yields can go a little bit lower, you're starting to get more

04:47and more people putting in rate cuts into the system now. We're below 435 on the 10-year yield.

04:54The 10-year yield mortgage rates are close to that level. If the spreads were normal, we'd have 6%

04:59rates today. So the market would handle everything better in that variable, but the spreads aren't

05:05back to normal. But if the data starts to get better, if rates fall, don't make the same mistake

05:14that everyone else makes when they look at old stale data and they have to wait 3, 4, 5,

05:216 months to go, what the hell just happened? We went from this. And I always use that November 9th,

05:27November, December, January, February, the structural housing dynamics had the greatest shift

05:33in history where people went all hell-bent on home sales falling to 2 million and home prices falling.

05:40If Ford did, it gets better. So all I've seen is a stabilization in the data line compared to what

05:47we have been. And what is the one variable that's changed? Mortgage rates have slowly gone lower.

05:53Now, we're not at the year-to-date lows, but the year-to-date lows came in April when Godzilla tariffs

05:58just drew the 10-year yield down lower to where I thought we shouldn't have been anyway. But we

06:04could see the data pick up and then all of a sudden it reversed higher. Imagine rates just going slowly

06:09lower. And this data line gets better in the second half of 2025. And that's why the tracker

06:17was created. Whether it's positive or negative data, the slope of the curve of all of our data lines

06:24combined, you can see some of it working. And those that have access to the tracker could kind of

06:29see what's happening on that side. So it is exciting in that sense because now that we got to the bottom

06:37end of 2019 inventory, like I said, when we get there, my low inventory talk goes away. Same talking

06:43points in the last decade, right? I'm not one of these low inventory. But post-2020, things were

06:48different. So we adjusted that. So we're going to get healthy inventory growth regardless of what

06:54happens, even if rates go down and sales pick up a couple hundred thousand. We have good growth this

06:58year. But it's something to keep an eye on because some of the structural dynamics could change like it

07:03has before last year at the end of 2022, the early part of 2023. So we would just want to keep an eye on

07:11that going out. But people can visually see just a little bit difference, even though rates are still

07:17above that 6.64% threshold that I've talked about. So let's put this in more historic context,

07:23because as you said, I mean, when it comes to purchase apps, we're going against like the low

07:29of the low last year. So can you put this in context for like in general, in a, in, you know,

07:36before last year or before the pandemic, what does this level of purchase apps look like?

07:42We're still, we're still listening to gangster paradise and no doubt as a top song. So we're

07:50still, we're still at a 19, we're still in the 1990s levels. It's still historically very low. It

07:55is no big material change, but it is a positive change. And this is where I think a lot of people

08:04make mistakes last year, the year over year data was not growing, but the weekly datas were getting

08:12positive. So nobody made a big deal about it. They thought home, and then all of a sudden the pricing

08:17variable changed to get stronger and home sales picked up a couple hundred thousand. So we're not

08:23talking about like the V shape recovery we saw in COVID. Remember COVID, I think it was August of 2020.

08:31Um, I wrote an article saying, guys, home sales are going to be positive this year. And like,

08:37like everyone, half the people didn't even understand that the, we were already recovering,

08:41uh, in the economy and housing made a V shape recovery, but because the forward looking data

08:46was so aggressively high in the rebound, we were going to have positive. Nobody believed that they

08:52were just like, this is nonsense. We're never going to, we ended up 300,000 higher. So we don't have a,

08:57what I call a big scale demand, but it is higher. All that's missing is the weekly data to firm it up

09:05a little bit. Just give you an example. We have 24 weeks of data. 11 of it has been positive on the

09:12weekly side. Nine has been negative. Four has been flat, but the year over year growth is the best we

09:19had in many years. I could explain that because this year rates fell last year. It was running a higher

09:26and then the new listings data, uh, is higher this year. So as long as everyone realized 70 to 80% of

09:34home sellers or buyers, when they get ready to sell that house, they fill out an application. So just

09:40think of it in that line, but it is growth. So we just want to, we just want to keep an eye on this

09:46because our weekly, our freshest weekly pending home sales data almost had a year. I mean, just

09:51very close to a year to date highs and purchase application data takes 30 to 90 days before it

09:57hits a sale. There isn't an exact science of when it actually hits one month. Sometimes a month gets

10:03really big. Sometimes a month gets very little, but, uh, that's why the weekly pending sales data is

10:09showing just a little bit of growth. And again, if that occurs, you know, we get a little bit of growth

10:14on home sales with elevated rates. The real question is if mortgage rates go down to 6%

10:20again, how much can we grow sales from these record low levels? It's always been a couple

10:24hundred thousand for, for just like one or two months. And in the last two years, I've already

10:30written the article in March. That's it. Home sales have peaked for the year because the forward

10:34looking data was negative. We're not going to be able to get, it's not the case in 2025.

10:39And nobody wants to talk about it. Cause I think so many people are confused when they see it. I had a

10:43Wall Street guy, really well-known Wall Street guy. He was like, Oh, housing's crashing.

10:48Housing's there. I show them purchase application. He's like,

10:51what? They don't know. They don't know. They don't know. Cause they don't follow the weekly

10:57data. So they have no idea. So it is the absolute shock that people have when they see the weekly

11:03data. Like, wait a second. You know, I presented this to CBS news and the CBS news people are like,

11:10what's this? But everyone is that. Yeah. Everyone's old, slow, behind. Home sales aren't

11:16crashing. We've never seen this in his, whenever, whenever home sales are crashing, purchase application

11:22data is down double digits easily. Right? Remember 2022, 2022 is a great example. It's like 35 to 42%

11:29year over year declines. I mean, just, and a weekly pending sales data, just crap. It's not here.

11:35I think charts are so helpful in this regard. So for instance, I'm looking at the tracker,

11:40I'm looking at the national single family inventory chart. And it's just so clear when you look at that,

11:46that it says, you know, 2025, we're up at this point, 29% more than last year, but we're still,

11:52we're still so far down from 2019. Like we're just at the very lowest levels of inventory in 2019.

12:00We've just reached that here. So that's the counter. And that's, that's what's so obvious.

12:06If you're looking at the chart to like, oh, this is a crash or what's happening. It's like,

12:11we're really just trying to get back to normal. The difference is in 2005, active inventory NAR data

12:19was at two and a half million. So it's roughly almost a million higher than what it was today.

12:25When home sales crashed from 2005 to 2007, that two and a half million went to 4 million.

12:32We did not have that happen here. The whole concept of my team higher rates in February of 2021 is like,

12:38we need higher rates. Don't worry. This is not the housing market of the housing bubble years. You

12:44don't have to worry about forced credit sellers or anything like that, but we have to get inventory

12:49up because we can't have a functioning housing market when active investors is too low of active

12:56listings. And we're getting there. We're getting back to normal. But I think the supply and demand

13:01equilibrium of the tracker is what I really want to teach. Because if it is, if, if rates keep on going

13:08lower, if hypothetical and the data starts to get better, you're not going to see this for months

13:15in the existing home sales report. And what happened last year, which was the funny part is because

13:20when I challenged Doomers and they tell me their forecast, they have a 5% decline in 2024 and a 12%

13:28decline in, or 12% decline in 2025. They have a cumulative 19% decline, which is literally the

13:35biggest housing price crash since the bubble. But it happened in a short duration timeframe.

13:39They're copying the first two years of the housing bubble. My God, I can't believe how,

13:42how amateur that is, but they're literally copying the same data from back then. In any case,

13:47I asked the individual, I said, so what in the data that's telling you this? Well, they say the

13:52price cut percentages are rising. And it's, I said, okay, then why is the median sales price still

13:58rise? This is the whole Redfin debate we're having. You know, why did Redfin like go Doomporn?

14:04Because they wanted attention. They got attention. And yet every week after that, they're like,

14:09oh my God, home prices at all time high. And it was like, wait a second, you told us that they,

14:13oh, Logan was right about us. We wanted people to read the data. So there is an equilibrium in

14:19that equilibrium in the tracker. You could see what happened in 2022, the slope of the curve of

14:24the price cut percentages. Woo, Nelly, that was hot. That thing just went, we went from 3% mortgage

14:30rates to seven. That was a drastic, the slope of the curve is getting, it's rising, but it's not as

14:37fast. So I had very, I think I was one of the lowest price forecasters of the year at growth at

14:451.77%. But I, I've used, I based that off of our slope of the curve of how, how I think housing's

14:51going to work. Not being a mortgage rate lockdown person, it makes sense. So that's why I like to teach

14:58the tracker because if all hell was breaking loose, man, that slope of the curve would look

15:02like 2022, right? But it's quite not happening. And just the last two weeks, you need a lot more

15:08confirmation, but just the last two weeks, things have slowed down, right? The inventory growth has

15:15slowed. The price cut percentage is closed. The weekly pending home sales have picked up a little

15:20bit. And the purchase apps are now working off of eight straight weeks of double digit year over

15:25year. That's how you formulate a live model for people to see. And when they visually can see it,

15:30because if things start to get stabilizing a little bit better, you'll see it in that data line.

15:37And then three months down the line, it'll be in the existing home sales report. Like last year,

15:41it was like, oh my God, where do these couple of hundred thousand home sales come from? What

15:44happened? Purchase apps weren't growing year over year. And it's like, nope, they were getting better.

15:50The weeklies were getting better. The pending home sales, like our pending home sales really got better

15:54last year toward the end of the year. That's why I knew my price forecast was going to be wrong last

15:58year. I was going to be too low. So we teach it this way. So we don't have to wait three months.

16:03Like some of these poor individuals that are sitting there is like, oh my God, home sales are

16:06crashing. I'm like, really? Where is it? Where is it? And they're like, oh, you don't track housing,

16:13do you? You're just reading headlines. It's okay. Don't worry about it. There's like a ton of people

16:17like you over there. So let's move, go, move along. Get over there. Get over there. Too old,

16:21too slow, not athletic enough, not talented enough. There you go. Get back in there.

16:26I love the way you taunt people. It's very funny. Um, okay. So I think one of the other things that

16:31you, you just mentioned, but it's really important is the last couple of years you've had to be like,

16:36it's like February, it's like March. And you're like, we're done. I mean, that was the peak. And

16:40this year we had so much more. We, it lasted so much longer now still to your point, still low.

16:46But how do you think about this year? I mean, in comparison to other years, as far as like how

16:52long we were still selling homes? I love 2025. If, if I had to take back the last few years, 2025 is

17:00my favorite year because it's a balance year. Considering how high home prices are taxes,

17:07insurance, and rates for us to be able to grow inventory. And what, one of the things we,

17:12we wanted to teach back in the old days used to have rising inventory and rising sales,

17:18right? So I could explain if home sales pick up a little bit with rising inventory,

17:23because that's kind of how it used to be. And when you're working from extreme low levels,

17:27you can get something like that. That's what I call the chef kiss. You know, this is why I love

17:312025. Like I've got purchase apps growing double digits. I got inventory getting back to normal. I got

17:36price cut percentages elevated to cool pricing. It's starting to become a buyer's market. This is what

17:42I've wanted for years. It's taken a little bit longer than I, than I thought it would, but still,

17:47this is what you need for years and years of sales growth. You cannot have 2020 and 2021 in the early

17:542020. No, it was, it was, it was the biggest vomiting puke housing market out there because it

18:02was so much forced price inflation because of the shortfall of active listings. You don't see that

18:08anymore. You don't see that. And that's the most beautiful thing about 2025 for me. So I am very,

18:14very happy about what's happening this year. And the fact that you have mortgaged, remember what

18:20people said, stocks are down 20% tariffs, you know, all this crazy headlines, you know, jobs are being

18:28lost governments, you know, all this stuff. Who's going to apply for, who's going to apply for

18:34mortgages? Remember COVID? Everybody's like, oh my God, Logan, Logan, there's, there's 25 to 30 million

18:42people unemployed. I was like, yes. And there's 5 million informed barons. There's 35 million people

18:48off the grid. Who's going to buy these homes? And what do we always say at every conference, at every

18:54meeting, everything, my army's bigger than yours. I had 133 million people back in COVID working, getting

19:02paid 3% mortgage rates. As soon as they think they're alive, things get back to normal. Here,

19:07I have 162 million people sitting, waiting for rates to go a little bit lower. And even with

19:15elevated rates, taxes, insurance, and stocks, and trade war, tap dance, everything, mortgage buyers,

19:22Americans, right? Badass American people who don't sit there and watch doom porn every time.

19:28They filled out because they feel like, hey, it's okay. Right. And, and just a little bit of

19:34growth. And like I said, it's a little bit, I wouldn't have taken this bet to have this kind

19:40of purchase application data with rates above 6.64% most of the time. But when, if rates go down,

19:46I really want to see, does the weekly data firm up a little bit more? And then you get that double

19:50impact. If it is, then I have to be mindful. And I, am I going to be wrong again on my price forecast?

19:57Am I going to be too low again? And this is why I want to get people, I want to train people this.

20:03So last year we tried our best to kind of get people, no, home prices aren't going to fall 5% to

20:0812%. Everyone's doing, no. And we want to untrain the fanatics of this world, get them back into the

20:14real world and just leave the few crazy people left by themselves so they could scream about whatever

20:21until they're dead. And in the afterlife, I'll join them in battles in hell forever. But,

20:26but for now we can teach the living, you know, how to do this. And it's so much fun. It's so exciting.

20:32But the last two weeks, for those that can read the tracker, you can visually see this. It's a little

20:37bit different. But we'll have to wait two weeks after the July the 4th things and see where we are.

20:43And we'll see where rates are at that point. We're kind of, we're getting to the point to where

20:47we're going to need to see weaker economic data to start pushing this a little bit lower.

20:51We're getting closer to that, you know, the bottom end range of the forecast. If that happens,

20:56you need validity to take us lower in that. Well, we're going to be talking to you all week

21:01because it is jobs week. So we'll be not on July 4th, but actually we, on July 4th, we will be,

21:09there will be an episode with you. It's, it's the next Monday that we don't have it. But

21:12anyway, super excited, Logan, thanks for walking us through this. We will be talking about jobs and,

21:18and what that, what the, the labor data means for mortgage rates. Next time I talk to you.

21:25Yes. And always remember starting next week, four times a week, we're getting the chart daddy up. And,

21:31and again, our job is to teach. We're teachers out here. So that's how we look at it.

21:36Amazing. Thank you so much. Talk to you soon.

21:42Bye.

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