On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the wild moves in mortgage rates last week and what to expect this week.
Related to this episode:
Mortgage rates dip below 7% after retail sales surprise | HousingWire
https://www.housingwire.com/articles/mortgage-rates-dip-below-7-after-retail-sales-surprise/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
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:
Mortgage rates dip below 7% after retail sales surprise | HousingWire
https://www.housingwire.com/articles/mortgage-rates-dip-below-7-after-retail-sales-surprise/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
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.
00:07My guest today is lead analyst Logan Motoshami to talk about the wild moves in mortgage rates
00:12last week and what we can expect as we start this new week.
00:15Logan, welcome back to the podcast.
00:18Happy Valentine's Day, Sarah Wheeler, and apparently you and I went to winter formal
00:24together.
00:27This whole storyline, I love it.
00:29It made my day.
00:31You posted a picture on Instagram, and I'm not sure why, but of you at your winter formal
00:36in high school with a girl who apparently a lot of our fans thought was me.
00:40They're like, oh, she looks like Sarah.
00:42Is that Sarah?
00:43Which just made my day.
00:45The back story here is that by the time you were in high school, I was married and had
00:50at least two kids.
00:52I think I was probably pregnant with my third child during that time.
00:57Me dating a high schooler would probably be problematic for many reasons.
01:02You had people saying stuff.
01:03I had people screenshotting and being like, is this you?
01:06I was like, no, it's not me.
01:08Hilarious.
01:09I love it.
01:10We have the best fans.
01:11I encourage everyone, anybody who's listening to this, if you have an Instagram account,
01:16follow me.
01:17It's just my name.
01:19We do 24-7 live videos.
01:20We have a half a million people there each month.
01:22We talk about economics daily, but we also have a lot of humor.
01:27Of course, we did a happy Valentine's Day to all the Doomers because the New York federal
01:33credit data came out again.
01:35We try to make it as fun as possible on there in a subject that tends to be traditionally
01:41very boring.
01:42Absolutely.
01:43No, you are definitely worth a follow.
01:45Also, you post all the time, so everybody can stay up on the news as well.
01:50We have a lot to talk about.
01:52Huge week for mortgage rates.
01:53Tell us what's going on.
01:56Probably the most interesting week in recent history.
02:01It was a whiplash on the 10-year yield.
02:03Again, for all of us, especially now, it's Valentine's Day on Friday, slow dance.
02:08Slow dance between the 10-year yield and 30-year mortgage rate since 1971.
02:12Mortgage rates go back way back then, but I just use that data because it shows the
02:16curve of the late 70s and then the downdraft in the 80s and 90s and 2000.
02:23The bond market had kind of a wild week to reports.
02:28First of all, there was the CPI inflation data that we talked about.
02:31It tends to be hotter early on in the year.
02:34Bond market went vertically up right after that report.
02:38Then we have people talking about rate hikes and 10% mortgage rates, all that stuff.
02:45The next day, the PPI inflation comes out and it was hotter than estimates.
02:52It was also revised hotter before, and yet the 10-year yield has a waterfall move lower
02:59because the subcomponents of the PPI inflation data that goes into the PC inflation, which
03:05is the main thing the Fed tracks, that came in a lot cooler.
03:10That happened.
03:11Again, violent reactions to headlines, fidgety trade fingers, bond traders are just running
03:18off this stuff.
03:19Then retail sales came out Friday morning.
03:23Misestimates badly.
03:24I mean, you could say there's some weather impact.
03:26You could say traditionally you see a little bit of a decline after Christmas, but this
03:32was noticeable.
03:33Waterfall dive.
03:34Mortgage rates under 7% again.
03:39So if we're at that stage where every headline is going to get this, it just becomes kind
03:44of a whiplash type of marketplace.
03:47I think that's such a great point.
03:50If you're out there running a mortgage business and you're trying to, do you lock, do you
03:54not lock?
03:55Do you tell people?
03:56How are you advising clients right now in this environment?
04:00You know, it's funny because people ask me, should I lock the rates?
04:05I never, never, never floated anyone when I was at LO.
04:10You're asking the wrong person.
04:13We do have a mortgage daily center at housingwire.com.
04:18Then also we talk about this on YouTube in the mornings as well.
04:22I try to give the best analysis with the reality of what the data is showing and you're starting
04:30to get some wild moves.
04:32Whenever you get these wild moves off headlines, it's usually at a top or a bottom and the
04:41forecast for 2025, 10-year yield peak is around 470.
04:45For us to get above there, you really need economic growth.
04:49You need the dollar to get stronger and you need inflation to really pick up.
04:54However, the best part of this week for me was that the dollar is heading lower, right?
04:58So I know it's not everyone's gig here, but the U.S. dollar getting back in its trading
05:05range to me is the number one thing to try to get rates lower because we can't have the
05:10dollar rise up and bond yields rise up with it.
05:16Out of all the things that happened this week, the dollar trading underneath 100%, I was
05:20like, yes!
05:21I was giddy about that.
05:23Okay, so looking at all of the news that you just recapped, all of the things that happened,
05:28the reports, what's happening with the dollar, all that, what's the takeaway on what to expect
05:34this week?
05:35This goes live on Monday morning.
05:37So jobs week is going to matter more and more, but let's keep an eye on jobless claims
05:42because now what we talked about, what Kevin Hassett, the White House counsel talked about,
05:48he wanted higher labor supply and weaker aggregate demand.
05:52Okay, so again, confusing to a lot of people, but that's kind of what Jerome Powell was
05:57talking about.
05:58Just running off the numbers that I'm seeing right now, 200,000 federal workers have been
06:03fired this week.
06:0575,000 have been taking those buyouts.
06:10If you look at jobless claims in the District of Columbia or DC, you could see it spiking
06:17already.
06:19The only thing about that is that there's over 162 million people working.
06:24So it's a tiny sliver, but the jobless claims data should actually start picking up some
06:30of these weaknesses tied to these.
06:32And again, these are one-off fires.
06:35And then if they can find a job, they can find a job.
06:38But just to give people some scope on this, because I know a lot of people are just saying,
06:42okay, we're going to push the unemployment rate higher.
06:45We're going to lay off all the federal workers and that should bring bond yields up.
06:49In theory, that would actually work, but context is key.
06:55The sharpest move we saw this week is when retail sales missed estimates out there.
06:59So economic data matters more.
07:02So I totally get that.
07:05When I think about the HUD cuts, right?
07:06So they announced that they were, well, I mean, they haven't formally announced, but
07:10we heard that they are going to cut 50% of HUD's workforce.
07:14So you think, oh, that's DC, except I think about all the housing counseling agencies
07:18throughout the country that like, who are they talking to?
07:21Or the Section 8 housing or the, like, I feel like a department like HUD that has just like
07:27NIH, right?
07:28So it has local implications all over the country and we don't really know what that's
07:32going to look like yet.
07:35So with the notion of, you know, like for example, if you said, Logan, we have to defeat
07:42inflation.
07:43What would you do?
07:44I mean, first thing, if you really wanted to do for inflation, you cut government spending
07:48and then you raise taxes.
07:50If you really wanted to do it because that both those two things together would bring
07:54less dollars into the economy.
07:56So obviously no one's raising taxes whatsoever.
08:00So I don't know if it's going to be anything fast enough anytime soon to withdraw money,
08:09circulate less dollars into the economy.
08:12You got to do a budget, you got to do all these things.
08:14But I mean, that's the marketing thing that's going around that, well, we're just going
08:18to bring aggregate demand lower and we're going to get lower rates.
08:22It really does show that lower rates is a thing, right?
08:29This is where I think they're reading the room that mortgage rates have been elevated
08:37for so long and rates just getting down to 6%.
08:42This is why I always tell people that the Federal Reserve doesn't read the room.
08:46You don't need 3%, 4%, 5% mortgage rates to grow sales.
08:50But when you're elevated, and if we wanted to, if we really, really, really wanted to,
08:55we could get lower rates.
08:57That's not a problem.
08:58Deficits, all that stuff doesn't.
08:59Fed cuts rates 1%.
09:01We're starting to get to the point where we can talk about 6% mortgage rates without the
09:04job market breaking, because we're 65 to 75% of really where rates are as Fed policy.
09:11And then the economic data itself, all this talk about treasury supply and nobody's going
09:17to buy our debt.
09:18We're broke.
09:20You got to stop listening to those people, because a lot of people said in 2023, there's
09:24nobody that will ever buy the 10-year yield because we're broke at 5%.
09:30You're crazy.
09:31And we had an unbelievable sharp move toward 3.62% on 10 years.
09:36We're not an insolvent country.
09:40There are clowns running out there that keep on saying this.
09:43We are the wealthiest, most powerful country in the world.
09:45We're going to be treated as such.
09:47Mexico and Canada aren't going to have better bond markets than us or China or Europe or
09:52anything.
09:53But in this context, it does look like the marketing push is, well, we're going to reduce
09:59government spendings.
10:00We're going to reduce government workers.
10:02If that makes the labor market softer, that's the supply that Kevin Hassett, the White House
10:06counsel chief was talking about.
10:08And then demand gets lower, rates will go down.
10:13That's the marketing game plan I'm seeing after everything we've read.
10:17So we'll see if that's effective.
10:18But right now, this Friday morning, we had a waterfall dive.
10:22Why?
10:23Because retail sales missed.
10:25We look at and we track economic cycles because we do waves for forecasting on the 10-year
10:30yield.
10:31We don't target mortgage rates and we track this stuff religiously.
10:34That's the proper way to do this.
10:36This is also something that very, very, very tiny amount of people on planet Earth want
10:41to do because it's gritty work.
10:45But for now, with the forecast for 2025, everything looks about right.
10:50We're still elevated with rates, even though the growth rate of inflation, like we're going
10:55to get the PCE inflation report toward the end of this month, and it's going to have
10:59another two-handle again.
11:03And if inflation was the main driver of rates, we would have much lower rates right now today.
11:10But it's the labor market, it's the economy.
11:13And the Federal Reserve has constantly said, if things start to get weaker, we'll act more.
11:18So don't put all the eggs basket on, we're broke as a country, rates are going to go
11:22higher or anything.
11:23The Fed's going to raise rates.
11:24The same thing happened last year.
11:27Last year, the CPI inflation data was hot early on.
11:29People are talking about higher rates, we're broke, we have to do this.
11:32And then all of a sudden, the economic data got weaker, boom, 10-year yield.
11:36Went all the way, broke through the Horde or line, broke through that level, and then
11:40the economic data got better.
11:42And just think of it as flows, right?
11:44Flows of economic data, Fed policy, it starts to make more sense that way.
11:48When you think about the labor market, when you write up the labor report, you're always
11:54looking at what is the education level of the people who are losing their jobs?
11:59And over the last couple of years, except for when a lot of tech people were losing
12:02their jobs, the biggest, unfortunately, the people who lose their jobs the most are people
12:07without a high school diploma or without any college.
12:11In this situation where there's a lot of people being laid off, say like NIH staffers or people
12:19from different government, that's not your typical, like, I mean, these are professionals.
12:23These might be people who are homeowners or they might be potential homebuyers in a different
12:28way than what we normally see when we have a bunch of unemployment, correct?
12:31The unemployment rate for college-educated Americans actually has been rising recently.
12:37The unemployment rate for high school, people that didn't finish high school was at 7% in
12:42August of 2024.
12:43Now, it's down to 5.2%.
12:46The thing is that once you file for jobless claims, it really is if you can find work.
12:52I'm assuming that the Fed is still looking at the job openings data being as big as it
12:57is as saying that the labor market still can handle this.
13:03With that said, Jerome Powell himself talked about, well, if you have a job, it's fine.
13:09But if you're looking for a job, okay, if you're looking for a job, that's one thing.
13:12But if you got laid off, then you're looking for work.
13:16The continuing claims data should go higher.
13:18So what I did is I just took the continuing claims and jobless claims of DC and it's been
13:23rising for some time now.
13:25That's going to increase.
13:26The question is, is that big enough, right?
13:30Is that big enough to move the needle?
13:32Because retail sales missing, okay, 10-year-old fell down.
13:35So it's something we'll track.
13:37It's something new, right?
13:40This is a new part of the economic cycle where we're targeting unemployment.
13:45We're targeting people to lose their jobs.
13:46So we'll see how it works.
13:49It's going to be, of course, regional to the DC area.
13:52But in bigger context, it's really the whole macro US story that matters.
13:59I think a lot of people took the Kevin Hassett statement the wrong way.
14:03They said, oh, they're actively pursuing a recession to bring rates lower.
14:07No.
14:08I mean, it's the same thing Jerome Powell talked about.
14:10I would argue that the Fed was actually forecasting a recession in 2023 with their unemployment
14:15rate target being at 4.6%.
14:17But in here, it looks like let's just focus on federal workers and it doesn't matter how
14:26much jobs they lose because we're putting it out that this doesn't matter in the bigger
14:30economy.
14:31We're going to reduce the government footprint.
14:33Okay, totally different things that we've been dealing with for decades, but we have
14:37to track it.
14:38We'll see what happens.
14:40But to me, that's going to be more of a regional issue than a national thing.
14:44We will see, right?
14:46I hope you're right.
14:47I think one of the things that I think about, like if you work in an industry, one of our
14:53coworkers has an immediate family member who works in a science-related job, and now
15:02all of those jobs are in doubt.
15:04So people graduating with those degrees are like, if public health has been cut so much
15:10or is going to be cut so much, what does that mean for all those people?
15:13So we'll be watching that because there's just so many different things about this cycle,
15:17in my opinion.
15:19I'm just going to say, if the 10-year yield goes down and mortgage rates go down, they
15:25could spin this as a good thing because things tend to get better on the confidence data
15:35when mortgage rates fall.
15:36Because you remember, housing is, even though it's new home sales and construction jobs
15:40that matter to the economic cycle, just general people, housing, it's the big purchase for
15:48everyone in their lives.
15:52It was an interesting week because the reaction to both the inflation data, but the retail
15:57sales still shows that it's the economic data.
16:01So we will track jobless claims a little bit more carefully now to show the distribution,
16:07like how much, because you can only fire someone once.
16:12And then most likely, a lot of times, they will find a job as long as the economy isn't
16:16in total recession.
16:18So we'll keep an eye on it.
16:19But I thought this last week was, I mean, it was so confusing.
16:24People saw the PPI inflation number being hotter and they thought, oh my God, rates
16:27are going to go up.
16:28And all of a sudden, the bond market fell.
16:29And then people don't understand the components because you are all normal people.
16:32You're sane.
16:33You should not know the sub-components of the PPI.
16:35Inflation goes into the PCE and PCE inflation, the whole report is only 16 to 18% of that
16:42is shelter or rent.
16:44Oddly enough, in the CPI data, it wasn't residential rents that was hotter.
16:48It was actually hotel and lodging.
16:50It's just that the rent disinflation, it didn't get worse or didn't go down enough.
16:56So hotels actually boosted that.
16:57So it's complicated.
16:59I get it.
17:00I get it.
17:01But I'm here 24-7.
17:02It's true.
17:03It's true.
17:04You can follow me on X or follow me on Instagram.
17:07We try to make sense of it all because access to data nerds is very limited in the past
17:16decades.
17:17But now with social media, you get a show.
17:20You get a show.
17:22So I know that you have said, as we get closer to 6%, that's all it takes to really stimulate
17:28home sales.
17:29What is the magic number where we start to see refi become something that is actually
17:34meaningful?
17:36This is a good question because Yahoo Finance interviewed me this week and they asked the
17:40same thing.
17:41I would say that 82% of the country has rates 6% or lower.
17:47And then we've already had a wave of people come in and do the rate and term refinance
17:52last year when rates got to 6%.
17:54So if you're talking about a bigger scale, you need sub 6% mortgage rates to make the
18:02pool.
18:03We also talk about labor supply, but the rate and term refinance supply gets bigger.
18:07Just like for every 1% that goes down or up, you have more homebuyers, 1% lower from that
18:136% level brings out more rate and term supply.
18:17But we saw that last year.
18:20Rates were 7% to 8% for a long.
18:21And then when it went down to 6%, you saw the rate and term refinance pick up a little
18:25bit.
18:26But so many people have such low rates that you need rates to really go below 6% to make
18:32that supply bigger.
18:33Okay.
18:34So what, from your perspective, heading into this weekend, what are some of the wild cards
18:39that we could see that are just going to throw a wrench in things?
18:43Well, I think number one, after reading that Valentine's article about, you know, Doomers,
18:50you should give it up.
18:51This is your article, so.
18:53Yes.
18:54Basically, the New York Fed credit data came out.
18:58They come out every quarter.
19:00And foreclosures and bankruptcies fell slightly in that.
19:05FICO score looks excellent and just flat out.
19:07FICO scores look excellent for 14 years.
19:09Some of you all just don't understand that.
19:11It's literally, there's no FICO score inflation in the homeowner side.
19:14It's really looked the same for 14 years.
19:17Qualified mortgage changed everything.
19:20On the credit data size of delinquencies, remember we're looking at all things, car loans, everything
19:23and all that.
19:24You could, the 30-day delinquencies are back to pre-COVID levels, which is like 1.1%.
19:30So I think wild cards, what we want to see is what are the headlines over the weekend?
19:37You know, by the time we come out here Monday, what's going to happen?
19:41What is our premise?
19:42We do not believe in a trade war, like universal tariffs, right?
19:47We've now had a lot of discussions about tariffs and then we've had a lot of, okay, we'll delay
19:53them.
19:54Right?
19:55So we're talking about the playbook on how Trump operates out there.
19:58It's just, when you go to this game plan early, eventually people are going to call
20:02you out and just go, we just don't believe anything.
20:04They just keep on delaying the tariffs out there.
20:06But I think eventually he's going to have to be a little bit more aggressive, but he
20:10wants deals, right?
20:11He doesn't like the trade deficit.
20:13So that's, again, that's going to be a wild card every day, every weekend.
20:17And why do we say every weekend?
20:18Because a lot of this talk happens on Saturday.
20:22And why does it happen on Saturday night?
20:24It's fun for me, but the markets aren't open, right?
20:27So the reciprocal tariffs that were supposed to happen this week have been moved back to
20:32May and April.
20:33So again, negotiation tactics, everything, where the 10 year yield mortgage rates, everything
20:37is, it looks about right currently.
20:41But we'll wait to see what happens every single weekend.
20:43There could be a headline and this is just how it's going to be for the next four years.
20:48So people have to get accustomed to it, which means you have to be versed with all the news
20:53that comes out, right?
20:56As this last week showed on a dime, the 10 year yields can go vertically up or waterfall
21:01down out there.
21:04And for a while there, we hadn't had a lot of volatility on the 10 year yield pricing,
21:08but you perked up a little bit this last week.
21:12I would tell people, so we published a thing that said the timeline, an updated list of
21:17all the things that Trump has done that affect housing.
21:20We update that every single time we do a story.
21:23And so that provides, if you're looking for like what happened since the last time I looked,
21:27you can always look at that.
21:28Our newsroom is working literally 24 hours there and all weekend long.
21:32We just signed up for shifts this weekend, Valentine's night.
21:35I will have people working, looking because you never know what's going to happen.
21:39And then I think what great timing for our housing economic summit.
21:43I mean, we could not have planned that timing better.
21:45We were trying to give him a little bit of time, the new administration to have some
21:49time to establish, but no one thought he would move this fast.
21:54And by the time that conference happens, we'll have a good picture of spring with our weekly
22:01data.
22:02Again, we're months ahead of everyone else, but it's not, it's not fair.
22:07So I was dealing with a housing bubble boy today and he's like, inventory is skyrocketing.
22:15And then I just do my, we call it color crayon charts.
22:17For those that actually see my live presentation, we call it crayon economics.
22:21Like you, you just, even if you're a child and you can't read, you could still just look
22:25at those lines and go, that does not look like massive inventory piling up.
22:30But we could kind of see, you know how, how does the weekly data look?
22:34Price cut percentages.
22:35You know, I, again, I'm, I'm a little bit lower on the price forecast than a lot of
22:39people because I'm, I'm using the models that we use and rates being elevated as it is can
22:45allow inventory to grow.
22:46So we get a good picture of that in the macro economic record.
22:49It's just, there's so much more variables this year going into spring than the last
22:54two years that we'll try to make sense of it all.
22:57And we're going to have a host of economists at DC people and, and mortgage market capital
23:02people to just kind of go over this.
23:04Yeah, that's 12, 12 days from now.
23:06And by the time this comes out, it's going to be like less than 10 days.
23:09So if people, if you are not there and you're like, I got to be there, I got to tell you,
23:13you do have to be there.
23:14I was on a call yesterday with Bill Kilmer, Jeb Mason about the wildcards for, for this
23:21economy.
23:22Listen, you guys need to be there.
23:23So Logan, thank you so much for being on.
23:26Thank you for being on on Saturday night at like one in the morning.
23:29We need that.
23:30So I appreciate you doing it.
23:31So I don't have to.
23:32Yes.
23:33Do you remember what music you were listening to in the 19, early 1990s?
23:37No, I was, I was pregnant and had little kids.
23:42I had four kids in six years.
23:44I had my whole fade haircut.
23:47It was like kid in play because I was a basketball player and it looked like a Russian hat.
23:52But yeah, it was, it was funny.
23:551990s were great, man.
23:57The 90s were just awesome.
23:58They, they were awesome.
24:00Okay, Logan, we'll talk soon.
24:01Thank you so much.