On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about mortgage rate movement amid market disruption and what happens next.
Related to this episode:
Mortgage rates fall as markets calm down | HousingWire
https://www.housingwire.com/articles/mortgage-rates-fall-as-markets-calm-down/
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 fall as markets calm down | HousingWire
https://www.housingwire.com/articles/mortgage-rates-fall-as-markets-calm-down/
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 market disruption
00:11and what happens next. Logan, welcome back to the podcast.
00:16Sarah, your voice is a little bit low because you lost your voice somehow. And that means I'm going
00:24to do most of the talking. And look what happened. You left the country. And as soon as you got on
00:31that plane, all hell just broke loose. It did. It was crazy. And as soon as you got back,
00:38things have calmed down. So you missed quite an eventful few days here.
00:46Okay. So tell me what the markets are doing and what that means for mortgage rates.
00:50So this is Tuesday morning. Lord knows that after this podcast, there could be some crazy
00:56headlines and all hell breaks loose. But for now, it's calm. The market is calm. The 10-year yield
01:06got back to 435. As I talked to you, as of this second, the last thing I saw was 4.32 on the 10-year
01:14yield. Mortgage rates have now come down. Three different repricings to the lower side now.
01:19So we're almost about 20 to 25 basis points lower from what we saw on Friday. So the market
01:26is calm. What the hell just happened? Chaos. And what happens with chaos? Chaos is a very
01:34short-term event. And you could get really crazy out there and people make some really big long.
01:41You know, we're talking about how some bond traders were like soft marshmallows. They're like,
01:45nobody wants the US debt. Oh my God, it's spiraling out of controls. Where are the bond
01:51vigilantes? Where are they today? We're about to have like $10 trillion of debt coming on, you know,
01:57tariff, you know, inflation, all this stuff. And the 10-year yield is exactly where it should be,
02:04where it would have been on jobs Friday if we didn't have the Godzilla tariffs. And now,
02:09as long as there's no crazy headlines or anything too bad, we could work off of economic data.
02:15Unfortunately, what happened is purchase application data was having a really good year
02:20in terms of, you know, it's the first time that we saw a year-to-day growth. By the time this podcast
02:24comes out, the data will be out to public to see how much damage that very sharp reversal did. But
02:30it was behaving better with mortgage rates at 6.75 this year than other years. So we're working our
02:37way back. Of course, if mortgage rates headed down towards 6%, sales are growing, everyone's estimates
02:43will be wrong. Yeah, yeah, yeah. Okay, that's given. But we're up here still. So it's a positive that
02:49this occurred. I mean, I had to bring out like a 40-foot eagle wearing sunglasses with me walking
02:56down the streets of Los Angeles to get people to calm down. And this does happen periodically from time
03:02to time. This is a very chaotic event. And it made the bond market go crazy. The day that you
03:10got to your vacation, one of the things that I said the night of Sunday was like,
03:15guys, one little word, and it could be a face-ripping reversal and yields to the up.
03:20And we literally had that face-ripping reversal. But as of today, right now, mortgage rates are down,
03:2610-year yields down. And as long as we could keep this calm atmosphere,
03:30we could work off the economic data. And that's how we should look at mortgage rates until
03:35chaos variables come back in again. So let's talk about the larger economic thing. Are we still
03:41focused on inflation? Should we be thinking about that?
03:47We got another one, Sarah. We got another Fed president to join Team Logan. Team Logan,
03:53labor over inflation. It's so interesting. It's the two hawks that have now gone to labor over
03:59inflation, where they're really highlighting inflation concern a few years ago. Now, both of
04:06them, Fed President Waller, one of our favorites, made a case yesterday, which I thought this helped
04:14the 10-year yield as well. He basically said, listen, if we're going to have a recession, I'm going to
04:21highlight the need to help the labor market, basically. And I prefer having more aggressive cuts
04:27this year, if that's the case. And if it is tariff inflation, like the Fed says, these are one-time
04:35price adjustments. Because it's so much bigger now, bigger than anybody imagined, and you don't know
04:42the retaliations, supply shortages, what's going to happen, all hell breaks loose in trade wars.
04:47But they believe that it'll be a one-time event. And then inflation, especially if it's a recession,
04:53will come back down. Because these are tariff inflations, not pandemic inflations, or let's
04:59say an oil shortage that drove headline CPI inflation much higher. So the fact that now we have Bowman
05:06and Waller, two people that are in the upcycle now of their careers to be possibly Fed presidents,
05:14they both have gone Team Logan. That's three now. Uh-oh, we're assembling an Avengers crew. Okay.
05:22And down the line, this means we could focus on the labor data. If the jobs data was bad the last two
05:29months, missing estimates like we saw kind of last year, then we could, hey, listen, that 10-year yield
05:34could go lower and lower. But where we are right now, it got a 4-3-2. Who knows, by the time you hear
05:40this, who knows what'll happen. This looks about right to me, and we could just focus on the economic
05:46data. What's the next economic data that's coming out that you think could throw things a little bit?
05:52So when we look at this monthly reports, retail sales, right? Housing starts, those are leading
06:02indicators where permits are going. Again, the labor data, I put that over everything. So we always
06:08want to keep track of jobless claims. And then jobs week at the end of the month, the manufacturing data
06:17is starting to look like really bad. The New York Fed survey, which I don't really put much weight on
06:23to, like the new orders had the biggest collapse of like 20 years. And I think a lot of this is just
06:27perception, like nobody knows what to do. And this was one of our talking points about 2018 and 19.
06:332018 and 19 was a small tactical trade war tap dance. It had a much better environment to work.
06:40Trump waited for his tax cuts to happen to give a cushion. And even with all that, business investment
06:45went to zero. The backdrop now is more chaotic. This is why I question, if you're going Godzilla
06:53tariffs, you better get ready to make deals because this can get worse and worse and worse.
06:59So we'll see. The marketplace to me is starting to believe that things, deals will get cut. And then
07:05eventually it'll just focus on China. But the clock is ticking. And you and I, before Godzilla tariffs,
07:16we said, you know, bluffing or doing tariff on, tariffed off for so early, you're forced to do
07:22something eventually because you don't want to be called on the bluff every time. And as of right
07:28now, it's a better environment because the markets are calm, right? Stocks are up a little bit.
07:34Bond market is not acting up. This is like a good period of time to, if you wanted to make deals,
07:40if that's your attention, get it done. I know the treasury wants to do some more deregulation to allow
07:48banks to hold more treasuries, books. I would have typically done that beforehand before getting
07:52into this. My opinion is that they were shocked by what the bond market did. And again, the stock
08:00market is one thing, but the mother bond market, you can't mess with that. But now without really
08:05big interventions or anything, the 10-year yield is calm. We're back to where we should be. We just go
08:09off the data. And again, jobless claims each Thursday morning. We have retail sales, housing stars.
08:15The existing home sales market doesn't really imply to the economic cycle as much. The new home sales
08:22does, of course. Industrial production, there's a series of data lines that we track. And I encourage
08:27everyone, if you're confused about everything and your clients don't know what's going on and
08:32everything, 24-7 live Instagram, Logan Moshami. We have now almost a million people there a month now.
08:37We nerd out 24-7. I am not a fun, cool person. I literally do not do anything but look at economic
08:44data. If you want some explanation, I'm your guy. And with all the new apps and everything, we can do some
08:52really fun stuff with AI. But I get it. I totally understand how confused and shocked and scary it was
09:01for a lot of people because now everyone's thinking recession, inflation, confidence indexes are all
09:07collapsing in a big fashion. We have to calm everybody down, get everybody focused, and then
09:14kind of take the next few stages of whatever this trade war tap dance will eventually be.
09:20I keep asking you about a recession, and that's because it keeps coming up. Goldman Sachs,
09:26their percentage goes up. Other people talk about it. Tell me what you're thinking right now.
09:31So before the year started, labor market getting softer, not breaking. We highlight the new home
09:37sales sector because residential construction workers are key. The residential construction
09:42workers, if I take the specially trade portion of that, which is another data, that's already falling.
09:49So we're keeping an eye on that. The thing now is because this was such a big shock to everyone,
09:56people are getting more and more negative. Even some of my smart friends that are conservatives too
10:05are flipping into the recession camp as long as this continues. Before Godzilla tariffs, we said,
10:16okay, now they're firing government workers and they're withdrawing money. That in itself would raise
10:21the unemployment target higher, okay? And the Fed, like we said, kept it low just in case for something
10:28like this to happen. They raised their unemployment targets. We're already there. Now with Godzilla
10:34tariffs, everyone's raising their unemployment rate targets higher and higher. New York Fed,
10:40President Williams, has it at four and a half to five percent, has growth slowing down.
10:46All these things are shocks into a system that could have been handled better in 2018 and 19,
10:54but we just don't have that. So I think that was the wake-up call to the White House on the bond
10:59market because as we've talked about, what does Trump want? He wants a lower dollar, check. He wants
11:05lower oil prices, check. He wants a lower 10-year yield, check. These things, when you put an economic
11:10shock that is negative, will all happen by themselves. So it isn't so much of a marketing line,
11:16they knew if they go into this, those things are going to fall. But he lost the 10-year yield,
11:22but it's coming back down. So we'll see how it is. I look at the weekly retail sales data. It's still
11:29showing positive year-over-year growth. We keep an eye on construction workers, but you can't keep on
11:34shocking the system like this because, man, the negativity on some of these surveys are getting
11:40really bad. And the business, the small business index is like 91% conservatives. And whenever Trump
11:48wins, that thing goes vertical. That's even falling down. So there has to be clarity soon
11:54because the longer this goes, this is why everyone is raising their recessionary targets, right? I have
12:01to have my triggers first. So we don't even talk about that until the triggers are laid off.
12:05But it's totally understandable how people are upping their recession forecasts as long as this
12:12chaos continues and there's no clarity on what it is.
12:18What do you see in the weekly housing data on the housing market tracker? How are you seeing this
12:24filter into that?
12:25So the interesting aspect, you take all the madness, you take all the chaos. The existing
12:32home sales market was doing better than anyone thought. Now, you're not going to see this in
12:36the existing home sales report coming up because our data is about six to eight weeks ahead of the NAR.
12:43But even with the recent drama, the pending contract data was still positive. I would say the weekly
12:49curve slowed down a little bit. Purchase application data had its best week of the year,
12:559% week to week growth, 10%. But the new one today should decline. Every time you have a reversal
13:00and rates very sharp and you're working from a higher base, that data line always retracts back.
13:06That's why we do ebbs and flows and waves with economic models. So we'll see because now rates
13:13are starting to come back down again. We just need to get everything calmed down and a little bit
13:19more focused. This is why I'm not a fan of Peter Navarro being part of Trump's team because nobody
13:26takes the markets don't take him seriously. And if you're going to like flinch when the bond market
13:32goes against you, he might not be the best person to put on TV. But again, we don't know what other
13:40countries are going to do and how it goes. But to me right now, the fact that the market's calmed
13:44itself down, everyone's thinking there are going to be deals done and still maybe the focus
13:50eventually be just China. But that's a lot of chaos. This is a lot. I mean, this isn't like,
13:56this is nothing like 2018 and 19. 2019, 2018 was small, you know, rates were lower. There are all
14:03these other things that were in a better backdrop here. I mean, the Fed is all, everyone's raising
14:09their inflation targets right now. That makes it more difficult for the Fed to cut rates. But
14:17Waller and Bowman have both said they're going to look at labor over inflation. I got two. I need two
14:24more. And then I can be Tony Stark. I get the Vengers going and we could run with this.
14:30Any chance we see mortgage rates getting down to that 6% mark anytime soon?
14:35You need the labor data. You need the labor data to break. So let's talk about that.
14:39The last two times mortgage rates headed to 6%, the end of 2022, wow, the dollar was strong.
14:47Everybody was, you know, going crazy. London was going to lose its pension funds. The Bank of Japan
14:52intervened. The IMF was going to send Ethan Hunt to take out the Federal Reserve because there were
14:57hiking rates too strong. That was a lot of market drama and it set the 10-year yield lower. And then
15:02the Silicon Valley banking crisis happened. So a lot of people thought, okay, this is it. And the Fed
15:08came in and cleaned up everything. The 10-year yield got to the Gandalf line, the Gandalf line.
15:12Sarah, we held that thing for eight tests. That's still crazy. Out of all the things in this cycle,
15:17to hold the Gandalf line on eight different times when everyone was sure of a recession,
15:21reversal, not happening. Last year, 10-year yield went very, very aggressively lower.
15:28Labor data was revised lower. People are thinking the labor market's breaking. We got the 10-year yield to
15:33break the hoarder. Labor data. That was all labor. That got us near 6%. Here, 435 looks about right
15:41because the labor data is just firming up, not crashing or getting it. But if those things start
15:46to break, now you got two Fed presidents talking about, it's going to be, to me, it's very hard for
15:52the other Fed presidents to like not get on board with that. Because when job losses start to occur or
15:58jobless claims start to rise, it's going to be more problematic to say, well, we have to wait and
16:04see. And one of the things I've tried to stress is one of the reasons having a trade war in a democracy
16:09very difficult is two-year political cycles. And if red states who are already getting government
16:16contracts withdrawn, who are already losing people that work for the government, if you start to get
16:21losses, job losses, the Republicans in Congress, you know, they'll pull the plug. They'll take the
16:27control back on tariffs out there. So as we said a few weeks ago, Trump's got a little bit of a
16:33window. Whatever he's going to do, he's got to use that because, you know, once that happens, it means
16:38all the things you did here are, you know, going to go out the door in the next midterm cycle. So
16:44whatever it is, get it done. Markets are calm. Take advantage of it. It's harder to do stuff when
16:51markets get chaotic because people see your hands and they go, they know when you'll flinch. And the bond
16:56market was the thing that made him flinch. Logan, thank you so much for being on. I appreciate
17:03you as always, even with my voice crazy. Even your voice. And just, it was, listen, it was a
17:10breath of fresh air, not being told what to do every day. And like, you know, don't say this,
17:16don't do that. Don't I? So, so I did enjoy it, but I am happy you're back, you know, because as soon
17:22as you left, all hell broke loose. And as soon as you got back, things have calmed down, right?
17:26And so everybody out there, market, market craziness happens here. They're just kind of
17:32like, keep that as a short-term thinking. Don't make these big, long, oh my God, the dollar's dead.
17:38And somebody asked me that, are we going to like destroy the dollar to make Bitcoin the reserve
17:43currency? No, no, it doesn't work that way. So try not to take these people on YouTube's big
17:50macro changes about the U S and for the, for God, Rayo Dalio is going to go off. It's calling us
17:57the Roman empire. We're about to collapse. Do not listen to Rayo Dalio. Don't do it. Okay. That is
18:03like the doomer boomer of all time. Okay. Just know we're not Rome. We don't have the Viscovs and
18:09the Huns coming down. We already had our plague that we handled. It's the United States of America.
18:13We are the baddest ball players in the history of the world. And we're not going to like crash like
18:18that in 2025. Thank you, Logan. I'm sure everyone's very excited about that. No one wants to be the
18:25fall of the Roman empire right now. So thank you so much. Talk to you soon. Pleasure, Sarah.