On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about Jerome Powell’s future as head of the Federal Reserve. The two also discuss housing data, which remains positive despite uncertain economic factors.
Related to this episode:
Mortgage rates fall after Powell remarks | HousingWire
https://www.housingwire.com/articles/mortgage-rates-fall-after-powell-remarks/
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 after Powell remarks | HousingWire
https://www.housingwire.com/articles/mortgage-rates-fall-after-powell-remarks/
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 Jerome Powell's
00:11future and what we're seeing in the housing data despite some crazy headlines. Logan,
00:16welcome back to the podcast. It is wonderful to be here, Sarah. You're
00:21getting your voice back. That means you're going to boss me a little bit more. I'm ready
00:25for it. I had my spring break without you. No, I think you missed me. I think you were like,
00:31no, she has to come back and boss me some more. I know. I know. It's weird not being bossed around.
00:38You get used to it. Okay. Well, we have some pretty explosive things to talk about today.
00:44Jerome Powell, man, got a target on his back more than ever right now. So,
00:48you know, Trump had his comments yesterday. You wrote an article about it. We're recording this
00:53on Thursday. How much trouble is Powell in? You know, I'm actually going to take it even
01:00a different angle on this. I think there's going to be a, in a sense, a very interesting civil war
01:08among the Fed presidents and Powell. Okay. And this week, oddly enough, we always say Team Logan
01:16has two new people, President Waller and Michelle Bowman. Both those two hawks have now gone into
01:26labor overinflation. But Christopher Waller basically gave his premise on how he would
01:33handle tariffs. And he basically said, listen, I want to get rate cuts going if the labor market is
01:40breaking or the economy is really getting weaker. Powell, on the other hand, kind of said, hey,
01:45listen, we're going to sit and watch. It was kind of like, listen, this is your thing. The tariffs are
01:50much bigger than we thought. It makes it more problematic for us to do our mandate. I'm always
01:56in the camp that when labor breaks, they fold. But hypothetically, let's say Powell is not budging.
02:08Jobless claims are rising. The unemployment rate's coming up. You have Fed presidents like Waller and
02:15Bowman saying, we need to start cutting rates and Powell doesn't. Trump is going to really, really
02:21try to rally the American people against Powell at that point. Because it's one thing for Trump to
02:27go after him while the economy is still expanding. And he's just going to ignore it. But assume this
02:35hypothetical that jobless claims are, which jobless claims came in fine again today, right? The honey
02:41badger labor market is still holding up. But let's say jobless claims are running to 323,000 four-week
02:47moving average. And then Powell just goes, listen, we're just going to sit and wait. And there's where
02:54I think Trump could start to push a full-on blitz against him and also elevate Waller and Bowman,
03:03who are both conservatives, to try to get more aggressive rate cuts going in. I believe Powell
03:09will fold when the labor market breaks. And we've always said this. Well, I think it was a 2022, too,
03:15that they're going to stay as restrictive as possible until the labor market breaks. And Powell's,
03:21and a lot of Fed presidents, says we are modestly restrictive. So we haven't even talked about
03:26like going to an accommodative stance or anything. We're just trying to get to neutral. So
03:30just before we got on this podcast, Politico broke out a story saying that Trump was furious,
03:41you know, just absolutely furious at Powell. But Besant is trying to calm him down, saying it'll be
03:49it'll be unstable to the markets if you try to fire him. It'll go to the courts. It'll be this
03:54whole thing. Does Trump really care what Besant says? Not probably really, but I think there's
04:02going to be an inflection point. And again, the labor data runs everything here. So that's where
04:08you could start to get Fed presidents almost getting in a civil war where they openly go against Jerome
04:14Powell and say that our dual mandate is maximum employment and stable prices. Tariffs are a one
04:20off price. They'll get some deals done. Things will go back. Let's get ahead of this. And there's
04:25where you and I talked about this like four or five weeks ago. The Fed can be in a place where they make
04:31an unforced error. And so is President Trump trying if they if they do something that is a little bit
04:36more extreme. Godzilla tariffs is really extreme. But now Powell's taking a stance about, hey, listen,
04:43we're just going to wait. New York Fed president William says, hey, listen, I've got unemployment
04:48rates going higher, growth slowing down, but we're we're OK where we are right now. So they can say all
04:55this as long as jobless claims are low. But when that damn breaks, boy, it's like we've always said,
05:03Sarah, it just gets more interesting. But that's the variable that's keeping them saying this
05:09these data or these talking points.
05:13So from your perspective, the cover that the Fed needs. So so say Jerome Powell really wants to not
05:18make Trump furious or or sees it. The only cover he really has is on the labor data, right? I mean,
05:25he couldn't just now say, OK, I'm going to do that. Like there's no there's no real reasoning behind
05:29that. The irony, Sarah, is that the inflation data, you know, there's no 1970s redo here. I mean,
05:37CPI inflation, PC, it's so hard to get inflation to break out like that data. Global pandemic did.
05:45And I encourage everyone go look at the year over year growth inflation data in the 21st century.
05:50We had deficit spending, QE1, QE2, QE3, operation twists, zero interest rate policy. We threw everything
05:57out. Could I get the growth rate of inflation to break out? But pandemics are very inflationary.
06:04Global World War tariffs, you know, they all say tariffs are a one time price. But the trade war,
06:13Trump, I mean, Powell said this, listen, we might have shortages because this part is made here and
06:18that part and things don't work together. And it takes for a long time. And look how long
06:24car, car inflation has been used. Car prices are still elevated. You know, he used that as an
06:31example. So while the Fed will say tariffs are one time price offs, they're already starting to
06:38make a claim that, hey, listen, we can't be 100 percent sure, because if this is a bigger trade war,
06:43then things aren't going to be working properly. And that's again, that's always been a problem with
06:48trade wars. It's not like you get to just declare whatever you want and nobody retaliates on you.
06:54Everyone retaliates. And, you know, unless you make deals, it gets more problematic. I mean,
06:59the manufacturing survey data is just collapsing. I mean, it is interesting. Some of these data lines
07:04actually look like COVID. You know, travel from overseas has had a waterfall dive. The new orders
07:11has a waterfall dive. The trucking data has had a waterfall dive. These are surveys. Some of these
07:16are harder data than softer ones. But the Fed and Trump's economic team is saying the softer data
07:22is getting weaker, but the harder data hasn't, which implies that the data in 2024 was fine because
07:29the data is fine now is fine then. But in this case, you get to really see why everyone is just
07:35waiting to see some of the other data lines. For example, retail sales beat estimates. Some people
07:41would say that's front loading on tariffs because cars and building materials were the big growth here.
07:46Jobless claims still there. The Labor Day, we talked about this with the bond market. The
07:52bond market 10-year yield should be trading again. By the way, what a wonderful week on the 10-year
07:57yield and the bond market behaving absolutely great. And even with Powell's comments and stock
08:03selling off, it wasn't like the 10-year yield had a waterfall dive. It fell a few basis points and now
08:09up a little bit. So bond markets have calmed down. So the hard data is the key for both Trump's team
08:16and Powell's team. But I do think within the Federal Reserve, you're starting to get a divide
08:22on people saying, we care about labor over inflation. We don't think this is going to be
08:29a long-term breakout in inflation data. And Powell's already taken the side. So when you take sides,
08:35you got to go with it and stick it. This is why the next few months, if deals aren't made and things
08:41don't get better, we'll see who really shows up for the war.
08:50So just very briefly, how bad would it be if he tried to replace Powell? Obviously,
08:58up till now, people feel like that's an independent post. You can't really do that.
09:02Aside from the legal part of that, what kind of instability do you think that that would lead to?
09:07Well, see, this is where I actually am interested to see what the markets do.
09:14Now, you can't just literally fire him and just tell him to leave. It's a whole process.
09:20Unless Trump's legal team has found some crazy verbiage or something that they can do something
09:26like that, it's not an easy process. But this is my working theory. If the labor market is breaking,
09:35I don't think Trump cares. I don't think he cares about what the markets think. If jobless claims
09:40are going up, people say, well, it's instability, like Pessette's telling Trump you can't. I don't
09:44think he gives a damn. I think at that point, he's just fired and whatever it is, he's going to put the
09:50pressure on him at that point. Obviously, let's say a bunch of deals are done and things go back to
09:59normal. It wouldn't be a big deal. But in this context, we've already got people on the other side.
10:06So always keep an eye on Bowman and Waller now on any Fed speeches. We'll highlight that when we
10:16can. But those two have now separated themselves from other Fed presidents. And we'll see how that
10:23works along in the future. But I think everything changes when jobless claims break, when residential
10:28construction workers lose their jobs. And we enter a different stage of this cycle.
10:35Let's talk about, against that backdrop, the housing data, because the housing data in many ways is
10:42holding up. So what do you see there? Before we talk about housing starts, I just want to add that
10:47a lot of people are saying that people are kind of afraid for their jobs. Confidence has never been
10:56this terrible. And even with rates getting above 7%, the purchase application data had 13% year-over-year
11:03growth.
11:08What do you attribute that to?
11:09Sarah, you and I have talked about this. And I know Ivy Zellman talked about this. I know Mike
11:16Simonson has talked about this. If people are really, like, afraid, like, you know, just panicking
11:26all the time. It's like those bond traders a few days ago. Everybody's going to buy the dollar or
11:29whatever. God, marshmallows. Such marshmallows, Sarah. If they really were afraid, they wouldn't be
11:36applying for a mortgage. Right? Fear trumps the purchase application data. Pun intended, by the
11:47way. However, for this year, even with elevated rates, it's one thing if it was like mortgage rates
11:53were at 5.5%. And then you go, okay, you get it. Right? Rates are elevated. And it's still showing
12:02growth. And people go, well, the total value. No, it's, this is, year-to-date is positive, year-over-year
12:06growth. We just had one rate spike. We saw the week-to-week data get softer, but, you know, we're
12:11still showing positive. We haven't had this in many years. So going out in the future, if this continues
12:18and people talk about fear, but yet they're applying for mortgages, something's wrong.
12:24Something's wrong with the premise. Because if you have fear, you contract yourself. It's like,
12:29nobody wants to travel to America. So guess what? All the travel data has had a waterfall dive.
12:36That makes sense. But you can't say that people are starting to be afraid and then have purchase
12:42application data still be positive. And this is with elevated rates. Again, if mortgage rates were
12:48sub-6%, people just go, hey, listen, rates are just lower. We're going for it. But the fact that this is
12:54happening should make some people be a little bit mindful of the fear part in relationship to the
13:01data. Because our weekly contract data is still positive year-over-year. Our total contract data
13:07is positive year-over-year. The purchase application data is positive year-over-year and year-to-date.
13:12There is something a little bit different this year than other years. So it's hard for me to kind of
13:17buy into the fear factor yet. What do you attribute that to, though? When you look at that,
13:22what do you think that variable is? I was seven when this happened.
13:30But the early 1980s, and we've always highlighted this as part of our work for the last year,
13:37this housing market reminds me of the early 1980s. Now, of course, back then, I was watching Spider-Man,
13:44the cartoon Spider-Man back then. I love how you bring up your age. I know what you're doing there,
13:50by the way. I'm just talking about how young I was in the 1980s. In any case, the late 1970s,
14:00home sales went from $2 million to $4 million. Big push, right? Huge. The baby boomers back then
14:07were buying homes. Then from $4 million to $2 million, 18% mortgage rates crash. And then home
14:13sales flattened out. What does it remind you? We had a huge crash in sales in 2022, and we flattened
14:23out. Every year, wages rise. Every year, households form. Every year, people get married. Every year,
14:30people have kids. We have grown a lot of jobs since 2022. So at some point, and we always talk about
14:38that $4 million level as being the key. That $4 million level held both in 2023 and 2024,
14:44existing home sales. So we're not counting the new home sales here. But back then in the early 1980s,
14:50we had two recessions. We had a lot more inventory. We had worse credit data, and affordability was
14:56worse. But yet, when mortgage rates went lower, there was a movie, Sarah, a while back. It says,
15:02life finds a way, right? And there are certain things that people consume each year, and housing
15:10is one of them. So we always said, when rates fall, I have no equivocation whatsoever. If mortgage
15:16rates are below 6%, sales are growing, no doubt about it. I would gather every single person in
15:21America, raise your hand if you tell me home sales are going to fall with sub-6% mortgage rates. No.
15:26I don't think a lot of people, some people are crazy. But in any case, it's just when you work
15:33from the lowest levels ever, it doesn't take much to move the needle. And we're getting to the point
15:38that even elevated rates are just smidging the data a little bit higher. But if we had just gone down to
15:456%, right? This is why the housing starts data is so frustrating. If we just go down to 6% and stay
15:51there, you can grow sales a little bit more comfortably, right? You know, we say 70% to 80% of
15:56home sellers or buyers, but they need that mortgage buyer to get that initial sales in there. And
16:02then that person can sell their house and buy another house and a functionality, another mortgage
16:06buyer comes in, and then you start growing. But man, if this data line stayed positive year over year
16:13with a rate spike, with all that's happened, this is April. Homies, this is April. We're not talking
16:20about December or January. We're talking about all hell just broke loose and yet people aren't
16:27running away. And what do we say? American home buyers are not middle-aged men. Podcast stock
16:34traders and bond traders, oh, they would run. Woo, Nellie. They're running a selling, get out,
16:38start crying about, oh my God. Homeowners, educated, proud, strong American homeowners,
16:45homeowners, home buyers. They live in a different, they just have their normal life. This is just a
16:49normal process that happens every single year. So if people are like confused, I get it because
16:56everyone's telling you, everyone's afraid. Everyone's so afraid of this happening, that
17:00happening. And yet the data is positive. If purchase application data was negative year over year,
17:0813% and mortgage rates were down to 6% and we had that happen, then I think people can make a claim
17:17that, well, even though rates are lower, confidence isn't there. But the exact opposite has happened
17:23in the most extreme, violent, headline, crazy time in recent history with elevated rates. So just,
17:30I just want you all to think about that for a second. So the next time somebody tells you,
17:34people are afraid. Oh, I believe there are some people that are afraid. But as of now,
17:41just the home, the home buyer thing doesn't have much validity in that. And if mortgage rates had
17:46gone towards 6%, home sales are growing more than anybody else thinks. We're just not there yet. But
17:52even for me, I would not have taken that bet if somebody told me mortgage rates would have been
17:56elevated 6.64 to 7.25 and you would have had positive year to date and double digit positive
18:04year over year growth after when rates spiked. What? I wouldn't have taken that bet, but it's here.
18:11So again, our personal beliefs on what should or shouldn't happen, that's fine for anyone to have.
18:17But if the data doesn't support it, then that means your hypothesis needs to be looked at in a
18:23different way. So we'll see. I mean, rates have come back a little bit. We'll see how it goes.
18:28I'm surprised at the data, but clearly what the first few months have showed, if rates get down
18:33to 6%, we're growing sales more than anybody else thinks just because the bar is so low.
18:38It has a record low levels of sales. So it doesn't take much to move the needle. That's why we've
18:42constantly pounded that line because at one point there'll be an inflection point and you don't want
18:47to be, you don't want to be like these people that are literally, we have literally people sitting
18:51there for like two years talking about one home in Florida that was bought in 2022. Like,
18:56get a life. Literally, literally get a life. Put this whole economy out there and then there's like,
19:03oh, look at this house. One group of people, Sarah, just one group. You see these clowns in
19:11the YouTube comment section, by the way, to the YouTube comment section, man, come find me on X.
19:15Oh, homie, please come find me. Just stop hiding behind your fake names. Come,
19:18we'll do our forecasts and models. And I'll add you to the list because I have this whole list
19:23of people's names and faces and their calls for the last 13 years that, oh Lord,
19:29the people that are still talking, it's hilarious that they're doing. And again,
19:33I understand for some of these people, this is how they make their living. Because of that,
19:37I am showing mercy. But some of you people don't do this for a living. You're just born just
19:42doing porn every day. You got kicked into a cult. You're older now.
19:48Sarah doesn't get prettier for guys when they get older. They know Dorian Gray. They don't got
19:54Logan's hair. But oh man, it just gets tough. It gets, you get angrier and you get frustrated and
20:01you can't do the things when you were younger and you just get mad and you go online and you go,
20:05the world sucks. Nope. You're just aging, dude.
20:11I really appreciate, and I know our audience appreciates your focus on data. So I saw a story
20:16a couple of days ago and it was like, buyers in droves are pulling their contracts because of
20:25what's going on in the economy and they're afraid, just exactly like what you were talking about.
20:29It's like, you know, if you sat back, I could see how someone could think that. I could think
20:33that like, oh, all these headlines, all this stuff, but the data just does not show that.
20:38And I immediately called you. I was like, hey, you know, what is this person looking at? But when
20:43we looked into it, it's like they went and talked to a couple of people and there were no quote unquote
20:48droves of buyers. They had no data about people in large numbers pulling contracts or anything like
20:54that. We're watching that really closely because of course our audience would be very interested if
20:58that was happening, but the data is telling a different story and it's, it's confounding in
21:03some ways, but it is the data. So there's always withdrawals of contracts that we have seen
21:09in whenever rates spike in a very short amount of time, you see people withdrawing their contracts
21:18because they never locked and they don't want this. We there's there's withdrawals every single
21:25month. It's like, it's like the jobs data, which again, this is, this is something that I probably
21:31failed as a teacher. People get fired every month. Like we have one and a half to 2 million people
21:36fired each month. Like people see these reports that, oh my God, this company let, why, why aren't
21:41this? Then one and a half to 2 million people literally get laid off every single month. Every single
21:45month we do have a withdrawal or cancellation. I would tell you this, the cancellation data that
21:52actually was really picking up steam was in 2022. And that was for the builders. Like the builders
21:59were getting cancellation rates like crazy because remember those people have to wait for the house
22:03is built. Then that final month they go into the purchase. And then, you know, when rates go from
22:08like, oh, I was going to buy this house at three and a half percent. And now it's seven. Of course,
22:12you're going to get high cancellation rates. Mike Simonson is going to have some data on this and
22:19he's going to start showing withdrawals rates and percentages. It does occur. What you want to see
22:24is tied to an event. If there's any uptick, like I totally get it. If some people just like people that
22:31work for the federal government, if you see your coworkers getting laid off, do you, do you really
22:36want to make that purchase? I mean, you technically, if you were in the loan and then you got laid off the
22:41last day, they got to check that anyway. And they're really going to check on anybody working
22:45for the federal government now more than ever. So yeah, you, you, you withdraw that. So it's
22:50something to see going out in the future, but so far it's, you know, purchase apps are positive
22:58weekly. It isn't anything spectacular, but again, for me this year, it's, this is happening with
23:05elevated rates, not lower rates. When you have lower rates, you can, you can really make a lot
23:11of different cases on what, what is happening or not happening. But the fact that we're just here
23:17now just shows that we're working from such low levels. It doesn't take much to move the needle, but
23:25the headlines headlines. I mean, listen, the, the consumer confidence data is so bad. Like we literally
23:33have like inflation expectations, spiking out of control and employment, you know, losses, you know
23:40people are worried about their jobs, but for now the data line that we track for housing has, has held
23:48up very well, considering, considering everything, elevated rates, trade war headlines, stocks pulling
23:57back, you know, you have all the intangibles there. And in theory, if you believe in your
24:03concept, then people should not be applying for mortgages. We should see another big downdraft down
24:0910% every single, but it isn't the case. And I just, I, I think home buyers are just in a more
24:15emotionally stable spot than middle-aged men podcast stock traders who complain about this all the time.
24:21Okay. Last topic is the builder's confidence and, and the new home construction. Let's talk about
24:28that. Yeah. It's, you know, it's a frustrating thing. We wrote that article yesterday, housing
24:33permits, walking dead, literally just a walking dead new home sales. I say, I try to explain this
24:41because a lot of my wall street friends, they don't understand why, why aren't the builders laying
24:45off people? Well, if you look at new home sales, it hasn't gone anywhere. Like when rates get down to
24:496% new home sales grow, when it goes back to 7%. So it's basically hovering in a range. So housing
24:54permits have been hovering in a range for, for a few years now. It's literally not going anywhere.
25:01We're not building. Remember the construction boom, everybody said, and what do we say, Sarah? Oh,
25:05you're so cute. You're so adorable. Such a good baby. When rates go up, it's going to end. So here we
25:14are, it's 2025. Housing starts, permits are still at basically the early levels of COVID-19. We're
25:20still building homes. Like it's not like we're down to zero. It's just the growth that people had
25:25anticipated. The builder's confidence had an uptick on three of the four data lines, but the big one,
25:33the four looking six month one that I, that I usually track with economic cycles that went down again.
25:37So hypothetically, let's just say there was no tariffs on lumber or anything that, that impacts
25:47the builders. And again, 7% of what the cost that goes into new home is, is imported. If mortgage rates
25:53were at 6% and there's no tariffs, I'm pretty sure all the builders confidence index would be rising
25:58together. And we could, we could probably start getting permits to grow again. We're not there.
26:04And that's, that's just, it's 2025, it's April. And if you look at the housing starts and permits
26:11data, single family, it's just not there. But because new home sales have been broken below
26:16the 2022 lows, you haven't seen that next level of contraction in the permits or start data.
26:25Multifamily permits are very wild month to month. It had an uptick, but if you look at it, it's basically
26:30at COVID-19 recession levels. There's not, there's not much going on there. So when you're talking
26:36about growth, man, permits are rising, single family permits, total housing permits, new home sales,
26:41all these things are moving together with housing starts. And that's what's happened with other
26:45economic cycles. This is a very, very unique cycle that housing permits have been basically going nowhere,
26:52but the economy is expanding. Some of that is, we still have the backlog of homes. We're getting
26:57things done, but it's a very unique cycle. I've made some even more adjustments to my model because
27:04of it. But the whole notion that we're going to have this big, massive construction boom, it's just
27:10no. Sadly, no. I mean, we would love to see more houses. Yeah. Just not going to happen. Logan,
27:17thank you as always for bringing in the data and giving us the context that we need. Appreciate you so
27:22much. Pleasure. It's good to have you back and get your voice back. And we're riling up the nerd tour
27:28again. We've got a bunch of cities coming up and we're booking things for the second half of the
27:36year. And it is going to be the largest nerd tour we've ever had, especially the second half. So a lot
27:42of states, it's going to be a lot of fun. Hope to see a lot of you guys. And the nerd tour charts just
27:48get more interesting with all the new data. Well, and I will say, let's point out the fact
27:53that we are coming up on The Gathering, which is HousingWire's big event and bigger than ever this
27:59year. We've already sold out of some things. Incredible people on stage, including you, Logan,
28:04being our keynote. So people need to come to The Gathering at the beautiful Broadmoor in June just
28:10to hear you. Pleasure. It's going to be a lot of fun, Sarah. It's going to be fun. Thanks.
28:18Bye.