- 1 hour ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about mortgage rates, inflation, housing vacancy data and more.
Related to this episode:
The housing market gets a positive Fed day for a change
https://www.housingwire.com/articles/fed-warsh-10-year-5/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
Want more from Sarah? Don’t forget to subscribe!
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.
Related to this episode:
The housing market gets a positive Fed day for a change
https://www.housingwire.com/articles/fed-warsh-10-year-5/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
Want more from Sarah? Don’t forget to subscribe!
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.
Category
🗞
NewsTranscript
00:10welcome everyone i'm joined today by lead analyst logan modashami and if you are watching this on
00:15youtube you might be like what is going on of course this is our annual halloween dress-up
00:20edition and today's theme is elizabeth holmes who wore it better so you know you might think
00:27i'm a woman i have an advantage here but if you're looking right now logan he's got the blue eyes
00:31he figured that out the facial hair is kind of makes it rough but otherwise i think you might
00:35win so uh logan welcome to this very unusual podcast it is wonderful to be here sarah i don't
00:43know why you're saying my facial hair would make me look weird okay first of all what does this have
00:50to do with the housing finance nothing we just like nothing we both saw that movie with elizabeth
00:56homes and we thought we had to we had to yes no i love this i i love it the
01:02big blue eyes really do
01:03a a big number for you i think this is not easy to make by the way so the chart
01:07daddy does not have
01:08the greatest skills but i tried oh my gosh okay well thank you for for being in the spirit of
01:14halloween
01:15i mean you've been saying all month you're like oh this could be a scary month for housing so let's
01:19dive into it are you going to keep that on for a while you're going to take that off
01:23uh just for a little bit we're going to talk about uh today's uh economic data which was
01:29really really interesting today jobless claims is under 200 000 uh oil prices are above 100 both wti
01:39and crude uh gdp was at 3.4 so which means nominal growth is near uh six percent and the
01:46ai uh capex
01:48boom it just really showed itself in this quarter uh close to 13 percent uh of the gdp was just
01:56from
01:56that uh and um inflation core and headline cpi are above three percent no uh ending to the conflict
02:06nothing and the 10-year yield was down a few basis points today so i just look at it as
02:11we won
02:12uh because it could have been a lot worse this month and six to eight i think it was eight
02:18weeks
02:18ago we talked about you know things are escalating and that 10-year yield has to hold that line at
02:245.35
02:24percent eventually got there and it held a few times and now uh the 10-year yield is under uh
02:30uh five
02:30percent so there's a lot of things that uh this morning uh could have gone very bad for rates but
02:37they haven't and i think the mindset is starting to look into 2027 uh uh and unless something crazy
02:45happens or some escalation or something something really bad happens with the trade war and the
02:50conflict uh maybe we've seen the worst uh uh with the 10-year yield and rates for now that would
02:57be
02:58incredible news and actually yesterday you wrote um an article after uh the fed speeches um after the
03:04comments and the q a that you know is actually we finally got a positive day uh a positive fed
03:10day
03:10for housing okay you are creeping me out with those with those i know those those eyes that you know
03:19um i actually think i look like tippy hedron more than i look like uh you know maybe i'm an
03:24older
03:24version anyway okay we're not going to get distracted by this sort of okay uh but no it was a
03:30positive fed
03:30day for housing okay i'll do you a favor i'll just take it off okay it's the first time i
03:37tried
03:37lipstick on i think i overdid it but um so we're the worst case scenario we were able to take
03:45off and
03:45now we have to start looking out in the future so i think there if i was to make a
03:50case you know
03:51because older older countries and economies don't have a lot of domestic investment because so much has
03:56already been built out that when you have a new industry like ai like if you took the ai capex
04:01hardware data centers all together it's actually more than the housing bubble boom in terms of its
04:08components to gdp so that that's much is here but you can also make a case is that this can't
04:14last
04:14forever right and eventually growth is going to slow down to a consumption-based economy when you
04:19become a wealthier country and you all you age you you basically become a service sector uh uh um
04:26consumption economy in that sense uh so i i think when we look back at this week and this month
04:32of
04:32october kind of the worst case scenario so the balls in our court to kind of move it to the
04:37next step and
04:38maybe you know alleviate some of the inflationary pressures that the country is dealing with uh and so
04:43far you know we it's thursday nothing crazy has happened we only got one more day left in october and
04:48then we deal with the midterms and everything after that but for now as as as good as you could
04:53hope for with all the variables in play talk about the inflation a little bit more because um you know
04:59that's one of the things that uh that kevin warsh said yesterday and he was like very clear he's like
05:04two percent is not uh there's no compromise on two percent like he's going forward with that we came
05:10out today tell us what that looks like so let's assume kevin warsh is 15 years ago and it wasn't
05:18president trump that was the president kevin warsh would have said hey listen tariffs are bad look at
05:24the core goods in inflation data we were heading toward negative on this and all of a sudden we put
05:30tariffs on and all of a sudden the core goods inflation starts taking off um so you could see that
05:39outside of that there isn't anything too drastic it's not like wages are creating uh inflation in a big
05:45way my concern going out in the future and not so much on pce is uh we're going to go
05:50into rental
05:51vacancies and homeowner vacancies a little bit later but uh we got a big lift from uh rent disinflation
05:59happening but it looks like rent inflation is stabilizing that's more of a cpi thing so we really
06:05have to get the tariff situation in check and then get the conflict in check because you know you don't
06:12want another variable added on to 2027 and have these two things laying around for the whole year
06:19so uh there's a pathway and of course think about everything that's happened a major domestic spending
06:25on ai uh deficit spending conflict war everything and still we're basically one one percent away from
06:33being close to two percent on the pce data so we throw in everything we can and this is much
06:39different than the 1970s right the 1970s had major labor force growth right and then we had an oil
06:45shock on top of that and oil would have to be 426 today to adjust to those prices so so
06:52we don't have
06:52that kind of breakaway inflation and we're throwing everything you possibly can at this and we're not
06:58that far from getting back to two percent so if growth slows down because the ai story slows down
07:03uh you get the conflict over with right and you don't make trade you got things you got things
07:09that can make this work so uh i think kevin war should just buy in some time to at least
07:13maybe get
07:14two of those variables uh fixed up a little bit i think this is going to be one weekend where
07:19we can
07:20be like we should not expect anything crazy at least from our side like maybe iran's going to do
07:24something but it feels like right before the midterms like days before the midterms maybe just things
07:29are going to be quiet for a minute what do you think i mean i know jd vance sent a
07:33letter to
07:33to iran you know and stuff and just remember iran can't take this forever right you know their
07:40economy is getting hit harder than it has in the past and again when you start to have military people
07:45complain you know uh wages and and and inflation over there their their inflation and weight their
07:51stories a thousand times worse than what we're dealing with here so uh eventually if something has to
07:58settle itself out you know this can't be a story going into 2027 okay let's talk about some data
08:04we got on um home ownership rates vacancy rates you have very strong feelings about this um would love
08:11to know what you make of that all right so home ownership uh for those of you who didn't follow
08:16my
08:16work in the last decade boy i i had some really like almost dark takes uh uh after when i
08:23started writing
08:23about housing uh economics and one of them were um if you take the adjusted to demographics of post
08:312007 where prime age population growth peaked and was declining which is a really really big thing for
08:36my work and then you take all the credit uh deterioration all the people that were going to
08:40foreclose on their house sellers that weren't going to be buyers um my work and this goes back to what
08:45i
08:45wrote in 2012 or 2013 that home ownership rates should bottom out by 62.2 to 62.7 that's where
08:53i
08:53think the home ownership and the home ownership rates was not at that level uh so people were
08:57thinking that's a very dark take but if you adjusted to the credit loss and everything i think after all
09:02the adjustments they've made on census data we ended up at uh 63.1 that was the low point after
09:08the
09:08housing bubble crash but as your households are formed and demographics are better and everything
09:14you know by years 2020 to 2024 a few things should change number one the mba's purchase
09:19obligation data should hit 300 first two weeks of 2020 we got there we should eventually have 1.5
09:25million housing stores during that period we got that check uh but the home ownership rates in the
09:31article i wrote uh 2016 or 17 uh we should get to 66.21 if you adjust it to demographics
09:39and the credit
09:40data uh getting uh so much better now from uh post qualified mortgage dot frank and the 2005 bankruptcy
09:47reform was and the high i think and this was this was a call for years 2022 to 2026 the
09:54high was 62.10
09:57so we close to getting to that level and then of course housing inflation took off prices took off taxes
10:04insurers and everything so the home ownership rate is 65.4 it looks relatively normal to me considering
10:10the whole scope of housing right now uh um and that's perfectly fine right you know that's that's
10:18i i always look at the 2002 to 2005 data as just that's not real everyone could just exclude that
10:24uh
10:25we're never going to have a credit boom like that we're never going to have home ownership rates like
10:28that we had the covet burst in home ownership rates that you discount oh so that was the tracking error
10:34and the home ownership looks perfectly normal to me when you when you make all the adjustments so i
10:38thought that was fine but the vacancy data that's where things get very interesting okay well let's
10:46talk about that also i do think it's interesting when you think about 65 home ownership rate is about
10:51normal right i think and because we talk about home ownership so much because we're like this is the
10:56wealth building i think most people think it's much higher than that but anytime we've gone higher than
11:00that is not is not gone well we've we've extended the credit to your point like it's just that's about
11:07where we are as a country you know some people make some a case that if you adjust it to
11:12households
11:12the home ownership rate is really like 53 to 55 because you have more people living in a in a
11:17house
11:18you know but just just how the census counts it you know that it looks about normal to me getting
11:23above
11:2366.21 percent in years 2022 to 2026 would would seem off to me uh and i think we got
11:31to 66.10 uh so we got
11:34close to that to that forecast but uh then we then it goes into the vacancy data uh homeowners homeowner
11:41vacancies and and homeowner and rental vacancies and one of the things that you hardly ever see in america
11:47is the homeowner vacancy data because you can't really do important you can't really do important
11:53that thing and the homeowner vacancy rate is 1.2 percent it rarely what that is does that mean that
12:00like you own a home and then you don't live in that home so what is that the vacancy rates
12:05are basically
12:06how your homeowner and this is basically the available homes for sale at the current moment
12:12right so basically the the the inventory that's available for sale your homeowner's vacancy rate
12:18is there so there's only one it's 1.2 percent now if you look at total active inventory nar
12:24it's 1.6 million there's pending contracts in that but you're also talking about 340 million plus
12:30americans out there the homeowner vacancy rate rarely goes above two percent in fact the only time in
12:37recent modern day history that that occurred was guess what the housing bubble crash years when
12:43inventory got up to four million and we had tons of distress foreclosures and bankruptcies in 2005
12:49six seven eight and all of our new listings data those were not homeowners that would be sellers so
12:54even with all that you got to like 2.8 2.9 percent we never even hit three percent just
13:00remember
13:00people live in your homes if you don't live in your house and you're not renting you're homeless so it
13:06would be really weird for all these people who have jobs and families and make money to be homeless
13:11this is why we always say we don't listen to middle-aged men podcast stop traders because housing is not
13:16a
13:16financial asset it's a shelter you if you sell it you have to replace it with a form of shelter
13:21or else
13:22you're going homeless and when you go homeless and your kids are eating from the streets the cops are
13:26going to come and take your kids away and then they're going to go homie you have a job what
13:30are you
13:30doing i i had to sell my house and get all my equity out and but you're homeless you know
13:35so we
13:36don't think like middle-aged men podcast stock traders on that um so the homeowner vacancy rates
13:40it still shocks people when i when i showed so let's talk about that um homeownership vacancy rate
13:47first of all what what is that what are we measuring there and what does it look like right now
13:51okay so
13:52the homeowner vacancy rate are the homes available for sale right and that's compared to the you know
13:59census population out there so naturally it always stays very low it rarely goes above two percent
14:05why because most home sellers are buyers but if you sell your house and you're not buying another
14:10house you have to go rent because most people don't sell their homes to be homeless so the vacancy rate
14:16if you look at the nar data there's 1.6 million active listings in america there's 340 million plus
14:21americans out there so uh normal active inventory is two to two and a half million uh and their nar
14:28has
14:28pending contracts into that equation so naturally this data line is very low it even during the housing
14:34bubble crash years where you had inventory went from two and a half million to four million we had
14:4015 million loans in distress where those people were going to sell to be renters you know or sell to
14:45be
14:45homeless right they weren't going to sell to buy a house it never even got to three percent so the
14:50homeowner vacancy rate is very low that's why i always like to teach people that in the active
14:54inventory the only things that matter in america active inventory and homeowner vacancy rates you put
14:59two together it squashes so much of the doom porn that's why you don't see the doom porn people use
15:05this site or this data line they like to do the vacant inventory or vacant units for sale we've had
15:11like 15 to 19 million homes that are vacant around america they always go oh and any second now 13
15:18million
15:18homes can hit the marketplace and it never occurs so new listings data active inventory vacancy rates are
15:24low that explains what's happened in the last few years affordability is very stretched so the supply
15:30demand equilibrium got hit on that homes are taking longer to sell as rates are staying elevated but
15:36we're still kind of in this construct where we're not back to like normal levels of of nar inventory
15:43we're getting close we're close we're at levels where i don't talk about a housing shortage anymore
15:48because i'm over 1.52 million and i have four months of supply but the vacancy rate is basically
15:53the units available for sale you know and most people remember we have so many people in america
15:58but only a small portion of people sell and buy their homes every single year and that's why that
16:03data line is very low historically going back decades and decades and decades it's actually a shockingly low
16:10amount of transactions when you look at the total and you know i so you know i love a road
16:15trip and i'm
16:15always driving right i live in texas i cannot tell you how many times i'm driving through a small town
16:21or
16:21like a really small town and there's all these vacant homes and i'm like no one's buying that home
16:26that home's not even you know you and i've heard these people before talk about like oh there's all
16:31these you know millions of vacant homes most of the homes that are vacant vacant like that and haven't
16:36been lived in for years no one's ever going to live there they're in the middle of nowhere
16:39they're falling down like that's not what we're talking about here you know you know unless it's
16:43available for sale it does not matter you know so i've dealt with that vacant unit thing for god
16:49knows forever i mean that was at 19 million it's like a little bit above 15 millions and every time
16:53people go over any second now and i go guys if this was going to occur you'll see it in
16:58the new
16:58listings data and then you'll see the active listings so that's why you have that uh vacancy
17:03rate very low uh you'll never see that chart i do it on the nurture sometimes i'll post it on
17:08instagrams too but uh that explains why that percentage is historically very low but then the
17:14interesting thing is the rental vacancies now the rental vacancies had been stabilized around
17:19a little bit above seven percent for some time but it perked up to about 7.6 so i think
17:23the the
17:24interesting aspect going out next year's housing construction has fallen down a lot the last few
17:30years but we're still like kind of 2019 levels there so um you know one concern is that because
17:36rates are still elevated and you know we're not building a lot of apartments or rental units that
17:41eventually uh rent inflation will take off again we're seeing stabilization in the rent data uh but
17:48also now you could see that you know rental vacancies by the census is is is is elevated to uh
17:54post
17:55recovery highs and wage growth is running at three percent so i for me to counter rental inflation i would
18:01say that vacancy rates are still elevated and wage growth is is is that cycle loads right and so if
18:08you
18:08had wage growth running at five six percent and regular rental vacancies down that's a bad oh that's
18:14it's a really really bad story and that's what happened during covid right uh all global pandemics
18:19are very inflationary including rent you go back to if you go back to 1918 and look at you know
18:25rent
18:26inflation back then uh you saw it really took off and then the disinflation happened as i think one of
18:30my
18:31uh interviews uh on squat box four or five years ago i said a rent uh inflation will pick up
18:37but then
18:37the disinflation will happen and that's where we are that's what it's been for the last few years but
18:41it's something to keep an eye on for 2027 uh if it just stabilizes and just stops going down or
18:48does
18:48it pick up a little bit you know i mean all things considered i feel like we're we're coming into
18:54a like you said i mean it's more positive than it could it could be do we wish rates were
18:59lower yes do
19:00we wish we had more origination yes but it could be so much worse yeah again my my concern was
19:05that
19:05because after the mou deal broke off you see this very very violent reaction with the 10-year yield
19:12and oil and getting back up to 5.35 if for some reason we closed above that and the conflict
19:20got
19:20worse and nominal growth is here and everything the bond market could sell off even more until the
19:26federal reserve tries to calm things down thankfully the 5.35 level held and even with
19:31all this economic data that we had today that was very solid we're starting to look past some of the
19:37craziness so you get the conflict over with you don't make trade war 2.0 and you know the ai
19:44uh boom
19:44can't last forever those are three things for an older country that does not really have a lot of
19:50older countries don't have these major demographic domestic investment things because we built out so many
19:55homes and commercial buildings and everything for so long uh you can make a case that maybe the worst
20:00is over but again there are a lot of ifs and variables that you have to take over but uh
20:05uh the
20:06last week of october man with the fed meeting and everything that happened boy that thing held and
20:11the last time we checked we're under like four like 4.98 on the 10-year yield and uh whenever
20:18that
20:19happens we survive the five percent 10-year yield so of course we all want rates to be just a
20:23little
20:23bit lower where demand can grow and everything and you know inventory is up to a level where it's
20:28healthy you don't have to worry about prices taking off right you know what covid was was the first time
20:33where it was very supply driven and then rates were very low so uh uh we late 2019 to early
20:402020
20:41was the lowest active inventory in the history of america this is why we were very very cautious i
20:47remember one of my tweets in may of 2020 uh uh during covid i said guys we have to start
20:53worrying
20:53about home prices taking off the whole hey guys we need team higher rates we need to get inventory
20:58back up and we we're just working this stuff out in the history of housing economics for decades and
21:04decades you have periods like this uh as long as wages could outpace home price growth you know
21:10affordability gets better you keep inflation in check uh those are positives
21:16we went from savagely unhealthy housing market which i still think is one of your best uh phrases that
21:22you've come up with um to now it's you know it's pretty oh it's it's healthy i i i love
21:26this i love
21:27this i i hated the housing market you know when we went from unhealthy to very unhealthy just savagely
21:32unhealthy in february february of 2022 when i saw 287 people sitting outside a house in la that did not
21:39deserve like two people but um uh that's when you you needed to blow this thing up uh to get
21:47any kind
21:47of normalcy because things could get out of hand shortages are the worst man there's nothing good
21:51that happens with shortages because whatever inflation you get is not deserved or earned and all
21:56it does is impact uh future demand and you see some of that in in in what's happening in san
22:02francisco
22:02it's a very unhealthy housing market there but that's not so much of shortages it's like a lot
22:07of money right you got a lot of wealthy people out there and you know everyone wealthy people like to
22:12have a nice house and uh uh they're paying up and you never want to see that but the dynamics
22:18of housing
22:19i think there was a there's a new york economist he was you know the professor galloway show and
22:24they were showing the new york times and since 1856 every decade there's always there's a housing crisis
22:30there's a housing crisis there's a housing everyone's been complaining about housing since
22:331856 you and i have talked about this with oh this technology is going to take all the jobs
22:40history keeps rhyming itself but one the one thing that always have wages rise right wages have risen a
22:46lot since 1856 so you know if you part part of the housing problems people make money right especially
22:52dual household incomes make money and that's enough to keep housing total home sales near near 5 million
22:59which in the last decade as i've always liked to show even with affordability the best ever and
23:04mortgage rates super low and lots of inventory the highest levels of sales from 2010 to 2019
23:10was around 6 million so you're you're with all this said the construct of housing demand is there
23:16uh if you get 700 000 more sales you're back to somewhat kind of normal and then to get to
23:22the
23:22peak of the last decade not 2020 or 2021 but the peak of last decade when rates were lower and
23:28affordability was just a million more homebuyers so you slow and steady wins the race here and uh
23:35just like they said in contact small moves ellie small moves it's it's always a movie reference i love
23:44it um logan thank you as always thanks for dressing up because i think i love lipstick yeah yeah i
23:50think
23:51now you look like jeff goldblum as a vampire oh great that's what it looks like now you remember that
23:56uh
23:56where there was a teenager in orlando that said you look like the guy in wicked the wizard you're the
24:03wizard of wicked i'm like oh it's talking about and and to be clear you were not wearing any makeup
24:09i was
24:09not wearing but you were just you know the hair i'm i'm getting older so i look more like jeff
24:15goldblum
24:17well thank you so much we'll talk again soon pleasure
24:21you
Comments