What has more influence on mortgage rates: jobs data or AI?

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about what’s having a greater impact on mortgage rates: the jobs data or AI stocks.   Related to this episode:   October jobs report strengthens case for December rate hike  https://www.housingwire.com/articles/october-jobs-december-fed-hike/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  More info about HousingWire  https://lnk.bio/housingwire   Top 5 Trending:   Florida’s Amendment 3 could give housing market a ‘sugar high’ through year-end  https://www.housingwire.com/articles/florida-amendment-3-cutoff/  Can the new Congress help lower mortgage rates?  https://www.housingwire.com/articles/can-the-new-congress-help-lower-mortgage-rates/  CCM’s non-solicitation push tests limits of lender control  https://www.housingwire.com/articles/ccm-enforcement-action-non-solicitation/  Here’s how the midterms could reset Washington’s housing agenda  https://www.housingwire.com/articles/congress-housing-policy/  October jobs report strengthens case for December rate hike  https://www.housingwire.com/articles/october-jobs-december-fed-hike/   Want more from Sarah? Don’t forget to subscribe!  https://www.housingwire.com/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.

Transcript

00:09Welcome, everyone. I'm joined today by lead analyst Logan Modashami to talk about what's

00:14having a greater impact on mortgage rates, the jobs data or AI stocks. Before we dive in,

00:19here are the top five trending articles on HousingWire.com. First, we have Florida's

00:24Amendment 3 could give housing market a sugar high through year end, followed by can the new

00:29Congress help lower mortgage rates. Then we have CCM's non-solicitation push test limits of lender

00:35control and how the midterms could reset Washington's housing agenda. Finally, we have

00:41October jobs report strengthens case for December rate hike. Okay, we are ready to dive in. Logan,

00:48welcome back to the podcast. It is wonderful to be here, by the way, Sarah Wheeler. Everything I'm

00:52about to say is factually true. We've been the number one real estate mortgage business news

00:58podcast in America for years. We're the 2026 Signal Award winner for best daily podcast with

01:05three others. And this week, as crazy as this week was, you know, for a niche company like ours,

01:14we broke into the top 10 of total business news podcasts. We're usually in the, you know, top 15.

01:20But, you know, to get in and that's crazy amount of time just means that you and I,

01:25we play ball. So, you know, the AI video I made is me breaking someone's ankles,

01:32playing basketball, and just not even shooting the ball, just throwing the ball in the stands and

01:36say, get off, you know. So congratulations again. In a time of chaos, that's when people need a little

01:43bit more guidance than normal. And I thought we'd done a good job with this past crazy week,

01:49especially now that Jobs Friday is gone. No, absolutely. And congratulations to you. I love

01:54seeing that. I do think we've been doing, we're talking about the things that people really care

01:58about, what they need to know. And so let's get into it. Jobs Friday on a very wild week on

02:04every

02:04other thing. So how, you know, let's talk about what we saw with jobs and then, you know, what it

02:09means relative to AI and other factors for mortgage rates. You know, fascinating report and response

02:17to the jobs data. Of course, the labor market has been improving for sometimes, again, second year

02:24of a trade war, things do get better. There's a lot of, there's still growth and investment going on

02:30in the U.S. and consumption that could keep the labor data going. My contention has been with this

02:35notion that the labor force growth has gotten so bad that we could have zero jobs created and have

02:42some, you know, and that'll be perfectly fine. You know, I mean, I understand the hypotheticals of

02:47you could even have three or four reports a year be negative and still be the unemployment rate

02:53doesn't budge. But, you know, having 165,000 jobs gained, but also having positive revisions,

03:00we're getting a lot more positive revisions now, you know, so it's not like a booming labor market or

03:06the labor market is tight or, you know, but it's good enough to keep the Fed's eye just on inflation.

03:13So this morning, I'm just watching Core Weave stock price and the 10-year yield. And Core Weave stock

03:21price Friday morning pre-market was up 10% at one point. The 10-year yield had been slowly moving

03:27up

03:27higher. Then the jobs report came in, the 10-year yield spiked up one or two basis points and just

03:32came back down. And now as we're having this conversation, the 10-year yield is slightly

03:36lower. So this becomes a very, very interesting situation with the bond market, the labor data,

03:43inflation and AI. You know, of course, when stocks go down, financial conditions like Kevin Warsh

03:50looks at get a little bit tighter. So it makes it a very fascinating Fed meeting in December,

03:59which a lot of people still say, you know, the rate hike should happen because the market properly

04:05will price in those two last rate hikes into the system. It's going above that. But with AI and

04:11everything else, boy, it just makes it much more interesting. It feels like opposing forces in some

04:16ways, right? Okay. So we're seeing this job growth and I'll ask you about what kinds of job sectors are

04:21growing, but also then at the same time, if you have this, you know, AI stock sell off and less

04:27capital coming in there. It's like, these are opposing forces in some ways.

04:31It is. I would say because of the level of where the 10-year yield is at, it makes it

04:36a good tug,

04:38a tug fight right here. But, you know, the 10-year yield got up to 5.35%. That was pricing

04:45in a lot

04:46more rate hikes. That was pricing in a conflict still going on. Trade war 2.0 getting worse and

04:53the labor market staying solid and the potential of the 10-year yield to break above that and keep

04:59going higher and higher because, you know, you can make a case that fair value for the 10-year yield

05:04like we've talked about months ago. It's like five and a quarter to 5.35. That's not abnormal where

05:09nominal growth is, but a lot has changed. That level held. The AI god king bled. There's more negative

05:19stories about, you know, AI this morning, Microsoft, Oracle. There's all these things happening. So

05:26I think the worst is done in terms of the 10-year yield and where rates could go.

05:31But the question is, can we get to that next stage? If the labor market is still solid and inflation

05:39growth rate is still above target, can we get to that next stage where you need the Federal Reserve

05:44to start sounding more dovish, right? They control 65% to 75% of where the 10-year yield could

05:50go. So

05:51the ball will be in their court. That's why we said that the last two months of the year are

05:57going to

05:57be very interesting because there are variables in play that can make this equation different.

06:03And after the midterms, and then we'll see what happens with the conflict in Iran,

06:09two big variables, the trade war and the conflict can be dealt with. AI, you know, the AI, it's not

06:16going to collapse or anything, but you can see the stocks selling off with the 10-year yields at

06:21484, like 484. That's elevated to compare where the low points were. So it's just going to be a

06:30fascinating, unbelievable tugfight between economic data, AI, and where the Fed thinks.

06:34In a time where Kevin Walsh doesn't want to give guidance, but his other Fed governors go. So

06:41our services will be desperately needed on a daily basis, Sarah Wheeler, to try to guide through this

06:47madness right now. I believe that. Well, let's talk about what sectors of the job market grew. As you

06:54noted in yesterday's podcast, it's like, you know, the growth that we did see some last year was like

06:59healthcare and social services, not exactly, you know, something that leads to a lot of inflation

07:04necessarily. What did we see in this report? Well, here's the thing with the Labor Day. The

07:09Federal Reserve, what we've always said, has an old school model that if you really want to target

07:142% inflation, you need wage growth below 3%. You believe in the 1% productivity growth, and that's

07:20how you get 2% inflation. So wage growth has been slowing down for years. But the labor data was

07:27not

07:27only missing estimates, there was no breath in the jobs reports last year. So the Federal Reserve

07:33deemed that to be not a very healthy labor market. This year, you've gotten definitely some breath to

07:40come up. Manufacturing jobs have come back. They're not very big, you know, in the total scheme of

07:45things, but they are growing. Construction labor hit an all-time high two months ago. They dipped a

07:52little bit. We saw professional service jobs have a really big print of 70,000. That might have been

08:00the biggest print since October of 2023. I might be wrong there. But you got a little bit more breath

08:07than you did last year. And the Federal Reserve just basically says, as long as we have 33, this is

08:13my

08:13belief, their break-evens are 33,000. As long as jobs are above 33,000, the unemployment rate should

08:19stay low. I mean, it has the potential to even go lower. So the labor market stabilized in the second

08:25year and it grew. And I just think a lot of people in the real estate and mortgage industry are

08:29told

08:29that negative revisions, negative revisions, the labor market's breaking, you know, rates need to go

08:34lower. That has never been the case, right? It's softened, right? Wage growth has fallen, but breaking is

08:42something completely different. And usually growth and investment and consumption and industrial

08:46production, all these things fall. And we just don't have that in the data line. Jobless claims

08:51were low again. So I thought very good, very solid jobs report. That's not inflationary. But if the

08:58productivity data comes back, unit labor costs fall and productivity goes, the Fed has their little

09:04miracle. That's why I'm really fascinated to see what Kevin Walsh says in the next Fed meeting about

09:08productivity. Like a lot of people don't believe it. Like I don't believe any productivity report until I

09:14see it with like duration and you could actually really see it in the economy. But the last three

09:20quarters have been impressive in that. And it'll be interesting to see not only Kevin Walsh, but Lisa

09:26Cook and how the Fed looks at productivity data. He really doesn't have an easy job. He doesn't have

09:34an easy job. And he just gets more variables all the time, it feels like. You know, it's such a

09:40fascinating year because when you go into a year thinking the labor market is breaking, which a lot

09:47of people did, and then you have two to three rate cuts going to be priced in, you're heading toward

09:52neutral policy, which makes it easier for the 10-year yield to trade between four and a quarter

09:57and 380. Then all of a sudden the labor, so I was thinking about this, the labor data improving was

10:03the

10:03big variable of the year. Nobody really, everyone wants to talk about the conflict and trade war, but

10:07the labor data improving changed the whole apparatus of 2026. And because of that,

10:16the conflict happened at the worst time ever, you know, because when you have the labor data

10:21improving, the Fed's going to focus on inflation. You still had the trade war 2.0. Some of that stuff

10:26got worse and, you know, food inflation on some of the items really took off on people, made it a

10:33very

10:33negative theme. And then the conflict happened. And that's basically, you have, you know, two extreme

10:37things. And then the Federal Reserve went into their AI rant, you know, where people were worried

10:42about AI being disinflationary January and February, but, you know, come, you know, August and September

10:50and October and November, inflationary. And now we have this is AI slowing down. So fascinating,

10:56Wheeler. It's just, it's just fun. I mean, I know for some people it isn't fun, but for me, it's

11:02just

11:03this really, really interesting tug of war now. Now, if the 10-year yield was at 535, you'd see a

11:10bigger noticeable dive this last week. If the 10-year yield was at 410, you'd see a noticeable increase

11:19in yields. But where yields are right now, it's a nice fight. I kind of like tell people, take that,

11:24take a crayon, take the 10-year yield at 395 this year and draw a line straight to where we

11:31are right

11:31now. And here it is, the conflicting battle between the 10-year yield, AI, jobs, inflation, the Fed,

11:38everything. And now we have all these variables that Congress is going to be in play. And can they

11:43change some of the stuff that the Federal Reserve and the bond market is worried about on inflation?

11:48One of the things you always mention is that the mortgage spreads, the spreads are there to

11:53absorb volatility, right? So anytime we have a quick change in mortgage rates or other things

11:59going around, we'll see that spread get bigger, which is not good for mortgage rates. But I mean,

12:05it is in one way because it's absorbing that. Right now, what do you expect to see when we look

12:10at the

12:11spreads this weekend? Do you think they would have gotten worse?

12:14So the spreads in this period of time should get slightly worse. Remember, we had a lot of bond

12:20volatility to the downside. Whenever you have such a very aggressive move. So you take the MOU deal,

12:25the 10-year yield at 460 and that shot up to 535, and then you're slowly moving down. Remember,

12:30compressed volatility is the spreads work, right? You're still near yearly lows. I think a lot of

12:36people want to make a... They're hyping the mortgage spreads increasing too much in the short amount of

12:44time as something tyrannical. No, it's actually in this environment, it's pretty normal. When sometimes

12:50yields go up very aggressively, when the spreads are... When the 10-year yield, the spreads get better

12:57because they compress volatility to the upside. Now you see it to the other side. So as long as...

13:02Once the market starts to calm down, spreads should improve. We haven't seen a credit-breaking event

13:10out there yet. And we're going into Thanksgiving and the private credit never created the recession,

13:17nor did the commercial lending never create the recession. In fact, the credit data has been

13:21pretty stable out there for the general economy. So it is, again, fascinating. But again, if mortgage

13:29spreads weren't near the lows, it would be harder to get to seven and a quarter. Now we're under seven

13:36and a quarter. So I think that's... I didn't plan on this year being the back end of spreads making

13:43the case that, hey, listen, if we're up here, it doesn't matter. With the 10-year yield, we need to

13:47go under 4% to get anything noticeably good. That was 2023. 10-year yield went from 5% to

13:533.80.

13:54The lowest mortgage rates got were like 6.65 at 3.80. Now you get 3.80, you're under 5

14:01.75, easy.

14:02So when you take the worst levels of the recent spreads to the low level, you have about 40,

14:0741 basis points difference. So you're probably in the 6.80 range where it is, where the 10-year

14:14yield at 4.84. Hug a mortgage spread, man. You still hug a mortgage spread big time. But

14:21when volatility compresses, the yields behave a little bit better. Spreads should compress a little

14:27bit more. Well, and I'll note for our listeners that you cover every weekend in the housing market

14:34tracker. So they should check that out. I was listening to the news, as I often do. And today,

14:40something that really struck me. So I'm in Texas. As you know, we had a blue wave from the top

14:45of the

14:45state to the bottom, really unprecedented. Like not just like, oh, we have a new governor, but we have

14:51all sorts of things happen here, Senate governor and all the way down. And the governor-elect,

14:56Gina Hinojosa, was talking about how we're going to, she's going to take money that had been

15:02into other things and just hire a bunch more teachers. Texas has seen a lot of disruption in

15:08the education space in the last couple of years. And I wonder, you know, we talked yesterday about

15:14what the new Congress can do, but we also have a lot of questions at the state level, like

15:18things like that could, you know, Texas is a big state. If they hire a bunch more teachers,

15:22that could affect jobs. If you have that happening, you know, in, in different ways,

15:26or like in Washington, if, if the Senate, the things that they can control, which is not everything,

15:32but they might do more government hiring. What, what do you think about that? As far as like

15:35having an effect?

15:36State employment is, is very small in the big scheme of things. Everyone kind of ignores government

15:42jobs. Anyway, it's the private sector jobs. Sarah Wheeler, why? What's our line? Ghostbusters,

15:511984. The public sector, you can get away with it, but the private sector expects results. So

16:02it's a non-economic event to me, what the states do, because in the big scheme of themes, it's like

16:09less than two tenths of all the jobs being created out here. The, the, the, what happens with the

16:15economic cycle in terms of how the economy moves with the labor market is a bigger variable

16:21than state educational employment. Um, so, uh, too, too small, you know, uh, for it to,

16:30to mean anything in the big scope of things.

16:32So this week you have had a very busy week on the, um, housing, our intelligence insights,

16:38where you throughout the day, give us insights on what's happening in the market. Uh, one of the

16:42things you said was that, um, you felt like Jerome Powell, maybe, uh, now we'll feel like he can

16:48retire because he doesn't have to stay on the fed. Like maybe he feels more secure about what's

16:53happening there. Does that change anything? Yeah. I mean, I see that the, the, the issue with the

16:58federal reserve is they're having a hard time firing or hiring people. The Atlanta fed, you know,

17:04hasn't been picked yet. I vote Neil Dutta, economist for REM capital. He'll, he'll do a great job on there,

17:12but I don't know how many people want to be the, the, the fed chair. Now, now that Congress has

17:17changed and, you know, obviously they're president Trump can't really go. The president tried to take

17:24over the fed. This is when it's all said and done, I'm just going to go back and like, think

17:28about what

17:29the hell just happened. We had Stephen Meyer as a fed governor. I still, I still can't believe that

17:34happened. Um, in any case, uh, uh, if they could hire someone, you know, I think, I think, uh, Jerome

17:42Powell just say, Hey, I I'm good here. Or if he doesn't feel like the fed can get other like

17:48people

17:48to join, you know, maybe he'll stay a little bit longer, but, uh, but now it checks and balances.

17:54And I think, you know, um, as Jerome Powell once said, you know, if you're a fed chair, you've got

17:59to

17:59develop relationships with people in Congress. Right. And I think that, that, that Congress,

18:05you know, uh, uh, layer of protection got a little bit better. So he might, he might say, Hey,

18:11listen, I'm going to go to more concert concerts, listen to Grateful Dead or whatever, you know,

18:16uh, uh, his time has come, but, uh, things are changing. And so I think we, we, as analysts and

18:24data analysts or political analysts, I have to see how, how it impacts the,

18:29the general economy. But, um, but yeah, what a, what a crazy year, man. I mean, you think about

18:36everything after 2020 and this happened, this whole year happened and we think like, how could

18:42it get any nuttier or anything, but this, this year, a lot went through, but, um, uh, uh, the fed

18:49is

18:49always going to be, uh, uh, a topic in general economics, even though I, I look at economics as

18:55demographics and productivity, like that's more powerful than the federal reserve. But

19:00here, it'll be interesting what Jerome Powell does over the next six months. Uh, or if the Atlanta

19:05fed does get, uh, somebody, if the Atlanta fed to hire someone, then, uh, one of the hawks

19:12doesn't become, uh, um, a voting member next year, which is the president of St. Louis

19:17Fed, uh, Alberto. Uh, so interesting. We'll see how that works out in the next few months.

19:25Okay. Uh, looking back at the stocks, of course, you know, over the last couple of days, lots of

19:30people saying this is, you know, this is a bubble bursting. It's going to continue to go. It could,

19:35you know, I've, I've read all sorts of things. Um, as you look at it and we saw it, you

19:40talked about

19:40core. We've, you know, made up some of the ground today that they lost yesterday.

19:44And they lost it. My last time I checked, they're only up just a little bit. So, so it's,

19:48so is this the start of a, of a huge bubble bursting, the AI bubble bursting?

19:53So I want to, I want to make a case with, if you look at the history of bubbles and

19:57if you want to

19:58look at equity prices, uh, usually the bubble disconnection is when equity prices go up and

20:03corporate profits don't. So, uh, the big boys are still making money. Uh, um, and I think for,

20:10for now, uh, the Titanic shift is a little bit different in terms of, let's say the tech stocks

20:16were e-toys was trading at $200, whatever, 1999, and they were never going to make a penny in their

20:22life, you know? So it's a little bit different out there. So, uh, as long as corporate profits for

20:27the big boys keep going on, they'll, they'll do it. But, uh, the, the, like, you know,

20:32Oh, the, the Googles, the, the, the, the, no, I mean the, the people that make money, the, the,

20:38the, the, the, let's take it Apple, Microsoft, Google, the big boys that are running kind of

20:46the AI push are still, they're not the e-toys or the Lycosis or those kinds of companies of the

20:521990s. But if you see corporate profits start to fall and your revenue start to fall, that's going

20:56to matter. So core weave is just the, going to be the sacrificial lamb, uh, uh, on here. So keep

21:02an eye

21:02on that, but it was really interesting how core weave stock price went up 10% pre-market.

21:06Now it's pretty much flat. The 10 year yield went up, didn't move much too much on the,

21:10on the job support started to tick down a little bit. So we'll, we'll, we'll see how it works out.

21:15We'll, we'll be on this 24 seven cause I have no life and this is what I like to watch.

21:20Uh, uh, but

21:21you, you need a shift in terms of revenues and, and, and earnings to everything to really bring that,

21:27those valuations and everything, uh, tumbling down.

21:30So you've already, you know, it's just another data line to add to your, I know, I know. I don't

21:35usually oil prices all year have been, you know, ever since the, uh, the Iran war, you've been

21:41looking at oil prices and 10 year old now, now throw that. That's why we created that AI versus

21:46housing, right? You know, uh, if AI gets weaker, there's one sector that has been depressed with

21:51stock prices and you know, they, they would benefit. So you do the AI versus housing 20, 20, 17. So,

21:57uh, but again, if, if the 10 year yield went a lot lower than, you know, obviously the,

22:02the housing stocks will outperform the AI stocks that the AI stocks are still, you know, dealing

22:08with bad headlines.

22:10Logan, thank you so much for walking us through this incredible week. I would say have a great

22:15weekend, but I know you're going to work all weekend.

22:16Yeah. I'm heading off to South Carolina for the first time in my life, you know? So, so the

22:21nerd tour is, uh, uh, it's almost coming to an end. I think it was 46 events this year, but,

22:25uh,

22:25uh, it's been a lot of fun. The hardest working, uh, guy in, uh, housing finance. That's what

22:30we'll say. The hardest working lead analyst. Um, thank you again. We'll talk soon.

22:34Pleasure.

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