Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about housing demand with mortgage rates at nearly yearly highs. First, here are the top five trending stories on HousingWire.com. At the top is Compass Files Ethics Complaints Against Zillow in 26 States, followed by For Home Builders and Buyers, Private Lender Channels Matter. Then we have the housing market spotlight, the local markets behind this week's national story. And Logan's article, can the housing market still grow with mortgage rates over 6.64%? Finally, we have Zillow Says Conspiracy. MRED and Compass say Zillow did this to itself. Okay, let's jump into today's topic. Logan, welcome back to the podcast. It is wonderful to be here. It's inflation week. So, so far, we've kind of survived inflation week. The PPI report came out today, and that was a whiff as well. I wonder what Christopher Waller's thinking right now. He was just all like, we're going to raise rates in July. We got one more bad report. We got to, and then like both of them whiffed. So the 10-year yield is lower, but not by a lot, but mortgage spreads, mortgage spreads, a good day for mortgage spreads. And it's brought rates down to 6.64, which is going to be the topic of the subject today. But so far it could have been worse, but it looks like we've made it through inflation week. And then the PCE report is going toward the end of the month. Okay, that 6.64% level on mortgage rates. That is where you feel like below that is good demand, above that housing demand falls. So what are you seeing right now in the numbers given that rate? So we haven't had a lot of time above 6.64%, but just going back in the last few years, what has happened in the last few years, rates get down towards six, demand picks up, and then rates shoot back up. Shoot, not slowly, they just shoot right back over seven. Demand slows down. And then within a calendar year, it's very hard to grow sales in that matter. So last year, as mortgage spreads started to improve, like it should, the backdrop in the second half of 2025, because when did the housing market shift? Mid-June, 2025. Mid-June, 2025. So the backdrop for growth was there. And because we were going to have rates break below 6.64 and spreads were going to get better. So we had a nine-month high in sales in December. Everything was working just right. But this year going into 2026, the forecast was very easy. 237,000 more existing home sales. If rates could stay out at six and a quarter, we're good. And early on in the year, that was happening. In fact, oddly enough, the biggest hit to demand this year was a snowstorm. Take Christmas and New Year's out of the equation. The snowstorm was actually the big thing that slowed things down. So we've had some very odd existing home sales prints. By the time this podcast comes out, we're going to get the pending home sales, Just be a little bit suspect of the pending home sales from the NAR data. But we're going for growth this year. Not a problem. But now we're above six points or we were above 6.64% and purchase application data came out. Now, just remind everyone, every weekly data line that's out there, there tends to be a seasonal curve where it goes negative. And purchase application data the last calendar week always goes negative. So people saw the 7% decline. The unadjusted numbers were actually positive, but they see that 7% decline. But then we did have a year over year decline. We've only had three weeks this year that have negative year over year. So now it becomes this topic, you know, as I was reading, well, mortgage rates are up now, now housing demand has to slow down. So the question is, can this actually hold up better with rates above 6.64%? So what do you look at to see if that's going to happen? We have different purchase apps is one variable in housing demand seeing how many people do that What else are you looking at So what you want to see is new listings data has its normal seasonal curve You don want new listings data to go lower. That's one of the problems with 2023 was that after 2022, the mid part of 2022, new listings data tanked and tanked to the lowest levels ever. Most home sellers are buyers. So you want to see a healthy level of new listings data still occur. Purchase application data is a forward-looking data line that looks out 30 to 90 days. It trends well with existing home sales historically, but it also needs weekly and year-over-year growth. So we saw that to a degree this year, especially on the year-over-year side. So you keep an eye on purchase application data because it looks forward. But then our weekly pending sales data and our total pending home sales data, which you can get for any city or zip code out there with housing wire intelligence, that gives you another layer of a forward-looking demand. And just to give you guys an example, the existing home sales report, even though the seasonally adjusted numbers were missed estimates, their monthly print, what they sold that month was actually one of the highest prints in years, kind of mirroring our data line. So we believe that we can get ahead of everyone else. And if our weeklies and total pendings and purchase apps and new listings look healthy, we can get growth here. So that's something to think about because under six and a quarter, not an issue, but we are toward the high level of the forecast. And so far, it hasn't really changed the demand curve. And part of that is housing got a little bit more affordable. Again, when home price growth slows down and wages outpace home prices, right? On the nominal and real side, I know a lot of people want to make the decision, but they're both kind of positive. So housing gets a little bit affordable. And I noticed this back in the early part of 2025. In 2025, mortgage rates were 6.75 and seven and a quarter, right? But the housing demand actually held up a little bit better. That's the affordability working itself for every year. More households are formed, dual household income. So we'll keep an eye on it. If anything shows a deterioration, we'll be able to see it first. And then the monthly data will catch up to us. But so far this year, nothing too dramatic outside the snowstorm, right? The snowstorm was actually the big hit on demand. But you get a little bit of growth out there and we could kind of push forward. Given everything that's happened this year, that's pretty shocking that the snowstorm had the biggest hit on demand. I know. I know. It's weird because you hear all these headlines about who's going to buy a house with the war and who's going to do this. And I said, guys, homies, literally, there was a plague killing people around the world and housing had the fastest recovery ever as soon as people thought, hey, I can get out and live again, you know? And it was the sharpest recovery during COVID with 30 million people unemployed and 5 million in forbearance. So millions and millions of people buy homes every year. It's the affordability and demographics and households and, you know, affordability got shot really bad in COVID. This is why the unhealthy to very unhealthy, to savagely unhealthy housing market. We'll keep an eye on this. I think there's the mortgage rates this year is just very complicated. It's very complicated with the 10-year yield and two-year yields. And I'm trying to do all these videos and try to teach people two-year yields now. Oh my God, we're having a party. We're bringing the two-year yield out. And it's like me at a disco club with a bunch of people. We're talking, make two-year yields fun again. But I think it's difficult for maybe some realtors or loan officers to try to like, because everyone talks about where do you think rates are going? Where do you think rates are going? Well, how would you say, I mean, the mortgage rate conversation seems to dominate, especially consumers. That's what they're paying attention to. What do you think that realtors and mortgage loan officers should be? How do they steer that conversation? What should they be telling their clients about mortgage rates So one of the things I see on the internet I not a big believer of this but this is the main thing I see in social media When are rates going to get down to five four three When are rates going to get down then I think about buying So I think one of the things how I would explain this or how I wouldn't explain it, you don't need to say that, well, we need to have like a COVID. We need to have a deep recession to get mortgage rates at three or 4%. We had the longest economic and job expansion in history and mortgage rates were three and a half to four and a half percent most of the time. So you don't necessarily need a recession. But with that said, you do need Fed policy to change. So I was telling people, why don't I forecast below 5.75? Well, the Federal Reserve has told everybody we're anchoring our neutral policy around three, three and a quarter percent. Well, if that's the case, it's really difficult. And if you're a loan officer, realtor, I would say it this way. If the economy's firm, inflation is above target and mortgage spreads are not back to normal, we don't have any history of mortgage rates getting below 5.75%. So whenever we do get the 10-year yield under kind of 4%, the labor data gets weaker, we have rates under there, that can happen. If the bond market is really afraid of the labor market like they did in 2024 and spreads were normal, then you could get rates under 5.75% for a brief time. But as long as the Federal Reserve is telling people neutral policy is 3% and mortgage spreads aren't back to normal. There is no history of rates going below 5.75. And that's why I would explain it that way. And then at least clients, because the problem I see is we get so-and-so person and so-and-so per, oh, rates are going to go to 4.5%. Kevin Warsh is going to cut rates. And they hear that and they think, okay, that's the, and I know that's not how it works. You know, if the labor data was breaking and jobless claims are up and the Federal Reserve comes out and we want to be more dovish. Yeah, that would be a material change, but it's not by accident that we get down towards 6% and we don't go lower than that because there's just not a lot of history. So if you're a realtor or a loan officer, you really want to show like a long big chart of the 30-year mortgage and the 10-year yield, the slow dance that we do, a little Jodeci, a little Usher, but kind of take at the Fed funds rate and say, listen, to get here, boy, you need this kind of policy and we don't have it. You don't necessarily need a recession or COVID anything. We had an expansion with rates at three and a half to four and a half, but policy was much different back then. So the Fed runs 65 to 75% of where mortgage rates go and explain it that way. And kind of like, don't listen to fake experts who tell them, no rates are going to go down to 3%, 4% because AI it's going to take all the jobs and we're going to have mass unemployment. Let the data kind of tell you this and let the Federal Reserve kind of guide you in that. And that's the history of housing economics since the Peloponnesian War, Sarah. Well, I also think it goes with the discussion we had last week about home prices, right? So it's very rare for home prices to drop. So, you know, if you're talking to somebody, it's like, okay, unlikely that mortgage rates get that much lower, very unlikely that you're going to see a big correction in home prices. And so if you wait longer, you're just going to, you know, you're battling home prices as they go up almost every year. One of the reasons I don't engage that talking point, because I know a lot of realtors and loan officers do this, they do the timelines of, you know, if the longer you wait, I always look at it as total payment for affordability, and then also put the dual household income factor into it. Because millions and millions of people buy homes every year, Even the last few years, total home sales were near 5 million, right? Existing and new. And the peak in the last decade was around 6 million. So I don't know if there's a lot of people waiting. I not been a big believer of that I know You never thinking that A lot of people talk about this but I look at the data and I don see a swath of people that are like on the sidelines or they come and say well I thinking about buying but you know I don know where, you know, it's just, I don't see it. I've looked back in history on this and it's almost like an urban legend to me. And I know the marketing is run around this too. People say, well, if you wait, the longer you wait is like, but I never addressed that because I was like, if there was like this massive amount of people sitting there waiting for, you know, but to me, it's like the history of housing economics. When affordability gets better, it's usually rates come lower. It's usually because of a recession. And then housing demand goes off because it's been sitting at a lull because affordability's hit out there. And that's if you look at those existing home sales charts all the way back to 1968, like we show them, that makes more sense to me. But to me, when you say, oh, there's, you know, housing demand comes back because there's been a lull, there's people waiting. That's exactly what I'm saying. There are people out there who would buy if conditions were just a little bit better. We see that every time rates go down, demand goes up. And most of that time, prices were always rising and they always end up buying just because of the total affordability. And it's their time to buy, right? It's not, I mean, housing is very demographic oriented. Housing tenure has doubled and tripled in some cases. That prevents most sellers, a certain seller to sell their house and buy. This is why we don't believe in a mortgage rate lockdown because all these first-time homebuyers, they're not locked down because of their mortgage. All these people with no mortgages, 40% of the country has no mortgage. They're not locked down. There's a huge swath of people with very, very low payments right now. They're not locked down. There's a certain time that you buy a house, right? The whole rent, date, mate, get married, three and a half years after marriage, have kids kind of thing about housing. And then we just go with it. So I think in that context, I'm just not a big fan of this. I just think when affordability gets a little bit better, more people buy homes. And COVID was a great example. What were we fighting during COVID? People are saying, Logan, you're crazy. There's 20 to 30 million people unemployed. There's 5 million in forbearance. There's a global pandemic. I'm like, homie, as soon as we stop hoarding toilet paper and wine, game is on. And what happened, it was the sharpest recovery in the history of not only America, but planet Earth for housing demand. Why? Because affordability was good. And we were at such low levels of sales that we just need to be breathing and living and just bam out there. So interesting. Okay, a couple of things before we end this. I wanted to say a shout out to Atlantic Bay. I was on their town hall this week. That was really fun. They're huge fans of this podcast. So shout out to all of our friends over at Atlantic Bay that listen every single day. And we are going to South Carolina. You are. Myrtle Beach in November to do the Atlantic Bay event. As August rolls around, the Chart Daddy Nerd Tour is about to gear up. I think we've got 21 cities coming out there. So it'll be a lot of fun. And again, our job is to teach economics, try to be as fun as possible because it's not the most... You got to be fun. You got to be fun. Okay, to that point though, you know, you said you put an AI thing of like the two-year yield and you in a disco. I'm just having a really hard time picturing that, you in a disco. Not on AI, but in real life, you in a disco. I don't know. Do you bring your chart? Really? You couldn't picture me with all the silk shirts I have? You couldn't picture me in a disco thing? maybe walking in, but like once you get in there, what are you doing? That's what I want to know. Oh, I couldn't do a Bee Gees. You know, that's what I'll do. I'll walk on stage with a Bee Gees song. How about that? Oh my gosh. Okay. That I can't see. Okay. You, you know, Danny, the, okay. We'll do that. Saturday night fever. All right, Logan, thank you so much for being on. And we will talk again soon. Pleasure. Thanks for listening to Housing Wire Daily. If you haven't already, we'd love for you to take a minute to rate the show and leave a comment and make sure to tune in tomorrow for more news and insight.
