The mortgage industry doesn't run on promises. It runs on ICE's proven AI-supported ecosystem that was built for every market cycle. Designed for what's next, powered by ICE. Visit icemortgagetech.com for more. Welcome everyone. My guest today is lead analyst Logan Modashami to talk about existing home sales and the fact that home prices are at an all-time high. Before we jump in, here are the top five trending articles on housingwire.com. Leading that list is Synergy 1 to take over New Res Distributed Retail Mortgage Operations, followed by two mortgage stories, both by Logan. One is Why Aren't Mortgage Rates Lower? And the second is Why It Will Be Hard for Rates to Get Over 7%. Then we have The CFPB Seeks Input on Mortgage Disclosures and Trid Rules. And finally, NYC Office Conversions Face Scrutiny After Pfizer HQ Incident. So many great stories over there. Okay, let's get to today's topic. Logan, Welcome back to the podcast. It is wonderful to be here. We just had a funny discussion about what would it look like if we had an economic Love Island show? Yeah, it was a funny discussion. With a chart daddy and all the economist guys, and then we could fight over charts and which chart wins and stuff like that. Yes, lots of things happen off air. Okay, well, I want to dig right in here to the existing home sales report because the headline for a lot of people was the fact that home prices are at their all-time high, which really, you know, affordability is something everyone's thinking about. Of course, we have that recent ICE report. So I wanted to get your high-level view. What did you think about the fact that home prices are now at an all-time high? You mean home prices didn't crash in 2026 like all those people talked about? This discussion is going to be affordability. Has affordability got better? And I think the unsophisticated narrative focuses only on prices, right? And I think to me, it's also a, not only an unsophisticated take, it's also a lazy take. Because we have these people, you know, like China's home prices are back to 2006 levels. And some people are like, oh my God, look, China's affordable. You know, people should be cheering. I go, homies, let me explain to you, deflation in housing, we've had over 80 years of history on this. deflation and with how housing prices work is usually something really bad is happening. And, you know, like I always try to stress, if I take 2007 and 11 out of the equation from 1942 to 2026, that is a very, very long time. You know, the only time home prices fell 1% was zero, right? In 1990, it was down 0.7. In 1991, it was 0.2. And those, you know, we had some credit stress in there in that data line in early recession too, but it just doesn't work that way with housing in terms of nominal home prices on a national basis falling. So China has a demographic cliff that started in 2015. That's why we say like almost in a sense of paper tiger. And they're gone. They're never coming back. Okay. So that one child rule hit them and they completely overpushed the real estate sector and their GDP in that country. We're much different. China, Japan, and Europe, their prime age populations are declining for some time. In the US, we still have Gen Z and millennials. So nominal home prices can't be the equation. Now, ICE did something very informative. They said long-term affordability can come back to housing if one of these three things happen. Number one, incomes rise 19%. That's not going to happen. Obviously, this year, incomes are running three and a half, in some cases, four. So that's not going to occur this year. Nominal home prices falling 16% nationally. That's not going to occur. Just remember in 2008, the worst housing crisis in over 100 years, it was 12%. And you had foreclosures starting in 2005, six, seven, eight. Then the job loss recession happened and active inventory was already at 4 million. The home sales, there's a whole lot of bad stuff happened for that. That's not always can happen. But the third one was mortgage rates getting down to 4.99%. Now, out of those three, what has the most likely chance of happening within this year? I mean, I don't believe mortgage rates can get down below 5.75%. But technically, if you had to pick the three, it would be that. And that just gets you back to the long-term affordability. But Sarah Wheeler, ask me why this is happening. No, I'm very interested. Why is this happening? Because the last two years, inventory has gone up. Remember this equation, everyone. Don't just focus on prices. Inventory has gone up. Price growth has slowed down. Wages have outstripped home price growth. And then of course, any dual household income put together, housing becomes a little bit more affordable for them, right? And because of that, for example, let's just say 2021, Home prices went up 20 That about 19 it went up But the next three years home prices were roughly flat So when you average up for four years we get back to my affordability index model that I specifically set for years 2020 to 2024 and said guys we going to be okay in housing as long as home prices don't grow more than 23% in this five-year period. That's 4.6% nominal on adjusted to inflation basis, a little bit lower. We'll be okay. Okay, we completely got blown out of the water. I only did that because years 2020 to 2024 was a unique period. But as every single year that goes on, as long as prices stay lower than wages or prices are lower than the rate of inflation, it is helping with affordability. And that can kind of explain housing demand holding up a little bit better this year, even with rates going up at 1.76 basis points. So you have to put the whole enchilada, because I know what I saw too, home prices are all time. Gentlemen, every single year since 1942, you could have said that outside of one period in time in history where there was a calamity and a lot of chaos. But millions and millions of people buy homes. We still have near 5 million total home sales. I always say this because the peak, the peak in the last decade when mortgage rates were three and a quarter to 5% and housing was very affordable because prices fell and rates fell and everything. The peak was around 6 million. So you're missing a million buyers from the peak of the last decade when it was like the most affordable at that point. So just remember, home buyers are different. They tend to make a little bit more money. This is why I'm not the biggest fan of median income because people go, oh, the home prices are median. No, listen, dual household incomes, people. Come on, right? That's how you get a lot of these home purchases, married couples. But going out in the future, don't fall for that. Well, price is just at an all time high. And that means housing is affordable, but it's not getting better because you don't have an equation variable of like declining prices on a nominal basis. You can do it on a real home prices, but that's just not the way to look at affordability. So ICE was correct. All these headlines about prices are at all time highs. And that's not just a working variable because we are getting things a little bit more affordable And it's going to be a benefit for not only 2027, but 2028 and 2029. The only thing I could say is that price growth is firming up a little bit. It's going to be harder for me to get my negative 62 basis points price forecast. I know a lot of people are focusing on like list prices. And how's that working out for everyone? Like list prices are negative year over year. And people keep, oh, well, home prices are in every single month. Well, why are the prices up here? because you're focusing on a list price, not an actual sales price. There's a difference, right? And you could see it on a national basis. These price indexes are still slightly positive on a year of year basis. I thought it would be a little bit softer on the pricing side. So we'll see how the rest of the year goes. But don't put all your eggs into the home price as the only thing variable because you're going to get lost every single time. And you can't explain why we have near 5 million total home sales still in this second least affordable period in history. America's housing sector builds strong local communities, but getting it right is harder than you think. Homeowners, developers, and insurers need access to crucial tools and information to make the best decisions. That's where America's federal research institutions makes a difference. Federal research agencies provide monitoring data and models that our housing sector relies on. Keep America ahead of the curve. Fund federal science and research. Visit usacompetes.org to learn more. Looking at that ICE report, I mean, they are making that correlation between home prices and wage growth. So you're saying wage growth is only, what, 3% to 4%? So from your perspective, why is that okay? But I mean, it's getting better. I mean, this data line was much worse in 2022, where rates were at 7%. because wage growth is outstripping home price growth. The last two years, affordability has gotten better. So the narrative that affordability is worse because prices are at all time highs is incorrect, unsophisticated, and it's also lazy. You have to put all the aggregate things that go into the affordability index, not just take one off. And again, I don't believe mortgage rates could get below 5.75% with neutral policy being at three. So this has to work with possibly low sixes or high fives unless something changes. But we have shown that it can work in the low sixes. But every year that goes by, it just gets a little bit more affordable and you chip away at that ice data, right? As long as prices don't go above wage growth, it's a positive, right? This is why I loved last year and this year. Last year, the price forecast was 1.77. I think we ended like 1.3%. So it looked right to me. This year, prices might be a little bit firmer than I thought it would, but still every year it gets better and better and better and demand starts to form up a little bit more. I always like to refer this to the 1980s. The 1980s, the early 1980s was the worst affordability in housing ever, right? Home prices escalated faster in the late seventies than COVID and mortgage rates got up to 18 So it a really big gap But even back then we had two early recessions in the 1980s Both recessions drove rates lower Both times home sales go vertical. Go back and look at that existing home sales chart. The worst affordability times during two recessions with more inventory, worse credit data, sales went vertical. It's really hard to get sales to go vertical in existing home sales, but it happened twice back then. So So as long as prices are a check, wages grow, households form, things get better. So don't put all your eggs into the home prices are at an all time high and that nothing's getting better equation. I think the affordability conversation really splits when you're talking about first time homebuyers versus people who have been homeowners this whole time, right? We've got equity, we're older, we've done things, but you can see how that first time homebuyer, it is hard even as wages are rising to outpace the home price growth. For me, I feel like it's a first-time homebuyer affordability problem mostly. What do you think? The last two months, first-time homebuyer percentages has grown at a clip faster than any time in the last few years. From what data? Just from the NAR survey of the existing home sales report. Like last month, first-time homebuyer percentage was up to 35%. That is a historically high number over the last 15 years. So I always say that's a denominator effect from 30%. This last report is up 33% from 30%. So we kind of have a low base. But again, generally what I tell people, when you have dual household incomes, we're not talking about single first-time homebuyers. A dual household incomes takes the affordability equation away. Why? Because if you, let's just say, let's use the NAR, you need $105,000 to buy a house in America. Well, if a single person makes 70 and their wage growth is 4%, it's going to take a while, right? However, when you have a dual household income, That explains why we have near 5 million total home sales and that we're a million off from a period in time where rates were lower and affordability was better. So always remember the dual household income factor. And, you know, just because Gen Z is coming into their first time homebuyer age, I even talked about that. It's a high percentage of Gen Z. Just the sheer demographics of that. That's why in the last decade, before you knew me because I was too much of a loser to be nominated for Housing Wire, rent, date, mate, get married, three and a half years after marriage, kids, dual household incomes, first time homebuyer millennials who were supposed to not have enough money or student loan debt and were the biggest homebuyers in America from like 2013 all the way on. Only when rates get above 7% did they lose that title just because of the sheer size of it. Demographics actually matter more. But that dual household income gives you that income power. That's how you have near 5 billion total home sales again this year. But affordability is getting a little bit better and better and better, right? And it just chips away time. Of course, if you're a baby boomer and you have like a million equity and you sell your house and you buy something with a 200,000 mortgage, it doesn't matter what rates are at eight, seven, or six, your total payment. Also, as you get older, your total wages, right? your peak prime age earning power is usually like 45 to 54, but we have people still working longer and their 54 to 65 income ranges is even good. So of course your total wages and your total incomes are higher when you get older. But again, that's just a buyer, that's Gen X or the move up buyers in this sense. So just kind of remember affordability works in multiple facets. So I know the headlines were home prices are all time highs and you know, but it has gotten better the last two years because price growth is slow. That's what we like to see. I'm biased, right? The only time I was really ever happy about home prices, I remember this at a conference in 2019 and I showed a chart and I was like, oh my God, real home prices are negative. I am so happy. And people were like looking at me like I had two devils on my shoulders. Like, what does that mean? I said, no, price growth slowing down is a positive. It's just really rare to get nominal home prices, but slower price growth, wages go, households form, there you go. So it is better. Of course, COVID, unhealthy, very unhealthy, savagely unhealthy. Why? We had more home sales, but the price we had to pay for that was just too much. The agents winning today aren't necessarily the ones spending the most on ads. They're the ones staying top of mind. Estate agent growth helps busy agents consistently show up online with a dedicated team that handles strategy, production, editing, and distribution. It's why top producers like Glenda Baker, James Harris, and the Hudson Advisory Team trust estate agent growth. Book a free consultation at estateagentgrowth.co forward slash HW. That's estateagentgrowth.co forward slash HW. I really feel like when you think about household formation, you're always talking about the demographics of housing, the people's ages, but also when they do get married, when they do start a household. And I feel like COVID slowed that down for many people, right? Through some people right off the track. And so it's like, you know, we need to focus on those getting people. We need a love island for housing. That's what we need. Match people up based on do you want to buy a house What kind of house do you want Let just go from there You know let start there and jumpstart the housing It funny you should say that because you know there these articles that you know like half the people under 30 are living at home Same kind of stuff that you saw in the last decade And kind of remember that we go to school longer, we start our careers a little bit longer, but we also get married longer. So I have this marriage chart going back to the 1950s and 60s, all the way up to 2018. And you could see the shift curve of people just getting married older and older. Of course, there's the World War II generation, people got married much younger. And it just, it takes longer. I mean, the whole years 2020 to 2024 thing that I talked about all the way, God, back in like 2012, 2013, that household formation has to work itself, but people get married later. So the ages 32 to 35 are really your first time home buyers. So ages 28 to 35 will be your biggest demographic patch, but that's years 2020 to 2024, right? So you could see that on the demographic. So people do things a little bit later. They still are normal people. They buy homes, you know, and nothing abnormal, but affordability got really, really bad in a period of time where qualified mortgage makes you, you've got to be legit now, right? There's no more fluff anymore. This is not like the 2002 to 2005 housing market where anybody can get credit. You are legit. So things move slowly. But overall the year, considering everything that's happened, it's a positive because inventory is up, right? We're not quite back to normal, but we're at a level to where I've always talked about, I've written about for years. As long as the NAR inventory data is 1.52 to 1.93. You have over four months supply. My low inventory discussion goes out the door. It does not exist in my mind. There's enough supply to keep the supply and demand equilibrium working. People will tell me, oh my God, there's no homes to buy. And I go, homie, we had 2 million more existing home sales when inventory is at all time lows. So the functionality of housing is much different than it was decades before. We closed transactions faster. We do things much faster now than we did in previous decades. So don't put all your eggs into the no homes can't buy. Sellers or buyers buy a home to get it, things move faster and we go with that. Okay. What else is going on this week that you're paying attention to? Well, there's something called the Iran conflict that's still going on. You know, what's interesting today, that 460 level that we talked about in the last podcast, it held again. Considering how many missiles that we've shot and things that we've blown up for oil, Last time I checked was 72. So it's much different than what we have seen the previous time. So to me, again, oil traders just don't buy into this. And this was a very good test. We had back-to-back bombings. We had Trump say we're no longer wanting to deal with them. I think what people might misunderstand is that some people believe Iran doesn't have the leverage it thinks. And they're just trying to nick and pick. And they're not serious about maybe taking this to the next level. They always threaten, well, we're going to block the other avenue for ships and everything. But so far, we haven't gotten to that next stage, nor can the US actually start a war without Congress reauthorizing the conflict and getting money for it. So that might explain why oil did not really take off. We talked about it. I thought 67 would be the low. Didn't quite test that level, but we got a little bounce. That's nothing. There was no firings or shooting, oil getting back up to 74, 75 would be perfectly normal. Nobody would think anything of it. But it is interesting how the 10-year yield did get to 460. It's bounced off that level. Last time I checked, it was like 453, 454. But oil prices are down a little bit. And a lot. This is 24. This was a 24 Wednesday night, Tuesday night, and most likely Thursday, we might get another. But that's been very interesting for me to see out there. And of course, when yields go down, rates get a little bit better. But it's been a very fascinating week with the conflict and how traders are looking at this whole process. Of course, the 10-year yield is elevated compared to where oil prices were. Before oil prices took off, the 10-year yield was much lower again, and we've covered this so much. It's really Fed policy has shifted. I can't wait for the July Fed meeting, Sarah, because I think it's going to be very interesting on many fronts, especially how the communication will go. It is going to be fascinating. And of course, we are recording this on Thursday morning. It'll be heard on Friday. And as we always say, what is it? Weekends are for war. It wasn't last weekend, but it seems like this weekend might go back to that norm. You never know. Who knows? We'll take it one day at a time. We will. Thank you so much, Logan. Appreciate you. 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 or leave a comment. We'll see you back here on Monday for more news and insight. How do you get employees to actually use AI? How do you implement it in a regulated environment? How do you measure success? Join us at the Housing Wire AI Summit on August 11th in Dallas, Texas for the answers to those questions and much more with real operators sharing real strategies. Walk out with your roadmap. What to implement in 60 days? How to scale in 90 days? understand how AI will push your business forward over the next year. The HousingWire AI Summit, August 11th in Dallas, Texas. Learn more at HousingWireAISummit.com.
