On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the jobs report and how it’s affecting mortgage rates. The two also discuss how the Fed is reacting.
Related to this episode:
Mortgage rates remain high due to labor market resilience | HousingWire
https://www.housingwire.com/articles/mortgage-rates-remain-high-due-to-labor-market-resilience/
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 remain high due to labor market resilience | HousingWire
https://www.housingwire.com/articles/mortgage-rates-remain-high-due-to-labor-market-resilience/
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 the
00:11jobs report and how the Fed reacted, as well as mortgage rates. Logan, welcome back to
00:16the podcast on this Jobs Friday.
00:18What a wonderful day, a wonderful week. A lot has gone on. This has actually been one
00:23of the more informative weeks since we've done this podcast. A lot has gone on and it's
00:29Jobs Friday, of course, which means it's Jobs Week and we had Treasury, Trump, all
00:34this stuff happened this week. So it's a good day to review everything.
00:38It is. Okay. Give us the headline number and what you think it means.
00:43So hopefully by now we can, everyone listening to this podcast, now that we've had another
00:49wave of revisions, we could understand that there is no cabal out there about the labor
00:56data. Labor data gets revised, right? You get a business survey and then after a year
01:02you could actually get the tax information to see where the numbers are. And the numbers
01:07look pretty much in line to my forecast. So they look correct. A labor market has been
01:13getting softer really now for 18 months, but it's not breaking.
01:17So we had positive revisions to the recent months. We've had a negative revision adjustments.
01:24And even with the negative revision adjustments, we are 1000 above my 2024 forecast in terms
01:30of job growth. Wage growth still is probably a little bit too firm for the Fed. Manufacturing
01:37jobs still lost in 2024, grew a little bit in this last report. Government jobs were
01:44the big surprise in 2024. That's probably not going to happen in 2025.
01:49So labor data getting softer, not breaking. Private payrolls, you know, six months, still
01:55not under 108,000. That's kind of my key level for that sector. But same thing, softer, not
02:02breaking, which means for the Federal Reserve, they need the labor market breaking to really
02:09change or pivot in a bigger fashion than what people are looking for.
02:14So you know, that's the big question is like, what is the takeaway for the Federal Reserve?
02:19What is the takeaway for the bond market? So what happened after the report came out?
02:23So this is the interesting aspect. The 10-year yield shot up vertically. And then we had
02:29the Michigan Inflation Expectation Survey, which is absolutely useless. This is a pile
02:35of garbage. The survey is so garbage that it should be discounted because it's basically
02:43a political ideological view. We had such a surge in inflation expectation because every
02:49Democrat thinks that we're going to have massive inflation now. And then every Republican
02:52doesn't think we're going to have any inflation. We're not getting the inflation of the pandemic.
02:56I mean, we are sitting here. This is a good thing for everyone to remind themselves. We
03:02are sitting here in February of 2025. We have $36 trillion in debt. We had a global pandemic.
03:09We have everybody screaming tariffs, inflation, everything. Literally, the PCE inflation data
03:14has a two-handle on three, six, 12 months, right? This obsession of breakaway inflation
03:22that needs a lot of things for it to happen like in the late 70s, it's just not a thing.
03:29A growing economy has inflation. This is why the stock market always rise. Growing economy,
03:34profits rise, prices go up. That's how it's been done since the Peloponnesian War, Sarah.
03:38We've showed you the charts on this as well. But in this context, the inflation expectation
03:45data, if it was taken at face value, the Fed would have to raise rates Monday.
03:51Wow, really?
03:53Yeah. That survey, if you took it at face value, is a huge expectations from Democrats
04:00on inflation. And then the other side is just as incorrect. There's no inflation coming
04:06from Republicans doing the survey. So it's absolutely useless. I am hoping that I might
04:13give the Fed too much credit that they kind of look past this, right? If this was a normal
04:18situation, then it would be a big deal.
04:21Ten-year yield spiked up vertically after the labor report. It hasn't moved too much.
04:27Mortgage pricing, not that much, not that big of a damage. This is what we did that
04:31we do mortgage rate updates early in the morning after we take in all the economic data and
04:36how it's digested. And what I talked about this morning was that the ten-year yield's
04:40up, but the pricing shouldn't be that bad because whenever yields have gone up in any
04:45kind of aggressive form, the spreads get better. So we had a very minimal, minimal increase
04:51in mortgage rates today. And again, that's the story really since 2024. The spreads are
04:56still getting better. They're improving. They're limiting the damage on the upside. That was
05:03a big story in 2023 that I still think it never got enough attention. The spreads were
05:07getting better in 2023 than the Silicon Valley banking crisis through everything. The whole
05:11year was just shot on that. Would not have had 8% mortgage rates if that didn't occur.
05:16So spreads being good today, I think everyone could see it on the pricing side. So that
05:21was the bond market mortgage rate reaction.
05:24So this is always the conundrum for me when we get these labor data. It's not like we
05:29want to see people losing their jobs. It's not like, oh, but yeah, it's like a great
05:34booming economy, all that growth. It's just not good for mortgage rates. And that's not
05:38good for our industry, you know?
05:40I wrote for HousingWire. You know what's funny, Sarah? That was because the trade war tap
05:45dance was ending.
05:46When was that?
05:47I think I wrote it late 2019. We published it in 2020. But I was talking about, listen,
05:54the trade war tap dance is ending. The economic data is actually getting better. Nobody's
05:58paying attention to it. But that actually would not be beneficial for rates because
06:03yields had a one-hand. We had a one-handle on a 10-year yield.
06:07Oddly enough, we never broke above my key level back then at 1.94%. So a better economy
06:14and if the Fed is still trying to balance the economy, then 6% mortgage rates might
06:20be a problem.
06:21Oddly enough, Neil Kashkari came out today and talked about, well, we might need rates
06:25lower in the second half of the year.
06:28Lori Logan, Fed President Logan, yesterday said, well, if the inflation gets down to
06:342%, we still might not cut rates, right? Again, everything, labor. Now we get to see it. It's
06:402025.
06:41Yep.
06:42It's one of these things where if the growth rate of inflation was the main driver, mortgage
06:49rates would easily be 6% around there, even under that. But that's not what they're removing
06:55on. They keep on hiding behind the labor market because they want to stay as tight as possible
07:02until they – oh, they cut rates because they thought the labor market was breaking,
07:06so they want to get ahead of it. Now they're like, oh, okay, we can take our time.
07:10So this is actually consistent with the mindset. After the Fed – see, if we could just go
07:16back in time, Sarah, whoever spiked the Fed's eggnog, we take that person out, right? We
07:21wouldn't let that happen. And then everything – they would have never raised rates after
07:254%, right? We would actually – the curve would have been much different. Again, 70%
07:30of the 10-year yield and mortgage rates really were wrong for a Fed policy. Think of it in
07:34that light. It would be a little bit easier to understand.
07:37So but that's – this is the world we live in. We just have to deal with it as best as
07:42we can. But where Fed policy is, economics still growing at 3%, the 10-year yield being
07:48at 450 is pretty reasonable.
07:52Remind me again, it's $323,000 on the – what is the – is that jobless claims and you
07:58think that's what would move the Fed?
08:00So this goes into the 2020 recession thesis that I think everybody was – everybody was
08:06all in on home prices crashing and the recession happening. And the early labor triggers weren't
08:12there. So I said, don't go into the recession talk until jobless claims get to $323,000
08:17on the 4-week moving average. We're at $217,000 right now. So it's got to head that way.
08:25And then the bond market will get well ahead of the Fed, but we're just not there, right?
08:29The labor dynamics, the demographics, the structural things are much different now than
08:32what we saw after 2008. So this is why job openings are still elevated.
08:37The job openings data this week, again, a bigger miss on the headline, still same story,
08:43but not breaking. We're just trying to get the Fed to like, you don't need to have,
08:49you know, too drastic of a policy. You don't need to wait until the labor market breaks
08:53because again, the key to everything and for those of you that read the article, you could
08:57see the residential construction workers. That's the key to economic cycles. Manufacturing
09:01jobs already lost. We're a consumption-based economy. So policy getting too tight eventually
09:06infiltrates the labor data. We're just not there yet. So we're hoping we avoid that,
09:11right? Because we don't want people losing jobs, families losing jobs, children have
09:16parents that don't have work. Not a good thing. Not a good thing.
09:20We have some crazy stock trader men who sit there and go, we're in a recession because
09:25we have to cleanse the excess capital. Sari, can you feel my vibe versus stock traders?
09:33Can you just, like, Lord have mercy. For a bunch of people for 14 years got the US economy
09:40just absolutely abolish them. And this is why we focus on economics, macroeconomic cycles.
09:48Be careful of middle-aged men, podcast stock traders.
09:51No, I totally get your vibe on that one. Okay. Let's talk about like, what does this mean
09:56for the spring housing market? Let's talk about what the tracker is showing you and
10:01what you're looking for. You know, that tracker always includes 10-year yield, mortgage rates.
10:07It looks at what the home prices is doing, home price reductions.
10:13So Mike Simonson and myself were a little bit different in our forecast this year. I
10:17had lower price growth based on the equilibrium models of, I don't believe in the mortgage
10:23rate lockdown. I believe inventory can grow. And if inventory grows and rates stay elevated,
10:29price growth, which is a positive for me. This is all a positive. And in that context,
10:35what we're seeing is that the price cut percentages are curving a little bit higher earlier, you
10:41know, which to me is perfectly fine. That's what I want to see. I want to see a more balanced
10:45housing market. What you never wanted to see is what we saw during COVID, escalating home
10:50prices. You know, even in 2023, home prices still stayed a little bit too high considering
10:57it was, you know, one of the weakest home sales. I would argue probably the weakest
11:02home sale year ever adjusting to the workforce. But now we get a little bit more balancing.
11:07We get new listings data growing. We get more sellers. You get a functioning housing market.
11:11My understanding just from what I visually see out there is not a lot of people have
11:15tracked economic housing cycles. So it's odd to them to see inventory increase and
11:21home prices not be falling on a national basis. It's actually very common to have sales and
11:27inventory data grow. It's very uncommon for national home prices to fall, right? So there's
11:31going to be, we're working our way back to something normal. So I'm keeping an eye on
11:37that. It's February. I'm hoping by this time we're starting to get, I don't want the seasonal
11:42bottom to happen in March or April. It shouldn't be happening yet. It's too late. It should
11:46be happening around now. And then we see the season and it becomes a housing market, which
11:50really isn't that, it's not supposed to be that exciting, really. It's just demographics
11:54and affordability. We just have some people that took advantage of 2008 and are still
12:00like, oh, Sarah, we got to teach everyone this lesson. One of the doomers, this person
12:05literally took a San Diego inventory. Literally this person cut off the left axis of all the
12:11charts with, it looks like an eraser. It looks like a child, looks like a four-year-old child
12:15took an eraser and cut off all the data to the left side. And then says, oh, inventory
12:21is really picking up, stops the inventory data right at June and July of 2024. It's
12:26six months old where any functioning person who has the internet could just go up to the
12:31Fred chart and take it and go, oh, it's updated. It looks a lot different now. These people
12:36are a plague, right? They're an abomination to data that they should have no business
12:41talking about economics. And I was like, okay, so I'll debate you right now, but you're going
12:44to give me your price forecast. Give it to me right now for 2025. Oh, well, listen, listen,
12:51I'm going to give you my 2024 and 2025. You could do the same. It takes like five seconds.
12:56Click, click, zip. Y'all don't want any. I think here's the thing. I was in San Diego
13:02last weekend. I'd stay there through the week for part of the week for Optimal Blue.
13:08And I'm just telling you, my daughter and I were looking up houses as I do everywhere I
13:12travel somewhere. I'm like, what do houses look like? What could you buy something for?
13:17Listen, San Diego needs all the inventory they can possibly get. If they were getting
13:21more inventory, good for them, because it is still wildly unaffordable in San Diego.
13:27So one of the stories that I like to talk about on the Duratory is Mike Simonson,
13:33president of Altos Research, right? We have the Altos data. People always say like,
13:39what were you guys thinking in 2007 and 2008? Literally, Mike Simonson went up to Lehman
13:44Brothers at an event and said, hey, listen, I've started this company. This is how we track data.
13:48We think it's more prolific and everything. Lehman Brothers said, I've got 85 analysts.
13:53Stock traders again, Sarah. Stock traders, Wall Street, arrogant men. I got 85 analysts.
14:01I know what we're doing. Okay. Oh, Goldman Sachs is there. I'm going to go walk over there.
14:06Goldman, homie. Hey, listen, I got this data. Goldman, on the other hand, said,
14:12whoa. Oh, this doesn't look good. All right. Goldman Sachs shorts the housing market,
14:18makes $10 billion. Lehman Brothers go out of business. We believe we are the most prolific
14:24housing data trackers on planet Earth. We are not shy about it either, Sarah.
14:28When stress happens, we'll see it in the new listings data. We'll see in the price. We'll see
14:32this because we saw there was only one period in US history post-World War II where we saw
14:37national home prices crash. And the data was very transparent there. So if something happens,
14:43those that read the tracker every single week, it will be the way ahead. We'll be the ones to tell
14:47you. And then you have the knowledge. You could tell Uncle Dave, right? Everyone's got Uncle Dave
14:51in their family. By the way, there's seven people that I've met that actually have an Uncle Dave
14:55that does this. I have an Uncle Dave.
14:57Yeah. But does your Uncle Dave tell you, oh, prices are going to crash in 2008. You kids
15:01are crazy to buy a house. You should rest for 40 years. Then baby boomers are going to die.
15:07It's like, in any case, do you think people either go there and go, well, if we wait 37 years,
15:13there's going to be a lot of inventory because people know. People live their lives daily all
15:18the time, right? That's just how the world works. You don't just basically stop there.
15:22Are there men out there that fall prey to the YouTube people? Yes, of course. I actually like,
15:28so far I've liked what I've seen in the tracker data. We just want to see it kind of grow because
15:33at some point mortgage rates come down to 6%. We have more choices, right? It was not
15:39comfortable in 2020, 2021, 2022. Of course, that was a savagely unhealthy housing market, 2023.
15:45Okay. Not good, but now it's like starting to look normal again and that's a good thing,
15:52right? Of course, there's insurance issues, taxes issues, Texas and Florida, all that.
15:58We get that, but as a general country, it's very, very hard. Now that we're here in 2025,
16:04which I was not supposed to be talking about economics, I was supposed to be done.
16:08The NAR's inventory data is 1.15 million. We're not even at 1.2 million. We were told 26 to 32
16:15million active listings because of the silver tsunami. We're not even at 1.2. This is after
16:21the third calendar year of the lowest home sales. It's different. Credit channels run inventory
16:26channels. We did that podcast last year. It was very popular. We're trying to explain what's so
16:30different about now than the previous decades. The credit markets are different and people are
16:35staying on their homes longer. This is how economics is supposed to talk. I know it's not
16:39the most exciting thing in the world, but I'm trying to make it as fun for everybody as possible,
16:44right? I was just at the servicing conference and they brought out the latest delinquency numbers,
16:51which are up off very historic lows. But they were telling people, they're like,
16:56but if you look at it, it's still a very small number. It's still a very small percentage.
17:01And they were very upfront about that. But what I think that you mentioned that we have to watch
17:07out for is insurance because insurance prices have gotten so mad. We have the freshest data.
17:13So if we see stress from insurance, which the Western part of Florida would be it,
17:19you know, the real estate investors and the Wall Street firms that actually use our data lines,
17:23that's kind of what they look for is that you'll see the new listings data pickup out there. Also,
17:30the theory that people are just hunkering in their houses and doing what they can because
17:35can't sell your house to, you know, cause you can't get a mortgage.
17:39Condos are more prevalent to get hit in that kind of marketplace. So again, it's an issue, but
17:45as general as the economy goes, we're still not back to normal. I was hoping we, I was
17:51really hoping we'd get back to 2019 inventory levels before 2025. But
17:57depending on the time of the month, we only had 10 states that got back in there. And remember
18:012019 inventory levels for everyone listening was the five decade low before COVID. This is why I
18:08said, you know, it was like, oh boy, inventory just crashed. This is not a good thing in 2020.
18:14Like that was the reason we were already on the razor's edge on the active inventory. We have a
18:18lot more people now, right? This is why those, we do those crayon. Crayon economics is designed to
18:24not do technical levels. By the way, for those bond traders that troll me on Twitter,
18:30your technical levels thinking on housing charts are useless. It's just a crayon direction to show
18:37you a trend, not technical levels. We're not going to have a liquidity crisis when X is broken.
18:44We're just here to show what happened and why this time in history. Remember, this is a very,
18:49this is like, we've got five decades of information. This is a historic event,
18:54but we could try to explain it because people buy a home, Sarah, to live in, to raise your children,
19:01to go to work, to have sex, to have friends over, to watch the Superbowl. By the way, you know what?
19:07You're a Chiefs fan. I'm a Niner fan. I actually, last week, I actually went back and watched the
19:12Superbowl last year. I did it. I did it like my old high school basketball coach. I looked at all
19:20the plays and everything. I counted 27 plays that the Niners screwed up on. The punt fumble was
19:28terrible, but man, a lot of blocking misses. Tough, man, tough. So like Christian McCaffrey
19:34says, I hope both team loses this weekend, right? And just let's get the draft going. Let's start
19:41it up again next year. You know, I mean, you tortured yourself by watching that. Oh, that
19:47was so sad last year, but I mean, I wasn't that sad because the Chiefs won. So, you know.
19:51Never look away. Blood stays on the blade. Gangs of New York.
19:56Gangs of New York. All right. Well, we are almost out of time. Thank you so much, Logan, for being
20:01on today and everybody. By the time this comes out, you can find the tracker. We publish it every
20:06Saturday and it has all this information and more. I encourage everyone go look at the labor
20:12article and you could finally see the formats of my labor recovery model, which is, again,
20:19a lot of people were thinking labor data is fake. The jobs. Listen, if jobs were crashing,
20:25jobless claims would be rising. That's how economic cycles work. Okay. So I realize some
20:31of you have been told for two years that the economy was terrible and we're going into recession.
20:35And I understand everyone being in the mortgage and real estate industry,
20:39that's what you want to hear because you're hoping that rates go lower off of it.
20:43That was not correct. So if you want to keep on listening to that person, that's fine.
20:48But if you are trying to tell your clients or anything, mortgage rates are going to come here.
20:52Listen, ebbs and flows with a 10-year yield, right? We do charts, right? We do channels.
20:58Rates can go down and up. But if you're going into the sub 6% mortgage market world, you really need
21:03the labor data to break. And we're sitting here in February of 2025. Mortgage rates just a tad
21:10of over 7% because the labor market hasn't broken yet. If it did, the bond market, trust me, would
21:15so go ahead of the Federal Reserve. They are so ready to go. But where Fed policy is, where growth
21:21is, inflation, the 10-year yield at 450 makes sense. We are hoping for those lower rates as
21:27we head into spring. Hope we see them. Logan, thanks for being on again. And we will talk
21:31again soon. Pleasure.