Logan Mohtashami on how tariffs are driving mortgage rates lower

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the jobs report and how that data is impacting mortgage rates while the markets are still digesting very significant tariffs.   Related to this episode:   Trump’s tariffs, not jobs, are driving mortgage rates lower this week | HousingWire  https://www.housingwire.com/articles/trumps-tariffs-not-jobs-are-driving-mortgage-rates-lower-this-week/    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.

Transcript

00:00Welcome, everyone. My guest today is lead analyst, Logan Motoshami, to talk about the

00:10jobs report and how that data is impacting mortgage rates, even while the markets are

00:15still digesting very significant tariffs. Logan, welcome back to the podcast.

00:20We're saying it again. Wow, wow, wow. What a week. I mean, this really escalated out

00:31of hand pretty quickly.

00:33Yeah, so we are recording this on-

00:35Sarah, you know what's funny? That's from Anchorman. And usually the next line is like,

00:41he was telling one of the characters, man, you had a grenade in your hand and a bunch

00:45of anchors got in a fight and all the anchors from all the other networks came and people

00:49were throwing tridents and nets and blowing people up. And that's kind of this week.

00:57So for everyone listening and watching, think of Anchorman and the fight scene. And that's

01:03the last few days since the tariff were announced. And it does look like my kind of assumption

01:12that when I saw the first tariff thing, I just laughed like, what's that? And then it

01:16looks like all the kind of the main people that Trump brought in to design kind of tariffs

01:23and percentage, he threw them all out and he said, Peter Navarro, he's got a bunch of

01:26numbers and they went with it, you know, kind of at that stance. And that's why it was aggressive.

01:30And now, now, Peter Navarro from UC Irvine. I live in Irvine. So now it makes sense to

01:37me. Now that whole thing makes sense to me more now. And here we are. It's Friday morning.

01:43The 10-year yield, guys, like I keep on like, you know, every 20 minutes I check in like

01:483.47 a.m. The 10-year yield took another dive lower. China did their retaliation. Everyone

01:55kind of knows that's happening. And then stock markets are selling off. We are talking about

01:58Friday morning. This is a few hours after the jobs report. Lord knows that something

02:03can change within 10 minutes after I talk right now. So who knows by the time this podcast

02:08comes out Monday. But we clearly have a set of variables that we know and the actions

02:15that occurred this week and time to move on forward with the next chapter of this book.

02:21No, this has been a very just a wild week. But but even just today. So like you said,

02:27it's Friday morning. And the crazy thing is the jobs data came out. And yes, we're seeing,

02:34you know, the 10-year go down, but we haven't seen mortgage rates go that low. Considering

02:40we did have the year to date lows on Friday morning. However, the spreads are getting

02:45worse. And if if the 10-year yield slowly moved down, let's say, OK, so let's go with

02:52my 2025 forecast. The 10-year yield peak was 470 in the forecast. The bottom range is 380.

02:58And let's just assume things were calm and slowly the 10-year yield moved down. And,

03:03you know, the economy was just, you know, moving in the same direction. The Fed did

03:06some rate cuts. We could have had the 10-year yield go down, mortgage rates go down and

03:11spreads kind of get a little bit better here. Just the last whatever, 72 hours, all hell

03:18broke loose. That was a waterfall dive. And whenever you get that kind of action, the

03:22spreads typically get worse. So even though mortgage rates are at the year to date lows,

03:27the spread has actually been bad during this period of time as well.

03:31I think it's crazy because when we were on the podcast yesterday, because we do a Thursday

03:36Friday back to back, you know, you said, you know, labor looks right to you. Labor looks

03:41about right to you. And and you didn't think that, you know, like everything, anything

03:45could happen. But actually, I mean, the the jobs report, it beat.

03:52There was no tariffs this week announced the 10-year yield is four point three five percent

03:56or maybe even higher. Jobs week itself, job openings data. Fine. I mean, the labor market's

04:04getting softer. We could see that. But even with all the headlines and the concerns of

04:08what's going to happen, still, OK, ADP report, we don't really care about that. But that

04:13did beat estimates. Jobless claims ticked down. The continuing claims factor is picking

04:18up there. So naturally, it's a softer market in that sense. Not breaking, though. And here's

04:23jobs Friday beat estimates. We did have negative revisions. This is probably going to get revised

04:29lower out in the future, but still intact. And if I'm a labor overinflation, labor market

04:36has to break kind of person. This is not breaking data. But it also to me, at least this is

04:42my assumption, emboldens President Trump to really go aggressive because he has he has

04:47a little bit of time before the labor data, because you can't do this if the labor data

04:54was breaking and the 10-year yield was higher. And you're just you're you're pushing yourself.

05:00So we will see what will be announced over the weekend, next Monday, over the next two

05:07weeks, 30 days. But the only reason bond yields fell, the only reason this is a tariff thing.

05:16This is this week. The economic data was fine on the labor side. There's a series of

05:20other data lines that are getting weaker. Right. Retail sales, new orders, ISM. There's

05:24a bunch of other things that have been getting weaker. The GDP numbers, even you make the

05:28gold adjustments and trade adjustments still negative. But the labor data I thought is

05:33holding in the tariff thing just blew it. Right. Because remember, 65 to 75 percent

05:38of where the 10-year yields can range and more is still Fed policy. And and Jerome Powell

05:42even talked today and kind of said, listen, this is a little bit maybe more than we expected

05:47on tariffs. And we're going to wait and see what the implications are. We are modestly

05:52restrictive right now. So if anything happens, we'll act. But this is not a labor story for

05:57this week. There are other economic data data lines that are getting softer and it warranted

06:02yields to go down off of it. But it's not because we're losing jobs or anything like

06:09that in a bigger fashion. The unemployment rate did tick up. Big theme of our work this

06:14year is that if everything stays constant, the unemployment rate will tick up. So that

06:19that has legs to keep on going higher. So we just have to literally take this every

06:24I mean, I have to say that every second because you don't know what's going to get announced.

06:29And I'm saying this Friday morning. By Monday, when this podcast comes out, it seems like

06:35three eternity as a life can happen during that time frame.

06:39OK, let's talk about within the jobs report itself. You're always looking at the the construction

06:45workers data, especially single family residential construction workers. What what did this say?

06:51Slight growth. Right. It was it wasn't anything spectacular. But the construction data itself

06:57now there's construction workers and then there's a residential side of that data line.

07:03But construction workers grew. Residential constructors grew slightly. So that traditionally

07:08falls like we see a noticeable decline. Then the recession happens. So this is why I'm

07:14keeping an eye on that. But again, it's not about the labor data this week. There is just

07:20about the the economy. And also today, not shocking. Trump went after Powell. That needs

07:28to cut rates. Fed always cuts rates very, very late. They're always late. Sarah, they're

07:35always old and slow. So in any case, regarding this, I think it just becomes a little bit

07:43more tricky for the Fed. Like, what are they going to do if they're going to sit back and

07:49wait? But I think just like Trump has a little bit of time wiggle room to try to get deals

07:55done. Powell has a little bit of time to hold back and see what happens. And he doesn't

08:01want to go full. I mean, the two year yield was just collapsing with a three and a half.

08:06That means, you know, markets almost pricing for rate cuts now. And we see this every every

08:11year. There's always a growth. This is a little bit different. Right. This is a huge Titanic

08:16shift, a policy change. So you be careful because literally President Trump could say one thing.

08:26The 10 year yield could go straight up. Stock market could rebound. Right. And it could be

08:31very sharp and fast. So everyone kind of be mindful of that. You have to be aware of everything.

08:38And if you need someone 24 seven, who's your chart daddy nerd, follow me on Instagram because

08:44we just track this stuff religiously and literally we try to keep people posted. But

08:50this is a very, very violent time. And as we did when the 10 year yield was at five percent and

08:55we're staying up at two o'clock in the morning doing 10 year yield charts, you know, while

08:59everybody's probably having fun here, it's such a violent move to the downside that any kind of

09:07news can flip this very quickly. So be mindful of that. Those who are in the mortgage and real estate

09:13industry that this kind of volatility is not normal. And if the economic data doesn't get

09:20weaker or or whatever, whatever is creating this, which we know is the headlines around tariffs and

09:25the tariff policy itself, if if that changes, yields can go up because the labor data didn't

09:31necessarily break this week, which is crazy to me because, you know, everyone would feel like

09:37I felt like, you know, if the stock market is going down so much, we've got 10 year yields

09:41going down so much. Surely this means way lower mortgage rates, you know, and you mean it is.

09:47I mean, we we have we have lower we have the lowest mortgage rates of the year.

09:52It's just the spreads did not. I mean, I would tell you this. If we had the good spread curve,

09:59you're probably looking at 15 basis points lower. So it isn't like mortgage rates haven't gone low.

10:05I think I think the thing is, people think if you're going into recession,

10:10the 10 year yield should be right at that Gandalf line. And I understand that. Right.

10:15That's why we held the Gandalf line. For those who don't understand it in 2023, when

10:19the Silicon Valley banking crisis happened, Federal Reserve got in. Everybody thought we

10:23were going to recession because the banking crisis, they cleaned up everything. Now,

10:27what we're seeing is people are starting to worry about credit. So this is a little quick

10:31mini introduction into credit credit cycles. If if corporates don't get debt, if IPOs get

10:38pulled back, people don't want to invest. You can't do any secondary to raise money for your

10:44company. That is not a good sign for the economy. So people now for the first time in a while are

10:49starting to worry about this. This is all the headlines and everything. This is what drama

10:53happens. And we always say itchy fingers, right? Bond traders, middle aged men, podcast stock

10:58traders, right? The itchy fingers. So this is why this is not normal action right now.

11:04You know, with this jobs week now, now we're done with jobs week. We've gotten all of that

11:09data. Is there anything coming up next that could could make this go lower or higher?

11:15Usually after jobs week, it's inflation week, you know, so we have CPI inflation and PPI

11:21inflation and, you know, oil prices fell. It broke. It broke its Gandalf line for the first

11:28time. You know, it's chaos, Sarah. It is absolute chaos. And it's hard to try to entangle

11:36monthly data into something that's happened within hours. Right. Or the implications of it going out

11:42because this thing just happened. So we have inflation week, but inflation week is data from

11:49last month, you know, and all we know is that the tracker chart daddy's housing wire tracker

11:58has shown that the one sector that's actually done good purchase application data. I'm not

12:04talking about existing home sales booming or anything, but it has been positive. It has a

12:09much lower bar than the new home sales market. Right. The new home sales market is still at

12:13twenty nineteen levels. It's got supply and profit margin issues. But here, actually,

12:18one thing that I got wrong, we had talked about like what how much how much does how much do the

12:24builders import percentage wise that goes into a home? I thought it was like nine to 11 percent.

12:30It wasn't even that it was seven percent. The builders came out. So seven percent of what the

12:33builders put into a house gets imported. So a little bit of context. So when they say that

12:40the cure for tariffs is lower rates, the builders, you know, in the sense mortgage rates going lower,

12:47more demand. That explains what happened during covid. Right. We had a what? Sixteen,

12:52seventeen hundred dollar lumber prices. Right. But mortgage rates are lower. So if you're

12:56trying to see why Trump and the White House and Bassett and everybody wants lower rates,

13:00if there's one thing that can mitigate some all this headline, it would be that. But again,

13:05that's just the real estate sector out there. There's there's other aspects of the economy.

13:10So you've been talking all along about how, you know, if you wanted to do, you know,

13:16these big tariffs, you would just put them in. It would it would there would be no negotiation. So

13:21we've already seen, I think, Vietnam make a deal. Right. So what's going to move the needle? What

13:28could what can move the needle for home builders right now? I mean, here's here's the thing. It's

13:35if you're talking about housing rates, override everything. If you're talking about the the

13:41the trade war, if you start to get a few countries doing deals. OK, that at least shows you there's

13:50a pathway. Canada and Mexico are big partners. Right. So the builders, as you can imagine,

13:58are probably not happy with with, you know, costs, but quietly. And this is why the builders

14:05next survey, I want to keep an eye on this last builder survey. Everything fell except the

14:10forward looking builder survey. Six months out, the sales thing stopped declining.

14:16So if that actually picks up in the next month report because rates have gone lower,

14:23builders feel a little bit more confident. Right. Housing is one of these things that,

14:28again, simple answer is it revolves around the 10 year yield. So we've had a noticeable drop

14:33in the 10 year yield. We're almost we're like seven basis points away from my forecast low.

14:38That's how crazy it's been the first three months. But here, I think I think the builders would just

14:45love lower rates. I think they could handle maybe some of the tariff costs. But I just think

14:49everything is just people just don't know. They're confused. They don't know what the

14:53rules are. Is this going to be it? Are they going to do deal? So until you get clarity and if I'm

14:59wrong, then Trump just sticks here and has these tariffs and we never negotiate anything. But

15:04I'm assuming the way he did it now that I think now that I know that Peter Navarro did this and

15:09it all makes sense now how chaotic this was, a little bit more hopeful that you get a little

15:16bit more clarity on this going out in the future. I know a lot of people out there are saying,

15:19you know, this is this is it. This is going to be the change. I think. Let me tell you something.

15:24Politics. Oh, my. Y'all don't know how powerful that is. We've got Republicans in California and

15:33New York doing salt increases, which helps homeowners. Why? Because the Republicans have

15:38a little bit more leverage now because of the house seats or not that they don't have too many

15:43house seats they could lose. But eventually what we saw is like the Senate actually stopped,

15:49you know, the tariffs from Canada. But the House didn't. There there are there are points of pain

15:57points to where you could see maybe Republicans drop off and then try to regulate Trump. But

16:04here we are. It's just a few days and you can see the chaos that happened. And for those that

16:08don't remember, in twenty eighteen and nineteen, this was kind of the case. It was much smaller

16:14tariffs back then. The Fed funds rate was lower. The growth rate of inflation wasn't breaking out.

16:20It was actually heading lower. So interesting times. We are just interesting times.

16:27In twenty eighteen, nineteen, penguins were safe. No penguins were being taxed.

16:31Yeah. No penguins had tariffs being levied on them. I think you hit on something here when

16:37you talked about volatility, because a lot of the stories that I read this morning in the in

16:41the mainstream press were about the fact that people kind of said, OK, on April 2nd, we'll get

16:46some clarity on April 2nd. We'll all know and kind of like, OK, well, we can go from there. And kind

16:51of what you said earlier this week, we're like, if it was just the 10 percent, if that that very

16:56first level that he did, it was like, oh, OK, I mean, you know, it has its things or whatever,

17:01but it didn't stop there. And I think that's what has surprised people, is that there was that whole

17:06extra level. Again, when the when the when the 10 percent tariff numbers came out, bond yields

17:13went up, stocks went up. OK, that's your cue for the market saying, OK, this is something,

17:18whatever it is, we could work with it. When they brought out the Godzilla tariffs,

17:24everyone's like, oh, Nelly, goodbye. See you elevator. Drop it down. So

17:30the markets are the markets, man. You know, this is this is just a way that you cannot,

17:36you know, try to control this thing. There's way too much money, way too many different

17:41players. And you can see what happened this week on Thursday and Friday. Again,

17:47what we know already is that this can change. Right. You know, one or two sentences and

17:55things can move. So I caution everybody. This is not normal periods of times. You know,

18:00if the economy was crashing and jobless claims are up and, you know, unemployment rates are

18:06going up, it's the the 10 year yield has room to go lower. But here it wasn't the labor data.

18:11We have other softer economic data. This is tariff. So be careful out there because

18:16something gets reset and it changes and you don't want to get caught off guard here.

18:21I think that's the the hard part, too, though, is because if, you know, the labor data doesn't

18:25change, you know, in a couple of days. Right. I mean, Powell's taking his approach. It's not

18:31going to be like, oh, in three days this could all change. I mean, if we're looking if we're

18:34waiting on the labor data, that's at least another month before we get any of that data.

18:38You I mean, you could you could see it through the jobless claims. But again, you know,

18:42we have one hundred sixty two million people working plus and four point two percent unemployment

18:49rate. The history of U.S. economics, people be like, oh, my God, that's awesome. All right.

18:55Jobless claims are low. Job openings are high. This that's that's that's a healthy market.

19:00It's just now we have other variables that people are looking at in the future. So

19:05I mean, there are I think Nintendo Switch delayed its release because of tariffs,

19:11you know. So, I mean, there's just things that. It's just going to be crazy. Right. And we're

19:17going to try to make sense of it all, but for housing, for everyone here, positive,

19:22right, positive story, because rates go lower and before rates broke that six point. I mean,

19:28we are now in the area where housing data actually has improved once I take the seasonality when

19:33we're under six point six four. And this is occurring after we've had the positive year

19:40already in purchase apps. Now, purchase apps are record low level still. It's nothing spectacular,

19:44but it's for the first time in many years. So it gets interesting for housing. I know a lot of

19:49people are like, what is oh my with the purchase apps were good, but with elevated rates now.

19:55So you can see, again, the game plan of trying to get the Fed to cut rates and lower mortgage rates.

20:01Right. Oil prices are down. So if you look at it in that concept, the two things they wanted

20:07to occur kind of happened. Right. Lower oil prices, lower mortgage rates. We'll see. We'll

20:13see how it goes. Very volatile on commodity prices. But and the dollar has come down.

20:19Sure. The Trump White House economic team is happy that the dollar is down. Dollar too strong. Not

20:25good for their playbook. We talked about that the day after Trump won. So interesting. Interesting.

20:32You try to play the guy and see what poker face he has or what poker words he has. And

20:41we will take the economic data one day at a time. When you're looking at playing the guy,

20:47I know you're talking about Trump there. But if you're looking at Powell,

20:50how do you I mean, the the the pressure is intense right now more than ever.

20:56I don't think Powell I think in some ways Powell goes, hey, man, this is you. This isn't us. We

21:04did our soft landing. We got the growth rate of inflation, even though it's not him. It's really

21:08pandemic disinflation. But we got it here. We were going here. You brought this in.

21:14So in some ways, I think Powell says, I got the Trump cover. Right. He's the one begging me to

21:20cut rates. He's the one who's doing the tariffs. So I think in some ways, Powell thinks, hey,

21:26listen, I can't control the guy. I'm just I just got to sit. The problem, what Powell might have

21:32is when jobless claims start to break, then that's different because that's part of their dual

21:36mandate. But for now, what he said this Friday, you know, talking about we are we are we are

21:41mindful. We're modestly restrictive right now. If we need to act, we will. But, you know, we want

21:47to anchor inflation. You know, these these things are not like, hey, I'm about to cut rates for you,

21:51homie. Let's go. But it's different now. And it's getting it's different than the twenty eighteen

21:57the twenty eighteen nineteen fight with the Fed. The growth rate of inflation was falling in twenty

22:02eighteen below target. It's we're not we're not having that now. So it's a much different time.

22:07You know, you brought up the Silicon Valley bank crisis in twenty twenty two,

22:12right? Twenty twenty two or twenty twenty three. It kind of started late twenty twenty two. But

22:17twenty twenty three is when all the action happened. OK, so and it was like, you know,

22:23we're we're talking on Friday night. You're writing things on Saturday and Sunday. And I'm

22:28like, that's just normal now. Now it's just normal that we have to do that. We have a lot of action.

22:33And just remember that it's very, very critical that the credit markets work. If the credit

22:38markets start breaking, that that's a that's a terrible negative sign. So far, credit has behaved

22:44very well, very well to people that are so surprised about it. But now the credit markets

22:49are showing some stress. So we'll see. I mean, who knows, Sarah, by the time we're end of this

22:53podcast and I go back on Twitter, hell, things might be different. But this is not normal.

22:59Everyone realized this is a very, very wild, volatile time. And people are just trying to

23:04make sense of what the real policy is going out in the future. Appreciate having you on. As always,

23:10I am going to be taking a break for the next couple of days. You're going to have another

23:13host here. So you should just have me do my own show. Come on. You should just have Logan unleashed

23:21by himself for three for one week. I don't get one week. I could imagine what I could be like

23:28when you're not here and not regulating me. I would be so much fun. I want everyone to

23:34email Sarah Wheeler at Sarah at HW Media dot com and say, give Logan at least, you know,

23:42a few episodes where you're on vacation, where he could just be himself.

23:47Oh, my gosh. No, that's you on Twitter. If you want that, you are already there on Twitter and

23:51Instagram. And and yeah, no, we're not doing that. No, I appreciate you so much. Thanks for giving us

23:56the latest, because things are crazy. And it's really nice to know someone's watching it so

24:00closely and giving everybody the information that, you know, as much as anybody can do it,

24:05you are tracking it. And, you know, everything every day that we meet, we talk about this the

24:09next day. It's like you were right about that. You know, this is what you said was going to happen.

24:13So pretty great. Thanks for being on. My pleasure. I love this stuff.

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