What's Happening With the Housing Market

Hey, listeners, what's up, Jeff Zimphur, your humble host for this episode of the Mortgage Marketing Radio podcast. You know the place. If you're returning listeners, thank you for tuning in. Appreciate you being here. If you're new, welcome. Glad you're here. Check it out. Search around some episodes. Search for topics you're interested in. And I would just say, hey, dive deep, listen to a couple of three episodes in a row. And whether you're new or you've been here for some time, I sure would appreciate your comments and feedback on the value you're getting from the podcast. So if you are so inclined, take a moment to leave us a review wherever you're listening to this podcast. And we appreciate that very much. Before we get into this week's special show, I wanted to bring to you another update from the streets, a success story. You know, this is the place that we help mortgage originators leapfrog from solicitor and vendor to becoming partner and peer when they're approaching, contacting, reaching out to real estate agents. One of the bigger struggles is, how do I get them to respond and engage and actually have a meaningful conversation? Well, I can tell you your approach matters, your value proposition matters, who you're talking with matters, all of it matters. The first question is, in the sea of sameness, in this noisy world, how do you rise above the sea of sameness and noise, right? You've got to have some means or method by which you can rise above that and attract agents to hear what you have to say. In our community, we lead with agent classes. We teach classes that help agents solve problems. We teach classes over Zoom. We teach classes in person. We partner up with affiliates, a title, a little more into escrow insurance. We get in front of agents at scale so we can have conversations at scale to reach the agents who are ideally suited for us to become productive partners with. Let's face it, would you agree in today's market? You need at least double the amount of agents you've probably worked with in the past. You need to build your agent database. You need to create an audience of real estate agents and engage with them and nurture those relationships over time. But you need to do it efficiently as a system, not one Z2Z. And that's what we do in our community through our my agent classes platform. Here's a win of the week. I wanted to share with you coming at you again from Carmella. What is up, Carmella? You are just crushing it out there. Carmella is the latest win of the week. She's one of the most consistent people we have in our community. So shout out to you, Carmella. She recently did our Facebook ads for real estate class, all new and updated. She had 22 agents registered, 20 show up. How long does it take you to get in front of agents, 20 agents, and have a meaningful conversation where you get to deliver value and not pitch products and price where you get 45 minutes to 60 minutes or more to build, rapport, to have resistance come down and trust go up for you to differentiate yourself within 60 minutes, separate yourself from 95% of the other originators they've ever engaged within their career. Well, that's what Carmella is doing is she's just got this play on repeat. She's doing it month in, month out, and she's doing all the things I talked about just a second ago. In this case, she decided to bring her a local marketing person who is somewhat familiar with the Facebook ads to help her put the class on very smart. And he's helping those agents set up eight of those agents to properly optimize their Facebook business page. Yes, folks, Facebook business pages are still relevant. And if it's not properly optimized and set up, it's doing the agents of disservice, right? And never going to actually be able to run Facebook ads if they don't have a properly optimized Facebook business page. And so this is a key part of their tech stack and their online strategy. And because Glenda's bringing those, I'm sorry, Carmella's bringing those solutions to them, right? She's winning. So she had agents in the room who she had never done business with. And she's actually invited them to an additional class while they're sitting in that class. So she's again, continuing to stay in front of these. What does she say here? Eight agents are adding me as their preferred lender. So guys, again, 20 agents in the room, okay? Three of the agents they've never done business with before. Eight total agents, all of a sudden she moves from lower on that pyramid to the top of the pyramid of partner and peer by saying, Carmella, you're my girl. You are my go to primary, you know, premier loan, originator partner. If you got a better method for doing that and accelerating that at scale, hey, let me know. If you don't have a method for doing that at all, hey, let's book a call and talk and see if this is a right fit for you. You go to mortgage marketing.pro, book a call and we'll have a conversation if it's the right fit. If not, hey, well, part is friends, you keep listening to the podcast, mortgage marketing.pro. Okay, my special guest this week is back on the show. Last time he made an appearance on our show with July 2020, it was a completely different housing market in July 2020, right? Let's face it. So my special guest is Logan, Matashami. Some of you may know him. If you don't by now, at the end of today, you will be inclined and motivated to go follow him on Instagram, the links to all the things we talk about are in the show notes, but his Instagram profile is Logan underscore, Matashami, who is Logan? Logan is a housing wire analyst for the housing industry. He's a renowned expert in mortgage and housing data. He's recognized for insightful analysis and commentary on the US economy in the real estate market as a whole. As I said, he's the lead analyst for housing wire. He's a regular contributor on the housing wire daily podcasts, which you need to check out. There are links to all that in the show notes for housing wire. He's been in this industry for over two decades, nicknamed the chart guy. That's great about Logan. He has the ability to take these complex data sets and translate them into understandable actionable insights for you and me. I have a saying is that a lot of originators in real estate professionals know what's happening. Some understand what's happening, but few can actually explain what's happening. In the market that we're in, with some of the uncertainty, what people seek is context so that they can feel more confident in making a decision that's right for them. In today's conversation, Logan delivers on that and more. I want you to listen intently. I want you to rewind. I want you to listen. I want you to share it with either other colleagues of yours, most importantly, real estate agents. If you want to help provide some context and education about housing, what's going on in the housing market, share this episode with your real estate agents. You will get credit for it. They will thank you for it and this will drive conversations, by the way, if you follow up on that chair and say, hey, what do you think? Love to talk with you more about that. How can I help articulate what you heard on that podcast from a housing mortgage rate angle? How can I help you articulate that with your potential clients? Here's another question. Who have you talked to in the last 30 days or 60 days that might benefit from a discussion around what's really happening with housing and interest rates? So guys, leverage this podcast in this way. Follow Logan on Instagram. Go to Housing Wire. Subscribe. Join the newsletters. Join the Housing Wire Plus. It's worth it. And then make sure you subscribe to the Housing Wire podcast. So without further ado, let's get into this week's show. Logan, welcome back to the show. It is wonderful to be here. It's been too long. As a matter of fact, I looked it up. The last time you were on my show was July 2020. 2020. Oh boy. That was actually right in the COVID-19 recovery model period time when I set up the housing bubble boys with again, because we had a V shape recovery and purchase application data and actually two months later that I created the term forbearance crash bros after that. So you have all kinds of cool terms, man. Yeah. We got to make it, you know, unfortunately, the academic side of economics, not the most exciting group. We try. Yes. So when I do these tours across the country, you know, a lot of after the throughs, I try to make it as fun as possible and go, you're so much different than your, your economic friends. They're, they're so dry and, you know, I said, yeah, I got a, I got a spice, spice it up a little bit. And I think the other neat thing about your style and approach is you do make it understandable if you will, right, for the quote, common man. Yeah. I mean, that's, that's the thing. You know, the, the presentations and the charts are, you know, in some ways, they might be complicated, but they're, they're presented in a way that to keep it as simple as possible. And at least, at least what, what I've seen in the last, I would say 18 months is that people go, wow, I first didn't know that chart existed or that data existed. And then I draw lines, like I'm known for these, taking these black lines and drawing in certain places and just trying to guide people to where they need to look. And then after they look to go, oh, I could really tell my clients, this was happening in 2008. And this is not happening. And I think if you make things simple that everyone should understand, then you know what you're talking about. I think a lot of complicated conversations stay complicated and just, it just can't get through to the other side. And that's the person's fault. The person should be able to explain it. And that's the old high school basketball coach of me trying out, you know, making sure that the kids know how to play defense properly and you got it, you got to make them understand. Well, I'm glad you said that because I think that's a good transition to our conversation. I was doing a class a couple of weeks ago for real estate agents that my mortgage originators also give across the country. And it was called Master of the Market, how to close 2023 strong and dominate 2024. And one of the premises in there is, you know, that a lot of agents or originators understand what's going or know some understand, but few can explain, right? And I think that's what I'd love to kind of pull out of our conversation here today is to help the people in the latter two categories is better understand, but also be able to articulate and explain because I think that's what I also wrote down this. We'll set this whole frame up and then we'll jump into the charts and graphs and data. But I wrote down in these times of uncertainty, this is where I think you have so much value, is people are seeking context so they can have some confidence to make a decision. That's right for them. Do you think that's absolutely because, you know, finances, a lot of it, of course, if you're financially could buy a house, you know, that's a check mark, but emotionally and confidence is another thing. And, you know, if you're always thinking housing's 2008, you're never going to pull the trigger. Right? And there are some, there are some, I don't think there's a lot of them, but there are some individuals that every year say it's going to crash, it's going to crash, it's going to crash, it's going to crash, and then 10 years of your life goes away. And you only have so many years in your life, right? And this is the part of the things I explain with housing is millions and millions of people buy homes every single year, like we traditionally have five to six million homes, total home sales bought. And even in 2008, they bought even in COVID-19, they bought. So definitely you're shaking a hand of a bank and saying, I've taken a 30 year fix mortgage and your family's part of it. So absolutely confidence, context of the data is always key. Okay, so what we're going to do through this conversation is help the listener, mostly mortgage originator, some real tourists sprinkled in, but we're going to help them feel more confident and be able to explain to their clients and prospects about what's really happening. So with that said, I saw one of the recent posts that might have just been hours ago or yesterday in housing wire, which by the way, we're going to link up all this stuff in the show notes. But timely for Halloween, what did you say that the housing market is, what was the term? There was that there was a tie in there for Halloween. You mean the savagely unhealthy savagely thanks that's actually yeah, you know what that's that's kind of my key phrase for some time now. So I have to always explain it because people go, what are you talking about? Well, the housing market, what's the one thing that changed in the last few years that's never happened in US history role inventory broke to all time lows. And guess what? We have 335 million people now and 157 million working. So when inventory breaks to all time lows with the workforce, this big, it creates what we call forced bidding, right? It's not like credit is booming and we have all this housing credit being given out to unqualified homers. We just have normal people bidding against each other. And what it did is it facilitated, you know, home price growth to go beyond trend. And it was actually February of 2022 that I think 78% of the homes in America were being multiple bids on. A march of 2022, this is a real stat. We only had 240,000 single family homes available for sale. And you know, that was the, you know, February, I said, okay, this is the savagely unhealthy housing market. We have to do something or else home prices are going to go up another 20% and, you know, that was a concept. And it's just the same thing is here. Too many people are chasing too few homes. And this is really the main reason why home prices have held up so well in this environment. That's what really gets interesting. You know, when you start having conversations with the people because, you know, obviously the mistake we make is let's not follow the narrative of the mainstream media because that's all, you know, the sky is falling and everything. But there's this interesting dynamic like yes, inventory is low. But demand is also kind of at a standstill or pause, partly because of mortgage rates. And yet we're seeing in a lot of markets, prices still go up, right? Stellars are buyers. That's kind of the one thing I've always tried to stress. And what's occurred is inventory has been slowly moving low and lower for many years. And what's happened is traditionally people don't sell their homes to be homeless, right? 75 to 82% of the people sell to buy another house. So what happened is when mortgage rates got above 6% mid July, one of the data lines that we track at housing wire every week, new listings data took a noticeable dive lower. And we weren't working from very high levels. We were working from the lowest levels ever. So for the last 15 months, new listings data has been trending at the lowest levels ever recorded in history. So supplies of function of demand in housing because the seller traditionally buys another house. So you can have very low demand, but not have the inventory data escalated out of control. Now what happened in 2002 to 2005, we had a massive sales and credit boom. But a lot of people don't remember this because they're not nursed, they're normal people to have lives. But me, on the other hand, we had rising sales and rising inventory. So it was very abnormal, you know, in context to what happened in the last 13 years here. And when the credit boom busted, inventory escalated out of control for the first time in five decades, not the case anymore because majority people have 30 or fixed mortgages fixed at cost rising wages. So inventory didn't escalate out of control. And then toward the end of last year, the seasonality of inventory came lower than what occurred as mortgage rates actually fell. And because mortgage rates fell, demand got a little bit better. So we're back to the low inventory, stable demand thing. And now mortgage rates are going back up again to 8%. Demands getting a little bit softer, but where we are historically, we are at very, very low levels of sales, especially when you adjusted to the workforce. And we don't traditionally break much lower than 4 million. This has been a big working theme of mine for the last decade. So trying to convince people that these buyers here are much different than the home buyers when we were at 6.5 million. And so it's like the housing market is two cowboys looking at each other, both have keys instead of guns, and it's just a battle about who's going to flinch first. And we're not accustomed to that kind of marketplace. So the days on market is still 20 days using the NAR data. It doesn't take that long to sell just because there's not that much out there. Okay, right. So there's various data sources. As you know, out there, you know, housing wife, of course, has got some some great data, and y'all listening should go there and subscribe and become a premium member I have. And I've got to tell you that like paying whatever that nominal fee is to become a premium member to get access to that extra data is definitely worth it, especially if you want to be able to explain what's going on. That said, I also use another website where I'm allowed or allowed where you can get this from your title reps as well is you know, you can look up like days on market, median, sole price, how many homes are over asked versus under. And it's funny. I've been playing around looking at some of these different areas around the country, including Orange County. Like, you know, the over ask is still the the higher percentage of sales. Yeah, it's the best way to explain this. So one of the things I do with the tracker article each weekend is that I'll give the new listings data the active inventory data. Those are two different things new listings are the people that put their homes on the market for that week. And then the active inventory is up until Friday of the week, you know, we get that data. So it's very fresh. And then we give the percentage of price cuts. Now one data line that I didn't realize that a lot of people didn't know one third of all homes have price cuts year round. So a lot of the kind of the trolling grifters in America, they take the red fins price cuts or Zillow price cuts and they go, oh my god, home prices everywhere are crashing. That's not the case because you always have one third of price cuts. Now this year price cut percentages is 4% below what it was last year. So how do I explain that? Well, last year we had the biggest home sale crash ever in history from six and a half million trending all the way down to four million. It took three years for that to happen from two thousand five to eight. So the velocity of data was much faster. But here, even with home prices higher and rates higher, the price cut percentages lower. And that explains part of why pricing isn't crashing this year. We just don't have the same type of market that we dealt with last year. Okay. And this is, I mean, it goes against the traditional narrative. I think that you see out. Let me give you an example. I was talking to somebody or you probably see this on social media. So I'll post about this the other day. And somebody said, you know, basically to the effect of, you know, when when rates quote come down, let's say they come from eight to seven, even six, let's say, you know, the presumption is we're going to see a flood of inventory happen when that occurs. And I want to get your take on a second. But somebody I was talking to, who's a very well seasoned housing investor owns lots of property was presenting the case that, Hey, if if I'm a seller and I'm sitting on sub four percent, like I need a really compelling reason to sell in six or seven percent, isn't it? So this is a, this was the 2021 premise. At toward the end of 2020 and early 21, many people told me that mortgage rates are down. Nobody listed their homes during COVID. We're going to get a massive wave of new listings data and people are going to sell their homes and it's going to flood the market and home prices are going to crash. New listings data in 2021 was trending at the lowest levels ever with three percent rates. New listings data in 2023 with seven to eight percent rates are now in effect trending at the lowest levels ever. There is nothing in the data we have seen after 2010. And the reason I use 2010 is qualified mortgage came into play after that. That actually shows that lower rates creates more active inventory. What we have seen in the data is that higher rates actually create more active inventory because the days on markets can grow and active inventory can accumulate. That's what we saw last year in our weekly data. That's what we saw in 2013-14. That's what we saw in 2018-19. Nothing big in real terms, but that works. But the thing with rates going down in new listings is that the sellers of buyer, so whoever puts their home on the market, they've already talked to their mortgage professional. They're already pre-qualified and then the demand is there because naturally the entire buyer pool picks up because rates go down. That's what we have seen after 2010. So I hear this narrative all the time. It's never happened. In fact, Sarah Wheeler and I and our podcast, we have this ongoing debate. She calls it a mortgage rate lockdown. I don't believe in that concept entirely. I think there's more variables in play. It is not so much. People have to move every single year, but the people that are moving are qualified. So if you look at it in that light, you could maybe understand that why inventory is still negative year over year. We're literally sitting here a few days away from Halloween, and inventory is still negative on a year-over-year basis because whoever's listing their homes, not all of them, but majority of them right now, as long as the economy is still expanding, are putting their homes in the market. If they get a buyer, they're going to buy another house. That's 75 to 82 percent of the market. There's another group that has to sell because they lost their job or their investors or they're taking the profits or they're selling to go rent, but that's not the majority of the market. So there's this natural equilibrium with supply and demand that nobody has really talked about for a very long time because I think so many people are used to. Demand goes up, inventory must skyrocket, and it hasn't been here for 13 years. Demand goes down, inventory could slowly accumulate higher. That has been the case. As long as the economy is expanding and people are employed, they sit in their homes and so much of my work over the last few years, but especially the last 80 minutes, what was the best hedge on planet earth against inflation? America's 30 year fixed mortgage. Why fixed debt costs, your wages rise during an inflationary period, your wages rise more. All my housing costs is very low. People have been living in their homes longer and longer. 1985 to 2007. It was five to seven years from 2008 to 2023. It's been 11 to 13 years depending on who you listen to in some parts of the US 15 to 18 years. I've lived my house for 20 years. My total wages versus my housing cost is very low. So it's not only a hedge against inflation, but the Federal Reserve is hiking rates, trying to create a recession. The best way to fight Jerome Powell was your 30 year fixed mortgage because the one thing they can't break is that fixed debt cost. That's another reason why the effective rate of where everyone has their mortgages is so much lower than the nominal rate that's out there right now for buyers. So you don't have the urgency to move or you just have people who can't afford to move. And this has kept inventory levels low. And part of this is the qualified mortgage changed everything after 2010. And the charts really show the historical differences between 2000 and 2008 versus 2012 to 2023. You couldn't have two more different housing cycles ever in history. And a lot of that is credit, you know, credit channels run inventory channels. So people just buy homes. They live in their homes longer. They're doing very well. They don't necessarily act like how I say middle-aged men's stock traders middle-aged men's stock traders will sell their house in a second because they're on margin. Nobody's on margin on their homes. You can't get a margin call at 12 o'clock on your house and you have to sell it, right? So two different kind of mindsets and a lot of those people that think people are going to rush because I've done the dealt with this for the last two years. We're going to rush to sell our homes to get out because we got to get our equity. Okay, where are you moving? Right. Right. There you go. Where are you going to move that the cost of housing is the same or lower? A lot of people would have to rent higher than what they're paying right now. What about this debate? I've seen a couple articles pop up recently about this that let's face it quote unquote, right? We've reached a place where renting is less expensive than buying more affordable. Rent has been better on the nominal side for some time now and my argument has always been that one-third of the society are what I call lifelong renters and their wages do not support home buying unless they're a dual household income. So now we can see it. Housing affordability got hit so bad that it created the biggest crash in home sales because home prices escalated out of control and then mortgage rates escalated out of control and yet even today we're going to probably end the year near five million total home purchases just because there's a certain group of people that buy homes that have the dual household incomes and for them owning a house and raising their families or downsizing is more beneficial than renting. So we're always going to have that to be the one-third of the renting profile because rental deflation in major terms doesn't really happen in America because most people are working in renters. You basically have to live somewhere if you can't rent then you're homeless. So that group can pick up some in the sense that maybe first time home buyers can't afford to buy but you don't usually see well I have a very low housing cost. I'm going to sell my home and go find somewhere to rent because a lot of homeowners just have a lower cost of living than what it is out there to rent and also it's not the most fun thing to move. Right you know I make a joke I said imagine a husband telling his wife honey we're going to go sell and we're going to go rent somewhere and then we're going to time the market and Jimmy has got to go to another school but we'll you know at some point that home prices will crash and then we'll get back in your wife's going to slap you your kids going to throw all their toys at you you're going to be sleeping on the couch until you change your mind so that conversation doesn't usually happen unless somebody financially has a reason to move to rent or something in that nature so that rent gap is so much higher just because home prices accelerated out of control mortgage rates accelerated out of control and we see it in the demand data as demand has fallen so much so it makes sense in that regard to what the sales data we see. Okay so yeah they refer to that as like what the 3ds divorce diapers death something like that as far as you know like you you've got to find they're really motivated in this and that has been happening every single year and inventory has been falling for 13 years really so I know a lot of people say death divorce and everything and inventory has been the channels have been slowly moving lower for over 13 years because there's not that much of that group and this is why I've always say that the housing tenure story which never gets any love is still one of the reasons why people are staying in their homes longer because you know we always have people dying each year their homes got to go to probate we always have people divorcing well you know in some cases even in divorce they're going well we don't want to sell this house because you get a house at 8% and you got you know so that is always going to be part of every single year but it's not as big as people think and that's one of the reasons why total act of listings have been falling for 13 years in this country. Okay I think this is a good time to pivot for a moment we'll come back to forecasted rates after this little segment but being a former mortgage regenerator yourself all right if you could take a moment and act as if you are originating today how are you navigating what are you saying who you know to both your realtors and potential buyers and prospects how are you finding the motivated getting people off the fence right giving them the context to feel confident. I usually say the same thing when I was in hello I would say housing is the cost of shelter to your own capacity to own the debt you know better than anyone else when you're ready to buy the house so that total payment should be the final determination because I don't know you that well personally but you know yourself and your finances better than any bank or anybody so this way millions of people are buying homes this year why because they're ready and when you're ready you don't need to ask me you just get the process starting and then you're part of that five million total home sales that we're going to get from new homes and existing homes and in that light you yourself know the answer to buy now of course a lot of people say I'm waiting for rates to fall down because I want a cheaper price then you're you're doing what's your what's best of your own interest and we saw this last year when rates started to fall from 7.37% down to 6% guess what happened we had three months of positive purchase application data what happened it gave us one of the biggest month-to-month home sale prints ever in history we almost had almost 600,000 homes bought at one month that's very abnormal so the buyers are there I mean we have 157 million people working 335 million population the housing demographics are unbelievably good now because ages 28 to 35 were the biggest in US history but you yourself have to you know tell your clients when you're ready trust me you'll let me know and we just get people as prepared as possible because boy everyone jumped on the market you know last year when rates started to fall so now some people say oh you know what home prices are higher well when when you're ready to pull that trigger you got to be ready to pull that trigger so all you have to do is give them the best amount of information it's possible and keep them updated as possible so when they're ready you got to jump on it because guess what hunger hunger hippo game again you don't have that many active listings out there and it's not 100% sure that you'll even win that bid when rates fall or when that payment level is so you all you could do is prepare your clients for the best possible situation for them to win and then trying to deviate from that is you're kind of doing something that you're not supposed to do you just get them ready it's like your coach get them ready to go out there and play that game and when they win this game time you got to get that deal in the pipeline as soon as possible yeah very interesting lot going on in that because you know well enough of course that you know each hike of 1% interest rate reduces the buyer pool right x amount of millions of people just based on a qualification or whatever that number is we just we know it does so there are simply some people or less people that will available to qualify at 8% right yeah every every every one percent up every one percent down the qualification the demand factor gets less with 1% higher it gets more and again also you can have a lot of people that are qualified to buy but it's not their time right so you know some of that gets pulled into and there's some people that you know hey listen I've got to I've got to buy a house because I need that extra room but the thing now is the qualification matters right there's no more exotic loan debt structures if you're in it you're in it and you're legit so the job is to get people prepared and ready in the realities of what it is to own a house these days because it's not just a mortgage rate you know property taxes insurance everything you you got to get prepared as soon as possible well like what you said in the context of if you're an originator listening to this what do you do right now you I think you simply double down on being engaged right via content via education be present help educate both referral partners and prospects and clients and you know kind of what you alluded to earlier is which is you know you do your your fiduciary responsibility and you know if it's not the right time for them it's not the right time right you're not going to force that we've got no Negam arm loans to force people into you know no everyone's legit and I think I think in this day and age especially now that social media has been created if you don't engage with your clients yeah someone else will well that's what I'm saying is like you're saying you know so what do you do as an originator right stay present stay engaged because there are people people when they're ready they're ready they're going to jump off the fence but who do you want them to think of first right is so don't just do the prequel and disappear right maybe a lot of this is a timing issue right it is a timing issue and I would say that you know the the the more you put into making sure everyone is informed and more engagement the better people you would attract to stay with you you know when I when I started to do this as an L.O. I had no intentions of being an analyst or anything like that but when I started to write about economics people were you know still okay Logan you know he's a loan officer you know what I have a cousin that you know it wants to buy home in California as long as you make an effort to keep engaged they will know you or they will come to you or they will stay with you and now you know having 160,000 social media followers you know I've got to keep them engaged by giving them content every single day 24 hours seven and then they stay so when the time comes boy well what's going on in the world I'm going to Logan's Instagram page because he's got a video up and ready and he's going to explain something so you always want to if the market cannot give you demand that doesn't mean you rich you know retrench back and then you become a ghost you know you have to make yourself accessible and and to your clients in that matter so they don't forget and when it's ready when they're ready to go you got to jump on that right away so it's a hard market when you sense demand is not there but you don't want to back out in that time well yeah and by the way real quick if you're not following Logan you need to link is in the show notes on Instagram it's Logan underscore Matashami we'll put that link in the show notes but make sure you follow them there it's got tons of great content yeah 100% stay engaged stay present because if you there's no such thing as a secret agent right no how much of this then you know this adjustment of of rates you know is a new normal or we have to settle into the new normal so one of the things I do with rates is I don't really talk about mortgage-backed securities I talk about the tenure yield and I always say that if you take a chart for the tenure yield and mortgage rates go back to 1971 these two have been a love couple they've been slow-dancing with each other since 1971 all the way down to 2023 now when the spreads get bad right now you know they're not slow-dancing close enough but wherever the tenure yield goes mortgage rates will follow right the spreads can be bad you know the spreads can get better of course where the spreads are really bad only 1980 and 1982 recessions with spreads but traditionally they move together in in that light so this year one of the things I had to do is I didn't believe mortgage rates can really break under 6% because the labor market to me mattered more than inflation the growth rate of inflation was going to fall no matter what just basic arithmetic but I had to stress so much that I didn't think the tenure yield could really break under 3.37 that I had to bring Gandalf I literally not even joking I brought Gandalf to great early in the year I said you shall not pass and the damn thing tested the level eight times I don't like my god you really don't want to pass you know so the labor market is better than what people think and to me jobless claims really runs the show so what's occurred is you know today economic growth was 4.9% jobless claims have been slowly falling for many months the tenure yield has been rising in that environment we are at what I call very restrictive policy right now even the Fed has talked about it before the before the last move up in bond yields the Fed was telling everybody hey listen we could cut rates next year because we're really restrictive right now if the growth rate of inflation falls we'll cut rates and then they ruined everything by having a very hawkish Fed meeting and then technically if you're a bond trader you short the market in that and bonds can escalate and that's what happened so right now we're in very restrictive policy the history of economic cycles and what I mean by restrictive policies the tenure yield note is higher than what the growth rate of inflation is or the Fed funds rate is higher than what the growth rate of inflation is so it's restrictive in the Fed's model next year has a better backdrop of rates falling than this year because the labor market will soften up labor supplies slowly rising but when it starts to break jobless claims will break with it what happened early this year is that because of the banking crisis people thought we're going to you know the Fed's going to cut rates sooner than later and we're going to go into recession once the banking crisis stop our spreads got hit bad so in a sense the banking crisis for the economy still kept intact but the mortgage market had to deal with worse spreads then you know the economy kept trucking along and it's not just us here in America global bond yields are much higher than ever so you can't have global bond yields high in the US economy still expanding and think mortgage rates are going back to what we saw in the previous decade but next year the labor market softens up a little bit more growth slows down a little bit the growth rate of inflation falls then you have a more concrete reason for the tenure yield and mortgage rates to fall for me jobless claims is the most important economic data right now and my key level is 323,000 on the four week moving average today we're about 210,000 when that breaks the bond market will get ahead of the Fed the Fed will do what they usually do they're old and slow that's what I call them and they'll be behind a curve but the tenure yield will start to go lower mortgage rates to go down so people say well here comes a recession right nobody's going to buy house because millions of people I said okay cute back in covid we had 20 to 30 million people unemployed we had 5 million in four bearance people buy it cut my economic price it Logan you're crazy you think who's going to buy this home when I'm thinking oh you forgot the 133 million people behind me that are still working right if home sales are at 4 million any kind of increase in demand raises sales right and that's what happened six weeks the purchase application data rebounded so now if the labor market breaks you got over 157 million people working assume like the Fed gets what they want 2 to 3 million people unemployed that is 154 million people working with lower rates so they all don't buy homes but whenever rates fall it disproportionately helps the housing market whenever rates rise it disproportionately affects housing in a negative way last year was a great example we had 4 million jobs created didn't matter mortgage rates spiked out of control prices were high demand hit but it also works on the other way and credit really can't get tight anymore like it did from 2005 to 8 you know everybody's 30 year fixed Freddie and Fanny are in conservatorship the credit will flow so much different backdrop in that light but you do need that 10 year yield to fall to have mortgage rates fall with it so just to be clear you like the dance of the the the not the feds funds rate for for trailing or tracking mortgage interest rates it's the 10 year yield and what goes into that economic data inflation expectations you know those things to me the fed funds rate of course you know we had inflation rising in 2021 and going into 20 to the 10 year yield didn't really go into a full expat or rising until the fed pivot happened and then global inflation took off as well so it was a much different ballgame after March of 2022 but here where we are now we're very restrictive policy right now the fed in the fed in a sense if it was honest with everyone they would be talking about cutting rates earlier so the next fed meeting is actually going to be very interesting because they should be changing their dot plots and everything because they messed up they did not need to do the hawkish tone and it blew up on them that's why you see fed presidents hey listen we're not going to raise rates we're not going to raise rates you know so that falls and there's the comma which is we're not going to raise rates but if we do they just they just oh my god they're so frustrating just shut up you've already hiked rates right rate of inflation is falling this is the this is the problem here because what the fed did and this is the honest truth they were forecasting a recession this year because then they said you know we can't have the growth rate of inflation fall without a recession because they were running their 1970s model okay this is a global pandemic the history of global pandemics very inflationary than the disinflation part happens so now with kind of egging their face the labor market is still tight based on their mark metrics and we had you know good economic growth and the growth rate of inflation is falling in fact the core PCE data that the fed tells us to track on the GDP numbers 2.4 percent we're almost at that two handle with the labor market still intact so they kind of messed up and they don't really know how to like get out of that so they they're keep on hawkish hawkish hawkish hawkish hawkish so they overdid it they can't just take the back I always say land the plane Jay just land the plane you don't need to do this and they did and it just oh you almost like take this mic and just throw on a wall like come on right what was the point of that he's not a good poker player right he's kind of rivet man too much yeah I would if it was me I'd take every fed president just put a taper on the mouth for the rest of the year and just go just shut up and just let the ball market let the data go and just stop rooting because one fed president says one thing the other says the other it had the bottom it and it's just like all right glancing over here in the last few minutes that we have at the MBA forecasts they just of course had their annual meeting I don't you've probably looked at some of this data but for the listeners who may not know according to the MBA forecast for mortgage rates to end 2024 at 6.1 reach five and a half by the end of 2025 demographic fundamental still support housing demand and lower rates will improve housing affordability and unlock some housing inventories is more owners become willing to give up their current rates and list their homes what do you say so no I would rather drink chlorox than to do a two-year forecast so that's why I you know I mean the yearly forecast I do but I begrudging I'm a weekly guy so we track weekly data more than it's so dynamic today right it's yeah yeah it's just like could you imagine like all like remember all the people that said home prices were going to be down 10% this year and 10% next year right and they're like six months later oh you know so youth the market doesn't care how slow you are because the market will move without you so for me it's we can get down to six percent mortgage rates but the tenure yield has to retrace the labor market has to soften the spreads would in a sense get better so I would follow jobless claims data that's the one data line that reverse to the positive as the as rates were running higher so it the where the tenure yield has is still a little bit higher than I believe it should be but it made sense with the labor day when the labor of data breaks then all of a sudden oh the growth rate of inflation really matters now because the labor market's getting softer the Fed changes its tune because then they become a dual house dual mandate Fed where it's just price stability in the labor market they don't want to or they we're not going to do that until the jobless claims rate you can get in the six handled next year not not a problem the only way that doesn't happen is the economy stays very firm the labor market stays hot so better economic data means rates could stay higher for longer softening of the labor market means the 10 year ago and really we saw better data at the end of last year the early part of this year with 6% mortgage rates so you don't need to wait down to five or get under 5% and then we take it from there and then the history of bond markets and rates you know we've been in a downtrend for like 800 years right so do does the demographic deflationary aspect of all of earth go back to normal I believe in time that gets back to normal unless you have like commodity wars or stuff like that so global pandemics I think a lot of people just because nobody everyone's normal it's not a nerd global pandemics are very very inflationary early on and then the disinflation happens to go back to what was normal war has this as well because the supply chains of what we produce as good as services during wartime changes as well that's more world war one and world war two things are different right now so inflationary period disinflation period especially like with rents rents go really inflationary 1918 to 1920 then the disinflation happens that we're seeing that right now shelter inflation rents drive that so there's a lot of good variables for rates to fall next year labor market softens up that's your model right there this year I just I know a lot of people thought because the growth rate of inflation was falling that that mortgage rates would fall with it what the growth rate of inflation is falling but global bond yields and the labor market is still too high or too strong too and that's the reason why we weren't able to really break under six percent that's why the Gandalf line was created and I could bring the Gandalf line to my high level at four and a quarter on the ten year yield once the labor market gets softer but we're not there yet it's a it's a more probable variable in 2024 well to put a cap on that for those that want to you know geek out which anybody listening should once again understand um you know what's going on uh and how to explain it most importantly so I think today's been helpful for that but one last note is back to the NBA forecast is I guess this is the bright side you know to your point about everything you just said with softening of the labor market etc and kind of relief in interest rates um is that NBA is forecasting an increase uh of what is this here x percent from it's from 1.6 trillion this year forecasting 1.95 trillion in 2024 uh which is uh 90 percent uh total mortgage originate generation nation units forecasting increased by 90 percent so hey there's a bright light we have the lowest bar to work from and let me tell you when you get one one and a half percent rare lower rates guess what purchase to go up and you get refinances again so uh the bar is so low we can all trip over it and you know this is one of the reasons people people see the pending home sales today and they're like it's up month to month how's that possible i said context people look we're really at these very low levels you know the interesting aspect is new home sales is growing new home sales were up 22% year over year new home sales have been trending higher why because they can offer sub six percent mortgage rates imagine the us housing market with sub six percent mortgage rates with sales this low yeah things are going up right uh more business for everyone refinances the existing home sale market doesn't have that luxury the builders do because the builder sell homes as a commodity and they don't have the you know seller buyer uh factor they just make a house build it and sell it move on to the next one uh so we actually do see that uh in the new home sales where they're growing double digits year over year but the existing home sale market is still rates are too high but you just got to get that 10 year yield to fall and then mortgage rates of fall and then that slow dance stays together and more people buy homes more sellers will be buyers so you get more people listing the sell to buy another home you know doesn't mean in total inventory grows but you get more sellers that'll be buyers in that sense and then what's the big difference now first time home buyers why they don't offer you a home but they finance 90% plus of their home buying where the baby boomers are less than 50 so you get more demand on the mortgage side there that kind of keeps inventory at bay to a degree so definitely it's all to me to me I I remember going on CMBC like the second month of the year I said literally the entire housing market moves around the 10 year yield so 10 year yield goes up to me out of get weaker up to 10 year yield falls demand gets better and when you look at purchase application data you could really see that relationship hold fantastic well this has been a clinic I think in understanding housing and how to explain it before we go we want to make sure people can connect with you once again and housing wire so once again the Instagram link will be in the show notes but if you're listening right now you want to go to Logan underscore modashami on Instagram let's tell them what they can find over there housingwire.com you guys you have a podcast you do as well yes we have an apple top 10 business podcast Sarah Wheeler myself housing wire daily news is every day but Sarah and I they come out on Thursday and Monday and we just geek out and talk about everything on the weekly basis and keep people up to date on everything housing wire itself the tracker article is very popular in a sense because I get all my information Friday night all the weekly inventory up to that and then talk about it the next day so people could actually see new listings data weekly actively inventory price cut percentages and that is so much ahead of all the sales data so this way you could be the person that says you know I how did I didn't know well we we provide the data we think forward looking housing data is the most efficient data and it's up to date every single week out there so housingwire.com gives you all the mortgage and real estate information the tracker article and the articles I write for economics is just my work housing wire plus hw plus Logan VIP 20 if you wanted a discount code use that one and considering that it's better than a lot of Wall Street information at a tiny fraction of the cost you know compared to them our job is to keep people as informed as possible with real data and not the crazy noise. Absolutely and by the way that's a good headline for the listeners as originators keep people informed with the right data not just that you know the noise so as we said at the beginning right know what's going on understand what's going on but most importantly be able to explain what's going on that's what's going to separate you as a true right advisor in today's market so Logan you're freaking brought at home again man thanks for crushing it today my pleasure and I always leave by saying you always want to be the detective and not the troll right math facts and data wins you know give people the right data and then the charts will be like wow it's really easy so so hopefully that's my job and hopefully I could explain it to you also then I every one of you could explain to your clients why it is in 2008 and why the Airbnb busted and happened this year and all that stuff oh love that love it all right listeners you know what to do first of all share this episode if you're a mortgage professional listening to this share with a real estate agent because there's a lot of good context in here for them and then of course listen to this again and make sure you check out the resources we talked about housing wire Logan's Instagram and we if you like this episode as well please leave us a review we appreciate you and we'll see you on the next one bye for now hey guys what's up real quick you've heard about the mortgage marketing pro membership before and I just want to quickly remind you if that you're in a place in your business where you simply need more purchased loans you need to fill your pipeline with purchase business let's just face it agents are still a solid pillar of business and sources of purchase business for you well good news our mortgage marketing pro membership helps loan officers like you close more loans without the hassle of chasing agents or cold calling done for you agent classes expert training videos a marketing automation platform that automates the entire process for you everything you need to build your personal brand in your local market attracting convert agents into referral partners plus done for you proven marketing materials and plug and play content to make promoting your class getting agents butts and seats partnering with affiliates real easy but that's not all you'll also get access to our weekly mastermind calls with top L.O's authors speakers and coaches to learn the best strategies to grow your business right now in today's market and as an extra bonus for limited time for all new members you'll get access to a database of 200 agents in your local market that have closed anywhere to from eight to 50 transactions in the last 12 months and we'll provide that list upload into our platform for you so you can get off to a fast start in reaching actually productive agents so what are you waiting for you can check out more at mortgage marketing dot pro see more of the success stories there and if you feel compelled to do so book a call we'll have a chat we'll see if it's a fit don't miss out on this opportunity to take your mortgage business to the next level right now head over to mortgage marketing dot pro