On today’s podcast, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about existing home sales, home prices and purchase apps heading into the spring housing market.
Related to this episode:
Why didn’t we see a national home-price correction in 2024? | HousingWire
https://www.housingwire.com/articles/why-didnt-we-see-a-national-home-price-correction-in-2024/
HousingWire Youtube:
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
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:
Why didn’t we see a national home-price correction in 2024? | HousingWire
https://www.housingwire.com/articles/why-didnt-we-see-a-national-home-price-correction-in-2024/
HousingWire Youtube:
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
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.
00:07My guest today is lead analyst Logan Motoshami to talk about existing home sales, home prices
00:12and purchase apps heading into the spring housing market.
00:15Logan, welcome back to the podcast.
00:17It is nice doing this three times a week.
00:20It is nice.
00:21You just got to get the other two days in and then the brain candy is a five-day-a-week
00:27thing.
00:28Listen, there is other news happening, you know, although this economic news is really
00:32important.
00:33Okay, well, let's talk about existing home sales and especially home prices.
00:37Let's talk about both of those things.
00:39Yes.
00:402024 forecast is going to be wrong.
00:45I forecasted a little bit too low.
00:46I was looking for 2.33% home price growth.
00:51What we see now in the data is that starting in summer, our forward-looking tracker data
00:58started to get better.
01:01Because everybody is enamored with the purchase application data and keep on saying sales
01:05are at record lows, the supply and demand equilibrium, they're not trained to read that.
01:12That was actually a big deal that the forward-looking data got better.
01:16What it did was the effective seasonality weakness that we would see in the second half
01:22of 2024 was somewhat negated because rates went lower, purchase application data improved,
01:28pending contracts started to prove in August.
01:32Then what happened is in October, it noticeably started to get better versus 2022 and 2023
01:39data.
01:40In that context, we ended the year off on a high note.
01:45Sales fell a little bit from 2023 levels, but now that we're here, you can see why I've
01:51always stressed that 4 million level.
01:55Post-1996, we rarely have monthly sales going below that.
02:00But now we have had the back-to-back, lowest home sales ever if you want to adjust it to
02:06the workforce.
02:08We still haven't broken under 4 million, but this conversation goes all the way back to
02:13November 9th.
02:14Nothing changed in housing November 9th.
02:18It was such a historic crash in sales.
02:22Home prices were authentically falling.
02:25This is 2023, right?
02:26Yeah.
02:27November 9th, 2023.
02:28Yeah.
02:29In the second half of 2022, so those things.
02:31But we made a theory that if home sales just hold their ground at 4 million, and if the
02:39forward data gets better, then you're going to have to go with it.
02:43What changed the whole supply and demand equilibrium in 2023 and in 2024?
02:49Because if you didn't know home sales crashed and we're just hovering around here at 4 million
02:57for 20 years, would you change your mindset about housing?
03:01Yeah, you would, naturally, because home sales crash, prices have to fall.
03:08This goes back to the original discussion in 2022.
03:12There are a lot of housing experts who say prices follow volume.
03:18So here it is, 2022.
03:21Y'all know who I'm talking about too, so don't be shy.
03:252022, home sales.
03:27There you go.
03:28You got your fastest crash ever.
03:302023, the lowest home sales ever.
03:332024, the lowest is the home price crash in the room with us.
03:39Hello?
03:40Are you here?
03:42Is it in the room with us now?
03:43Yeah.
03:44Is it?
03:45Is it?
03:46Is it?
03:47No.
03:48And it's gotten to the point that a lot of doomers have basically kind of, you know,
03:53are giving reasonable forecasts now because it didn't work.
03:56And I always harpen back to our November 9th thing.
04:00The dynamics shifted there.
04:03You just have to have the ability to read forward-looking data.
04:07And we've made this argument that people don't have this, right?
04:11Or they don't know how to read it, right?
04:13It was a hilarious part, was like watching people like ruin Redfin's data and like take
04:17their charts and like say that prices are...
04:21In any case, in 2025, here we are.
04:25And that whole premise from 2022, three and four didn't work.
04:30But why supply and demand equilibrium?
04:33The history of housing economics post-World War II, it's not rates that drive prices down.
04:40It's that supply that in terms of crashes was 2007-11.
04:45Major supply increases, then distress sellers, right?
04:49In 2007, the NAR's inventory data peaked at 4 million.
04:55It started to go lower in 2008.
04:57So, see, not a lot of people know this, but supply with active inventory was actually
05:01falling in 2008 and that time.
05:05The monthly supply actually were elevated in 2008 and 2009 and 2010 in big terms.
05:12But then we had distress sellers into the mix.
05:15So the supply and demand equilibrium were so different.
05:19Here today, we're just a tad above 1 million.
05:22By the way, another round of applause to the Silver Tsunami crowd because it's 2025.
05:30And this grifting crew actually started in 2008, said that from 2015 to 2025 would be
05:37the unbelievable time that all the baby boomers were all going to downsize to the millennials
05:44who could not buy avocado toast, but they couldn't buy homes.
05:48They had to cut their prices and active inventory would be between 26 to 32 million.
05:54We end 2024 with just a tad above 1 million today, 3.3 months of supply, a little tad
06:02above 1.1, I think 1.15 million active inventory NAR data.
06:08And there are very few Q&As that I've seen you do where someone doesn't bring up something
06:13about the Silver Tsunami and they're not doing it to like, I mean, they're really,
06:16they're interested.
06:17They're like, hey, isn't this going to affect things?
06:19I have been dealing with the Silver Tsunami since the Peloponnesian War, Sarah.
06:24It is just going to be with me until the afterlife.
06:28And it was a very, very effective grift because it would make sense to the eye, right?
06:35The first baby boomer hit 62 in 2008.
06:38There's so many of them out there.
06:40They all have to downsize.
06:42And from 2015 to 2025, the massive supply increased, something we've never seen, you
06:49know, not even in the housing bubble crash years, you know, 26 to 32 million.
06:53And it was a tragic failure.
06:56And all of these people will be going to the graves with this one because it did not happen.
07:00And we're in 2025 now.
07:02So I'm pretty sure I'm going to be dealing with this for the rest of the century.
07:06So it's fun for me.
07:10I know you do love answering that.
07:12When someone asks you that in a Q&A, I'm like, oh, here it goes.
07:15Here it goes.
07:15Oh, yeah.
07:16A big old grin comes to my face.
07:18I go, wait a second.
07:19This is my favorite subject.
07:21So I just hope people could understand that one of the things we try to focus on is most
07:27sellers are buyers, OK?
07:30And why don't we listen to middle-aged men podcast stock traders, Sarah?
07:36I mean, I can think of several reasons.
07:38Yeah, but it's because they look at everything as an asset.
07:44We have people actually try to do 200-day moving averages with inventory data.
07:48It's like, what are you doing, right?
07:51No, it doesn't.
07:52Because you can literally get margins sold out of your position at 12 o'clock.
07:58You don't have that kind of velocity in housing, right?
08:03A foreclosure process takes minimum, minimum 9 to 18 months.
08:09You can get margined out in 9 to 18 seconds.
08:13So the whole notion, it's funny because we actually tagged the guy, the stock trader
08:18guy on Twitter today who said, oh, new listings, 7% mortgage rates.
08:23Everyone's going to rush to sell.
08:25Stock traders, think of a different line.
08:28Rush to sell to get out of their homes.
08:30No, it has not happened for 14 years.
08:34And here it is.
08:35The irony is that, oh my, the two years that these people talked about would be the biggest
08:40rush of selling actually ended up being the two lowest years of new listings in history.
08:45Can you ever be so terrible?
08:48Yes, you can.
08:49You can do it.
08:51We would welcome some of that inventory.
08:53We don't want to crash at all, but give us some of that Airbnb.
08:56Give us some of that Silver Tsunami stuff that's sitting out there.
09:00We would welcome it.
09:01Yes, but in the concept, if most sellers are buyers, then all the inventory channel makes
09:08sense for decades, for many, many, many decades.
09:12But the one period of time it didn't was the housing bubble crash years.
09:17And I used to always point this out on Twitter where, listen, last two years, 30,000 to 90,000
09:24new listings.
09:252008 to 2012 period is like- That's weekly.
09:29Yeah, weekly, 250,000 to 400,000 per week.
09:33These are not people who want to sell their homes.
09:36They are forced to sell their homes.
09:38Not to mention that 2005, 6, 7, and 8, we had four years of foreclosures increasing.
09:44Then the job loss recession happened.
09:47So there are a lot of things that we do have a period in time in history that we reference,
09:51that we model out, that we use in our data lines, and that was very credit-driven.
09:56We don't have that now.
09:58So the whole prices falling volumes was 2023, 2024, and now kind of everybody's kind of
10:06thrown up the white flag.
10:09Even some of the biggest doomers in American history are kind of like trying to forecast
10:13something because, I guess, these are not serious people.
10:19You have to realize this.
10:20I know they have millions of viewers and all that stuff, but listen, if you want the real
10:26show, the brain candy, the chart daddy, I have challenged these people to live debates.
10:29It did not end well for any of them.
10:34And I'm showing mercy too.
10:36You are.
10:37I think you are.
10:38Okay.
10:39So you were too low last year.
10:42When you look at the forecast for this year, because one of the things that I remember
10:45talking about this time last year with you and with other people was like, it was surprising
10:49to some, like how firm prices stayed even though rates got higher.
10:55And you just talked about that.
10:56But like looking into 2025, we don't think rate, and you have your range for rates.
11:02What's your range for home prices?
11:04So 1.77% nominal home price.
11:08I'm a back-to-back negative real home price year.
11:11Inventory is growing.
11:12Inventory should grow again.
11:14New listings data should get to the target levels that I have this year.
11:19And that is all a positive things because as every year goes by and price growth slows,
11:25right?
11:26No crashing, but slows, wages grow, households grow.
11:30And what happened is I believe in the last few months, you know, we're working from such
11:36low levels.
11:37It doesn't take much to move the needle.
11:39And we just got a little bit of movement and it grew sales.
11:42What we could prove now is that if mortgage rates just stayed at 6% for the whole, like
11:48if it was between 5.7, I mean, this is hypothetically very difficult to happen, but 5.75 to six
11:54and a quarter, half a million plus more home sales total.
11:59Everyone's forecast we were wrong.
12:00It's just that getting to that level has been difficult as we've talked about, right?
12:05Labor over inflation and you can get growth in sales.
12:09And that's really the history, you know, after the qualified mortgage rule inventory
12:13channels change.
12:14But in previous decades, you'd have rising inventory and rising sales and rising prices.
12:19That was very common in the eighties and the nineties, even in 2000 to 2005 inventory was
12:25growing with sales growing.
12:27But now it's so many things have changed with the credit markets that it's, we, I saw glimpses
12:33of it in 2024, which made me so happy.
12:37Going out in the future, we work with that supply and demand equally.
12:41And also we have to remember that Texas and Florida are dealing with their own issues.
12:45Also in New Orleans.
12:47So much like what we saw with the one year that home prices fell nationally outside of
12:512007, 11 was 1991%, a lot of that was Southern California driven.
12:55So you can make a case, Florida, Texas, some other will kind of slow the average down even
13:01more.
13:02That's why my forecasts are lower than everyone else's.
13:05I'm kind of going with historical models here that whenever you have a big period of
13:10price growth, things just slow down.
13:13And I know nobody, nobody likes negative real home price discussions.
13:17Like they don't understand it and stuff.
13:19And people look at me like I have seven heads on my shoulders, but having negative real
13:24home prices after a price growth period, like we had is pretty normal.
13:30So that's why my forecasts are a little bit lower than everyone else's.
13:34And still at the end of the day, it's growth.
13:36I mean, it's not like you're saying home prices are going to fall, you know, 10%.
13:39I mean, you're saying they're going to slow down to growing one point.
13:43It's growing.
13:44And then, of course, when you have negative real home price growth and wages grow, household
13:50formation grows, affordability technically gets better to a degree.
13:55So I just think consumers don't like real home prices, doesn't make sense to them.
14:03I remember speaking in Orange County in 2019.
14:05I had this big old chart and I was like, we have negative real home prices.
14:10That's excellent news.
14:11And everyone's looking at me like, what are you talking about?
14:13I was like, it is.
14:14And I was like, oh, this is not working.
14:17So.
14:18Well, I'm glad we have you.
14:19So let's talk about purchase apps.
14:21What have we learned this week?
14:22Yeah, purchase apps, positive week to week, positive year over year.
14:26Again, some of this is still the seasonal demand curve.
14:29What we have seen in the last few years is, you know, there is some practical reality
14:37to the seasonality of the bond market.
14:39Bond markets typically have sell off kind of after February.
14:45What we've seen in the last few years is that purchase application data basically stops
14:49growing.
14:50Rates go up and that's it.
14:52It'll be interesting this year to see because we saw some firmness in the data.
14:58Does that change a little bit now going out in the future, continuing this?
15:02And of course, rates aren't at eight percent.
15:06The spreads are better.
15:08But normally, just normally speaking, if we take the pre whatever post-COVID data lines
15:13out of the way, usually the second week of January to the first week of May, total volumes
15:19always rise.
15:21Volumes rise.
15:22Supply rises.
15:23Again, supply volume rise.
15:25Most sellers are home buyers.
15:27People put their homes on a market.
15:28They're ready to sell their homes, buy another one.
15:31So we'll see if that changes.
15:34That's what I'm keeping an eye on.
15:35But the last two years, mortgage, especially last year, 6.75 to 7.5 percent, 14 negative
15:43prints, two flat prints, two positive prints, not a lot of volume declines, but just not
15:47a lot of growth either.
15:51That forward-looking data line created a very negative curve for sales data.
15:57And even though we had a growth in the last three or four months in existing home sales,
16:03what occurred was that we still ended up the year just slightly down year over year.
16:09Still held that four million level, but back to back, historically low levels of sales
16:15considering our workforce and our demographics.
16:18It's not like we have underwater mortgages.
16:21It's not like credit is getting tight.
16:23This is a straight affordability issue.
16:25But the construct of the housing market, because the credit data are so good, it kind of stayed
16:29intact.
16:30But the sale levels are just historically low.
16:34Better the last few months, I'm imagining the pending home sales data does get hit coming
16:39up in the next few days.
16:42Our weekly tracker has gotten softer the last few weeks.
16:46But just recently, purchase apps have gotten a little bit better the last two weeks.
16:51I feel like that four million now, even in all the conditions of rates over 7% and we
16:58have all this other stuff, it feels like that's the baseline of like, that many people need
17:02to buy a home every year no matter what, and they can afford to buy a home.
17:06That's our token line since 1996.
17:10I remember in 2020, there's been a lot of times where I get tomatoes and cabbages and
17:17stuff thrown at me.
17:18But one of the craziest things is I wrote the demographics crush the housing bears.
17:26And I said, you know what, we're going to have positive home sales in 2020.
17:31Back then, people still couldn't believe the COVID-19 recovery was happening.
17:36But I said, the forward-looking data are getting better and that, yeah, we're going to have
17:39positive sales.
17:40Nobody, everyone thought I was crazy.
17:42It ended up being 300,000 higher in 2020 than it was in 2019.
17:48So keep an eye on apps.
17:51But we could see now that four million level just holds, right?
17:57You know, it doesn't crash.
17:59We could have, let's say, home sales end of year at 3.97 million, something like that.
18:04But you can see that there's just that core base home buyer, that home seller that's a
18:09buyer that there are a lot of people that have a lot of nested equity, 38 trillion dollars
18:14in nested equity to sell their house.
18:16For them, especially as they're older, their wages are much higher.
18:21And if you need $103,000 to $110,000 to buy a house in America, if you think about people
18:26in their 40s and 50s, right, dual household incomes, easily $200,000, you know.
18:31So that's how you still have five million total home sales.
18:36Of course, the builders are doing much better than the existing homes because they live
18:39in a sub-6% mortgage market.
18:41But oh, if you can imagine a sub-6% mortgage market world, oh, the Fed, the Fed couldn't
18:46take it, Sarah.
18:47They couldn't take it.
18:48Too many people will be buying homes.
18:50Too many people will be having sex.
18:51Too many kids, they just go, no.
18:53All this is inflationary, it's bad.
18:56I do think when you look forward at 2025, and especially, you know, 2026 too, like in
19:02the mortgage industry anyway, you know, we've had just tons of layoffs.
19:06We've had a contraction in the number of people in the industry and in companies, lots
19:11of consolidation.
19:12So if you have this base of like, this is how many transactions you're going to have,
19:17at least it's split among fewer people, right?
19:20I mean, I would vote for booming sales.
19:22I wish we had this, you know, incredible market, but at least it's like, I think there's less
19:26people around to share it.
19:29My numbers can be off, but if I remember right, it's like, there was like 485,000 loan officers
19:38at peak.
19:39That sounds right.
19:40Yep.
19:41And then now it's down to 93,000.
19:43We have heard those numbers, yeah.
19:46And out of 93,000, probably 42,000 of them do kind of volume work out there.
19:53So it is, again, when I say the biggest and fastest crash ever, we always have to remember
20:02that the workforce is a lot bigger now.
20:05So also the employment of the people in the industry was bigger.
20:11So the existing home sales had such a crash, but it's again, transfer of commissions, right?
20:17That's how, that's why the Federal Reserve and economists don't look at the existing
20:22home sales market as like a big macroeconomic thing.
20:25It's commissions being traded.
20:27It's for the consumer, for the people, it's a really big deal, right?
20:31For moving trucks and local economies and everything on that side.
20:35But as a direct sector, the new home sales market and construction workers mean a little
20:42bit more to the Fed.
20:43That's why we say the 2025 wildcard is the new home sales sector.
20:47But existing homes have had the lowest home sales ever.
20:50This is now the calendar four year going in.
20:54So again, but just like the 1980s, right?
20:58In the late, late 1970s, the baby boomers were playing the millennials.
21:02I always ask this question, was there avocado toast back in the late 70s?
21:07Like what were the baby boomers like eating that was not?
21:12I was five.
21:12I don't remember.
21:13So what was it, Sarah?
21:16You're asking me because you think I remember, but I'm not a baby boomer.
21:20Was it Chef Boyardee?
21:21Yeah, but that was so cheap.
21:23It was so cheap.
21:24That wouldn't be the avocado toast.
21:26So the baby boomers back then were eating, couldn't afford Chef Boyardee, but they were
21:31buying homes, right?
21:32Because inflation was rampant back then, okay?
21:35Listen, when I was growing up, we had a hamburger helper and we were, I would say my dad was
21:40an officer in the military, a solidly middle class family, and we ate hamburger helper
21:44on the regular.
21:45Wasn't he a little creepy, the hamburger helper marketing thing?
21:49He was, yes.
21:50I mean, I'm one of six, so I get it.
21:53Maybe that's why, but I just don't think, I don't know what the avocado toast equivalent
21:59would be, but boomers out there, if you remember, if you're like, oh, I've got this answer,
22:03let us know.
22:04Logan at hwmedia.com and Sarah at hwmedia.
22:07Yes, and what happened was they were buying homes.
22:11They were having sex or having kids and home sales went from 2 million to 4 million.
22:15Mortgage rates went up to 18%, right?
22:18I laid up London, still not a lot of people knows, home prices grew faster from 1977 to
22:2379 than from 2020 to 2022.
22:25But then home sales crashed just like we see now, but affordability was worse then.
22:32Inventory was higher then.
22:33We had less workers and there was a recession and home prices didn't fall, but mortgage
22:38rates fell two and a half percent plus.
22:42I show these charts on the Nerd Tour and I say, look at that vertical move with the worst
22:47affordability because rates fell.
22:49So that's why when I say that the fastest velocity, we actually do have a model for
22:54this.
22:55The worst affordability ever, rates fell two and a half percent plus and sales vertically
22:58went up.
22:59Again, when you were such low levels, that first move is always going to be big.
23:04It's what happens after that.
23:06So we haven't had that because we haven't had sub 6% mortgage rates.
23:10If you look at what the builders are doing, the builders are, hey, we're still up here
23:13in 2019 levels.
23:14How are you guys doing?
23:15Oh, you guys don't have the sub 6% mortgage market.
23:19Okay.
23:20All right.
23:21So it's a shame because there becomes a sociology thing.
23:26How does a country handle not being able to sell and move their lives?
23:33And I'm hoping, hoping one day Federal Reserve all looks in the mirror, they look at themselves
23:38and say, okay, maybe it's a good thing to just be living and we don't have to worry.
23:42Again, not three, not four, not five, but just mortgage rates heading towards 6%.
23:48You know, it does much better.
23:51I did want to mention, of course, our housing economic summit is coming up and oh, and if
23:56you're watching on, on YouTube, you will see Logan's cat, right?
24:00Make an appearance.
24:02He is a Maine coon stray that is a very, very big baby and is a menace because he's so loud,
24:12even if I put him outside.
24:13So he will, he will cry so loud during the podcast sometimes.
24:18It's like a banshee.
24:20He's like, he's like a banshee screaming.
24:23It's like worse than a child or something.
24:25So yeah, but so I was going to say for the housing economic
24:31summit on February 26, not only will you be speaking, not only will Mike Simonson be speaking,
24:37but we have a whole time set aside for wild cards.
24:41What's happening?
24:42Because we know in between here and there, things are going to come up and we're like,
24:46listen, we need to set aside a time just for whatever crazy thing is going to happen between
24:50here and there.
24:51That's going to affect things.
24:52So I would tell people.
24:54And also it is a very critical time in our tracker data, you know, January, February
24:59and March really to get a good idea of what's going so far.
25:03What we've seen in the new listings data is just pretty traditional.
25:07We're trying to see if we can just get back to normal on the new listings.
25:10I believe we can just get over 80,000 in the peak seasonal months.
25:15So but again, so far the first few weeks of the year, it looks normal on that front.
25:22But I'm hoping that we get back to normal new listings.
25:24And again, most sellers are home buyers.
25:27Inventory growing is a positive.
25:29It shouldn't be looked at as a negative.
25:31Well, I appreciate it, Logan, everybody.
25:33Check out the tracker.
25:34It is now live by the time this comes out.
25:36And we will talk to you again soon.
25:38Pleasure and eat your avocado toast and your Chef Boyardee.
25:42But all I remember as a kid is spinach, right?
25:45Because Popeye, Popeye the Sailor Man, Robin Williams played Popeye when I was a kid.
25:50God, that was a long time ago.
25:51OK, see, you're old, too.
25:52I'm just saying I'm not that much older than you.
25:55All right.
25:56On that great note, we'll talk to you later.