Episode summary
Is a hot economy good for housing?
HousingWire Daily
· · 18 min · Hosts: Sarah Wheeler, Tracey Velt · Guests: Logan Mohtashami
Summary
Logan Mohtashami argues that a hot economy is keeping mortgage rates elevated, but that does not automatically help housing demand. He points to strong manufacturing PMI data, low jobless claims, 4% to 4.1% unemployment, wage growth above 3%, and heavier AI and deficit-driven spending as evidence that the economy is running hot enough to pressure the 10-year yield. In his view, that is why mortgage rates can stay stubbornly high even if oil prices ease or the Iran conflict improves.
He says the housing market is healthier now than during the COVID era because inventory has recovered and price growth is no longer spiraling. By his account, the market from 2020 to 2024 was unhealthy because sellers had too much power, bidding wars were extreme, and active inventory hit about 240,000. He now sees a more balanced supply-and-demand setup, with inventory around 1.52 million to 1.93 million units and buyers and sellers both needing to compete.
Mohtashami also draws a sharp contrast with the late 1970s, saying that a hot economy then helped home sales because labor-force growth and housing demand were booming. Today, he says, weaker labor-force growth and stretched affordability mean the same kind of hot economy does not produce the same housing tailwind. He adds that purchase applications are still below last year, but the year-over-year decline has improved, which he reads as consistent with a market adjusting to higher-rate comp periods.
Key takeaways
- Mohtashami says a red-hot economy is now a headwind for housing because strong data is pushing the 10-year yield and mortgage rates higher.
- He argues the current housing market is healthier than 2020 to 2024 because inventory has normalized and sellers no longer dominate pricing.
- He says rates above 7% tend to suppress housing demand, while mortgage rates near 6% can still support sales.
- Mohtashami says the late-1970s analogy breaks down because today’s labor-force growth is weaker and affordability is already stretched.
- He says purchase applications were down 11% year over year, but the decline improved from 19% the prior week.
Notable quotes
“a hot economy here does not help housing. A hot economy in the 70s did”
“this is a much healthier environment. This is a supply and demand equilibrium that can work, right”
“the year-over-year decline became a lot less this week than last week. Last week was down 19%. We're down 11”
How the episode opens
Hello out there in HWD land. I am Tracy Velt. I'm filling in for Sarah Wheeler. I'm the host of the Real Trending podcast and also the senior managing editor of Real Estate for Housing Wire. So, welcome to the podcast. Uh here we go with Logan. How's it going, Logan?
It's going well. So, I just want to answer one question to everybody. I I put a rap video of Sarah and I on social media and she hasn't been on the podcast for the last two times. No, her daughter is getting married. She's she's she is still talking to me. So, this has nothing to do with that video, which Sarah did not enjoy, of course, as you could imagine, but you know, it is what it is.
Yes, definitely. Well, I I want to talk to you a little bit about um you know, it's basically a hot economy which is causing, you know, rates to rise in that, but is that good for housing? So, let's talk a little bit about that.
So, this is very interesting because I think the first article I ever wrote for housing wire uh uh in 2020 was, "Is a hot economy good for housing? If the economic data is recovering, uh uh will it benefit? And back then, oddly enough, it was 2018 to 2019, we had a trade war.
Uh uh it was a much smaller version, but a lot of people were very bearish on the economy because the the they thought the trade war would escalate into a recession and you know, the stock market was down 20%. I remember on Christmas uh eve in 2018 and then the second year of a trade war things get better. Um, so to me it was back then, well, if the 10-year yield starts to go up higher, mortgage rates go higher to it's not generally a positive.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- mortgage rates
- housing demand
- housing market balance
- economic growth
- interest rates
Watch the episode
Watch “Is a hot economy good for housing?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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