Episode summary
Is the housing construction cycle breaking?
HousingWire Daily
· · 22 min · Hosts: Sarah Wheeler · Guests: Logan Mohtashami
Summary
Mortgage rates were described as still elevated but only modestly changed, with the 10-year yield and oil prices driving the day-to-day volatility. Logan Mohtashami said the market remains near his earlier worst-case forecast, with mortgage rates around 7.19%, and argued that the recent spike is tied more to the oil and 10-year yield trade than to any single data point.
The bigger debate was whether the housing construction cycle is finally breaking. Logan argued that the answer is not a clean yes, but that builders are moving into a more fragile phase: rates have risen again, profits are tightening, builder confidence is near cycle lows, and housing starts and permits are drifting lower even after years of falling. He emphasized that new home sales are a much smaller market than existing home sales, and that builders have been using mortgage-rate buydowns and discounts to keep demand intact.
He also stressed that the key warning sign is completed inventory, not the broader supply statistics many people confuse with existing-home supply. In his view, once completed units for sale move above roughly 120,000 to 122,000 nationally, builders tend to pull back. The sector has not collapsed yet, but Logan said the next 12 months will show whether residential construction employment, new home sales, and builder activity finally break lower.
Key takeaways
- Logan Mohtashami said mortgage rates were still near 7.19%, close to his worst-case forecast, because the 10-year yield and oil prices remain the main drivers.
- Logan argued the housing construction cycle is not collapsed, but it is entering a more fragile phase as builder margins, starts, permits, and confidence weaken.
- He said builders operate in a sub-6% mortgage-rate world and use price cuts and buydowns to keep new-home sales moving.
- Logan said completed new-home inventory around 120,000 to 122,000 nationally is the level that signals builders to pull back.
- He expects the next 12 months to determine whether residential construction employment and new home sales finally break under prior lows.
Notable quotes
“I thought, you know, 5% tenyear with mortgage rates between 713 to 718. I think last time I checked we're at 719”
“this is something now you have to keep an eye on”
“The builders have always worked with a sub6% mortgage rate”
“I've only seen housing data get better when mortgage rates get below 6.64 64 down towards six”
How the episode opens
Welcome everyone. I'm joined today by lead analyst Logan Moto Shami to talk about rates and new home sales and whether the housing construction cycle is finally breaking. Before we dive in, here are the top five trending articles on housingwire.com.
First, we have the Fed rate cut cycle has started. What's next? followed by UWM broadens condo financing rolls out eligibility tool.
Then we have housing market spotlight, the housing market signal to watch as rates top 7%. And what real estate professionals should know about the rate Fed rate hike. Finally, we have why more builder discounts aren't unlocking new home demand.
Okay, we're ready to go. Logan, welcome back to the podcast.
It is wonderful to be here post Fed rate hike day. We all survived this one. We survived the 5% 10-year yield again. Oh, I got to put that picture up again. But in any case, we're still here. — Well, let's talk about where are mortgage rates, where are oil prices, what do we see today?
You know, this morning, the 10-year yield is basically trading like it was yesterday. Uh oil prices were falling, the 10-year yield was falling, and then as Kevin W started to talk, you know, whenever you're you got traders around a Fed press meeting, you know, it could get pretty volatile. uh 10 year old spiked up after that.
We're pretty much where it was. Oil prices had been falling throughout the day. Just the last, you know, uh last I checked it was perking up just just a little bit.
Of course, you know, headlines all over the place, but but for now, the mortgage rates are down just a tad. Uh again, we always talked about in the last few months the worst case scenario above my peak forecast.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- mortgage rates
- new home sales
- housing construction cycle
- fed rate hikes
- builder discounts
Companies and tickers mentioned
- UWM
Watch the episode
Watch “Is the housing construction cycle breaking?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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