YouSaid · the spoken record

Logan Mohtashami

lines on the record: 88
first: 2022-08-09
most recent: 2022-08-09
sittings or episodes: 1
sources: podcast

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“For certain groups, it's just that these states, their population is so big. I think Los Angeles, there's only like five states in America that are bigger than the population of Los Angeles. So perspective on how many people leave compared to how many people are staying and whatever comes in typically is our higher income people. So these states export housing inflation in a negative way and they don't import housing deflation in a sense that's the people that usually come in and buy homes usually make a lot of money. So that is problematic and has been problematic during this post 2020 is that the work from home model created more housing inflation if it wasn't around people still would have moved but it would have been probably less than what we have seen do from this work from home premise.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“That is cheaper, and again, like people like us here in California, like the median price of a home in my neighborhood is like 2.6 million. So everywhere in the nation looks cheap to us. So if somebody who lives here in Irvine or anything who needs a bigger home, boy, Texas still looks cheap. The Midwest looks cheap. So there are opportunities.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Part of my work has always been that in years 2020 or 2024, I thought people were going to move anyway just because we have more people ages 30 to 39 having kids. So naturally, you need a bigger home. So the expensive areas, you go somewhere where you could actually afford a bigger home. Then the work from home model came and it just was the biggest magnanimous event in housing history where you can actually move and keep your same job. You might get paid less, but you keep your same job, but you could buy a bigger home. That changes everything, but there's limits to that, right? There's only so many buyers that can do that. But in general, people move when they're having kids and they need bigger homes. So birth rates are starting to pick up from a very low level. And usually that's the case. You don't live in apartments or condos if you need a bigger home. So if you were living in an older home that was small, you're going to move to other areas.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“That changes the dynamic, and of course, that would be a 2% plus decrease in mortgage rates, where historically that has kind of been the case after every economic expansion recession mortgage rates fall to 2.5% lower. Here, the difference now is that the lowest mortgage rate was 2.5%. So for us to do that again, to do from the low point to another expansion, we need half a percent mortgage rates at 30-year rates. That's not going to happen. Right. There's embedded housing inflation now that can't be changed just because rates are trending toward a bottom area that has a very hard time of breaking again. And we see that now.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Mortgage rates should be under four and a half percent right now if we had anything normal just by itself. But we're 5%, maybe under 5% today with the yields falling. But yeah, but again, we still had a 1% decrease in mortgage rates with bond yields falling. That's a big deal. Just like it was a big deal, mortgage rates going up 2%. But usually housing really changes when a 10-year yield gets below 1.94%. That means sub 4% rates.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Logan, we saw earlier how the 10 year treasury and the mortgage rate move in lockstep, but there actually is that the spread between both of those figures does move around. And I actually think if you look at that spread, the 30-year mortgage rate minus the 30-year treasury, its historically high. I think it's higher than it was in 2008, and it's just below where it was in 2000.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“This affordability, so you have a good battle between good demographics and affordability right now. But again, we're still going to have probably total 5.7 million total home sales new in existing homes. You know, that's still a decent amount considering what's happened. Existing home sales is falling as long as purchase application data has negative year over year. We're going to be sales trends to fall. But now the rate's gone down. Let's see what happens now after that big move down. And let's see if rates go even lower as the economy goes into more deeper economic dive recession where jobs get lost. And I just can't see rates going up in that environment. Or I can't see the growth rate of inflation not cooling off with demand being hit like that.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, that's how I look at it. That's why I always say the fear I have is mortgage rates come back down and demand stabilizes and the growth rate inventory slows or pauses or reverses, which I don't want to see. Once I'm back to 2019 inventory levels, I'm all good. Whatever happens in housing there, it's a functioning marketplace. I just don't think the market can function properly with the inventory levels post-2020. We've seen dislocations in markets all over just because the total inventory was just simply too low. And the demographic demand that I've always talked about is the years 2020 to 2024 story. I think some of that ends after 2024. So it's just we chose the worst time in history to have inventory levels break down and we pay the price for it. And when you pay the price, that means that housing inflation is sticky and now rates have gone up. So some people can't afford homes. It's just a simple.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“So what you would want is for mortgage rates to go up and stay high so that the price of housing will go down. But what you think that what you want is not going to come to pass and that because we're going to give it a recession, mortgage rates will go down and that will be very quote for the price of housing if you own real estate, but not good for home buyers.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“I think a lot of people thought that inventory is just going to skyrocket and people are just going to sell their homes for 20-30% discount. Sellers don't act that way. You know, 2018 was a good case, even though sales trends fell from $5.7 million to $4.9 million. Sellers just were stingy and just held their homes on for like 45 to 90 days and some of them just took the homes off the market. This is why I'm keeping an eye on new listings to see if people just say, yeah, I'll wait till next year, which you don't want to see if you want balance.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Lose single family building, multifamily could go for only so much longer and then production falls and down the line that impacts future inventory. But the existing homeowner is fine, the home buyer is stressed, the builders are stressed. Look at it in that context. And for somebody like myself who's rooting for home prices to decline, who wants inventory, I need to get my price model back. It's just we're not there yet. It takes time. It takes sales to fall. It needs rates to stay higher. He needs sellers to agree to prices. You need a buyer for that home as well. So it's a much different process than.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Know in a sense that a housing recession means the builders aren't building homes and that's down the line. There's less single family homes, multi-family homes growth that should be there because it's tied differently. There's good rental demand. The housing recession is tied to the economic expansion in terms of construction jobs, big ticket items. Copper, we see copper prices fall as so much of our house is in copper. So that's why housing forward indicators permits are a really good thing. Demand falls down. So you need less copper, less lumber, stuff like that. But again, when rates fall, that changes for the builders. They can sell bombs, but there needs to be a point where the builders feel comfortable about building homes again. And it's just hard for them with rates at these levels to feel that comfortable. So the housing recession is in that context that less production. We can lose construction job.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“They just sit there and we're all good, right? They don't get impacted by anything. But the home buyers, right? And then the home sellers, in a sense that now their rates have gone up, some home sellers say, you know what, I can't afford that house, that bigger house, not with 6% mortgage rates. Rates have to come back down to 4% for it to work with me. So then that, in a sense, can maybe reduce sales levels even more as sellers who want to move can't. Sales get impacted right now. We see it. Inventory is rising, but until we get back to 2019 levels, I'm just going to still say it's a savagely unhealthy housing market because inventory is too low and lower rates can prevent me from getting to my balanced housing market look, which is still, again, four decades lowest, but I think it's balanced. So let's wait till we get to that sector, that area, and see where mortgage rates and what's going on in the economy.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Flow, right? Sellers need to adjust their prices and buyers need to buy. Let's wait till we get back to a normal market first and then see where mortgage rate is. Again, my thing is that I was worried that mortgage rates come back down and then the inventory channels pause and we don't go anywhere. And that to me would be a negative. So that's why the rate variable and the economic cycle timing works with housing when there's no credit boom, right? Because affordability is really an issue. Mortgage rates were so much higher back in the housing mobile years, like 6% plus for a while, but the debt made the housing sales demand inflated, right? We don't have that anymore. So we have legit homebuyers. And when rates go up and prices go up, those homebuyers get hit. It happens all the time. 2013 and 2014, we saw it, 2018 and 19, we saw it. Here we see it again.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“There are new home sales, median prices moves differently just because of the makeshift of sales. Like in 2017 and 2018, it looked like median sales prices were falling, but it really is just there was more smaller homes being put in the mix. The builders can cut costs and give incentives to sell product. The existing home sales market, and kind of my rule of thumb for people that I kind of wrote this thing, our home price is going to fall for housing wire. And I listed every reason why home prices were going to fall from 2012 to 2021. None of them worked. So let's think of this. Let's get back inventory just to four months of supply and get back into the 2019 range first. And then let's see where the market is doing then. That just gets us back to normal. You can have home prices fall with very low total inventory as long as monthly supply spikes. But that's a transaction.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Worry about home Rental inflation has taken up so much, they don't have that protection with that fixed product. So homeowners are sitting there chilling. They're all, hey, so just look at it in that way and just realize it's not. Not the build up in credit from 2002 to 2005, nor is it the stress and credit from 2005 to 2008. So that's why a lot of my work I try to highlight the two differences. Because as someone who says we had the weakest housing recovery ever from 2008 to 2000, we don't have a credit boom. I try to show that and we see that here in the data. Mortgage debt adjusting to inflation is not even positive still today even from the housing bubble years. That's because that was an enormous spike in credit demand back then.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Right, the renters, even yeah, I'm aware, I remember going on Bloomberg saying, listen, everyone needs to worry about renters.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“But we went from near five million to we're actually under 400,000 right now. So homeowners are just in a better spot. And much different backdrop. And sales, like the awkward conversation I have with people go, hey, where was purchase application data in 2008? How much farther do we have to go? Purchase application data is already below 2008. What? Yeah. We're already there. We never had a credit or sales boom. Homeowners bought homes. That's what they do. They live their lives. They have sex. They have kids. Their kids go to school. They go to jobs. They don't really care about the market distortion because they have a fixed 30-year product. Especially in a time of inflation, that payment doesn't really go up in terms of the debt costs or taxes or insurance, whatever. Renters do not have that luxury.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Trying to get that. So I'm trying to find a way to get inventory levels high enough and mortgage rates high enough in a recession deep enough to create that inventory channel with demand falling. And it's just my thing is that mortgage rates, you know, staying high during a recession is traditionally not the case after 1982. And remember, the government is going to do whatever it can during a recession to get everyone back on board faster than ever. That's one of the things that post-crisis 2008, we saw what happened in COVID. I don't imagine us getting any kind of national forbearance plan without any verification that you're stressed. The forbearance numbers were inflated just because of the fear of COVID. We had near 5 million forbearance. I remember coining the phrase forbearance crash bros in the summer of 2020 saying that people don't understand most homeowners actually got their jobs back. This data line is going to crash by itself over a year period. That's what”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“If you're talking like Wall Street, I buyers one to one and a half percent, right? There's mom and pop investors, of course. They've run the market. They're always like 90% of all investors anyway. Again, that's a different marketplace than primary resident owners. So owners are doing good. You have to convince owners for some reason to sell their house at a major discount, even though they're working, right? And most homeowners are always working, right? Homeowners make roughly over $100,000 on a household much more than kind of a renter and especially a low-wage renter that typically has the higher unemployment rate during a recession. So it's just myself, I need, because my home price growth model broke, I need nominal home prices to fall 12 to 18% over the next two and a half years just to get my model back in line. And I'm thinking, God, I'm going to be, I'm going to be in trouble.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Educated cash flow American home orders to willfully sell their homes at a thirty five forty five fifty five percent discount to the market bid or you need sales transaction flows to really slow down over a period of time of years housing peaked in 2005 sales fell 2005, 6, 7, and 8 job loss recession happened credit was deteriorating all the way down Here, sales are falling. Inventory is nowhere near 2012, 2014 or 2016 levels and we're not even anywhere close to 2006 or 8 or 10 inventory levels. Why? Because the homeowner is doing better now. The credit profiles are better now. So if people want to make a case, well, it's these investors, institutional investors went from 0.4%. Buying to 2.5%.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Credit. People forget this housing authentically broke out before COVID hit us. When I think about this period and time in history, it's actually the February 2020 data before COVID hit us. Mortgage purchase application data was double digit year-over-year growth all the way up to March 18th. That is when COVID's starting to hit us. So housing broke out just based on demographics to do a kind of a do-and-gloom, you're going to need what I call positive.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Crisis, you need massive unemployment and people not getting paid or anything like that. And that's why rent inflation has been very stable but doesn't have the kind of acceleration in home prices that we saw in the run-up to the housing bubble. And then, of course, what we saw from 2012 to 21 prices.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“It's very rare. We had a very brief time in history after the housing crisis where it went negative year over year. Shelter inflation is always rising, right? Rent inflation is always going. Most people are always working. But home prices after 1996 have deviated from rents just because rates started going lower, right? So there's this big gap between home prices and rent inflation, right? And there's just no way rents can ever catch up. Home prices have accelerated so much higher. I think there's a 63% difference now where at the peak of the housing bubble there was a 39% difference between OER rent and then home price growth. So home prices blow out rent inflation. Rent inflation much more stable always growing very rare. Is it negative on a year-over-year basis just because most people are working and most people need somewhere to live. And now that wage growth has picked up, it's firm, right? If you're talking about a rental deflation,”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so it was a summer of 2020. CPI shelter inflation was falling right and I said, listen, people are the city's are going to get hit right now. And it's just CPI shelter inflation lags so much that we're not going to see it until later on. And then that growth rate is going to explode up higher. And then because your rent inflation is tied to wages, there's only so much you can do. Wage growth has been really hard. In fact, I remember telling the Washington Post ad that we're going to get to see, we're going to get to 2% CPI so much faster and stay higher. And if wage growth picks up, they can ask for more rent and they have. But there's limits to what that can do. It's such a high growth rate that it can't sustain itself. So it's going to take time for the CPI to actually account for not shelter deflation, just the growth rate slowing down. But if you look at home prices, like if you compare home prices versus rent inflation, right, rents always are rising.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“The people that were making money doing mortgages and selling homes got dinged. So the higher rates impacts the economy on that sense. And then, of course, homebuyers, it's just difficult anyway, even with more supply, there's so much price inflation and higher rates. It's just the cost of housing has gone up. I mean, this is a historical event. It's not just home prices. It's shelter inflation, rent inflation took off too. It was harder for me to convince people rent inflation was about to take off just like home prices were. But this is a historic housing inflation event on both sides. And there's one thing in common, rental vacancies have been falling for years as well. So we just got stuck in a very bad spot historically and we paid the price for it with higher home prices and higher rents.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Well, if rates go down, it's better for the builders. Okay. They can sell their products. They're very good in taking advantage of lower rates when they need to, especially that their homes are under contract. When I think of the existing home sales market, higher rates is bad in the sense that transactional transfer of income goes down. So the existing home sales market, its benefit to the economy is just a transfer of commissions. So when sales go down and mortgage loan originations go down, those people make less money and they get their jobs lost. So that is one sector of the economy. Higher rates does impact very noticeably the transfer of commissions, less moving trucks, stuff to that nature. The new home sales market construction stops, right? Recession red flag is up. But if rates come back down, they get to sell some of their homes off. And then maybe if they feel more comfortable, then they'll get to start building again. We're not there yet. So that sector is already dinged in recession.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Be a little bit more positive on construction, but then the existing supply that we had, some of that growth slows down or reverses, and then we're stuck here. And being stuck at 2020 plus inventory levels is just to me not a functioning housing market. And a lot of my work is to try to show people. This is not normal. Like, you know, like the last sales in Las Vegas, sales were down 24% year over year. Home prices were up 21% year-year. That's not a normal thing, right? And that's only working because we had an inventory shortage, which I don't think everybody's ever seen this. So it's new to a lot of people. And balance means more inventory. So the higher the inventory, the better places that can't grow their inventory bad. So that's how I look at it.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Buyers are always going to be in a challenge here, and the positive aspect is there's more homes on the market now. That's a positive places like Boise, Idaho, Las Vegas, parts of California, Austin, these areas, any part of the U.S. that's in 2019 levels healthy, right? I know some other people say, oh, it's not healthy. I have a completely different take on that. More supply good. Less supply bad. What we saw, the housing crisis was the inventory crisis. That was not a good thing. So the more supplies are positive, the parts of the US, especially like in the East Coast that aren't seeing the rise in the inventory still savagely, really unhealthy. So the closer we get to 2019 levels, especially getting to the higher range, the better it is for the housing market. And if the worst case scenario for me is that rates come back down, it'll be good for the builders. They'll be able to unload their homes and make”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“When those people come in, okay, you're just going to get a little bit more demand, right? You're going to have more people looking for homes, right? Demographics is economics. Unlike Japan or Europe, we have a massive young replacement workforce. I don't call housing like a sales boom or a credit boom. I just say replacement workers, replacement consumers, replacement buyers. So you just have more people looking for shelter during this period of time. So if inventory channels keep on breaking, you're like, ouch. Something bad can happen and it happened and that's why I'm like, oh, well, everything I could think of that could go wrong and housing has.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Back in the early 90s, we actually had 1.5 to 1.93 million inventory monthly supply spiked to nine months. We had some price declines back then. We just have a lot more people now, right? And that was the fear of 2020 to 2024. So when people always say, why do you always talk about 2020 to 2020? Listen.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“I was delighted to see in the sense that inventory levels were starting to rise from the lowest levels ever in history, but I'm also mindful that mortgage rates falling back down can prevent me from getting to my 2019 inventory levels, which I always like to remind everyone, which was four decade lows before 2020.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Don't want to see this, and what we're seeing right now in the data is that new listings are declining. And I'm just like, no, they're pulling their house on the market. So what traditionally happens is inventory rises in the spring and summer and then it fades in the fall and winter. And usually the second half of July, the families that move over summer, if they haven't done it already, whatever, you know, the new listings stop, the growth rate stops. So we're starting to see that now. And then mortgage rates have come back down. So we have this inventory now, and I'm worried that, oh, God, they're going to come in and people are going to start buying this. And now we're stuck back at this level. So for me, it's like being stuck at these low inventory levels is very problematic for housing where we never have to worry about this from 2012 to 2019. We always had plenty of homes to buy and sell and days on market or over 30 days. But here it just isn't the case. And I'm just hoping that I was.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Here's a good example 2011 When the market started to head a little bit lower on the inventory, it was 101 days. Back then, here it is for days on market has been a big talking point of mine for so long, and I just like, this is not good. This is not good.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Market here because inventory levels are still low. We still have the days on market as a teenager and nothing good happens in America when your days on market as a teenager.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Those things are very real. There's always a traditional active listing of homes. But to accelerate that, like one of the things people said last year, well, when rates rise, people are going to rush to the market and sell. No, they don't. That's how stock traders think, right? Homeowners, it doesn't move like stock. Like I try to highlight this. When you look at the stock market, margin debt and stocks move one to one, very fluid. Housing debt doesn't work like that, right? It's a whole process and the seller has to obtain another form of shelter, right? Where you could sell your stock like in its seconds down 30% doesn't matter. It's so much more fluid. Housing just takes forever. And traditionally, it's like over 30 days, the median days market. This is why I always say when I saw the meeting days fall year over year in the last report, I'm like, we have to get this back to over 30 days, which is normal. And that again, a normal market's about.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“1985 to 2007 people stayed in their homes five to seven years from 2008 to 2022 it's 11 to 13 years some parts of the US are 15 to 18 years I've stayed in my home for 18 years people are just staying their homes longer and on paper they look so good right cash flow is positive fixed debt payment all this inflation that we've seen boy what's the best hedge against inflation you're 3% mortgage rate So let's look at when we took a national data about 13% of the country have 3% mortgage rates or lower about 38% of the country have rates between 3% to 4%. And then another near 30% has rates between 4% to 5%. And then the rest are, unless they're buying a home recently in the market, they have kind of old loans. So a lot of households are just doing well. So they need a reason to sell job loss, job gain, divorce, need of bigger home.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“You could say maybe an investor that has no relationship tie to a house. Okay, that's a different equation altogether. But a primary resident owner doesn't like sell their homes to be homeless or they don't sell their homes to rent at a higher cost. That's part of a savagely unhealthy aspect is that we got to such low inventories that people god, if I sell my house, I have no idea if I could even get a house. And I don't want to like be in this situation. Some people just didn't even want to test that marketplace and think about him. If they had sold their home and their rates went up so much on him, you're renting. You have a family. Your kids go to school. You have a job. So when you make that decision to sell, it's a big deal. So that's always been my problem with inventory channels is that sellers are doing really good. So one way to highlight this for people is I explain it this way.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“But I've always tried to explain this. Think of a homeowner when they're selling their home. What do they do? Like 75 to 82% of the time they buy another house. Right? So a traditional seller is a buyer of a home. So when they put their home on the market, no matter where mortgage rates are at, they go, okay, when I sell my house, I'm going to have enough equity to buy, even if rates are at 6%. And this explains why the inventory channels from 1982 to 2022, basically around $2 to $2.5 million. You have to think of it that way. People don't sell their homes to be homeless.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“You don't look at it as foreclosures, you almost look at it as forced selling, not in a foreclosure state. You have all these homeowners that have so much equity that they decide, listen, I lost my job. It doesn't look good for me, but I do have this house. I do have so much capital. So I'm not going to go through a foreclosure process that takes forever. I just sell my home in a sense that maybe that creates more inventory than traditional. Usually when you see a job loss recession to traditional risk is the late cycle lending, as we call it, the people with the lowest down payment with the most struggling cash flows FICO scores are so good with homeowners, we barely see anything under 640 or under 620, but those people are always at risk when there's a job loss recession, late cycle lending. But if the economy doesn't have lower rates, doesn't recover fast enough, and the duration of the recession is longer, then you can see a more deeper dive.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“So, when I think about deeper recession, there's three things that come to mind. Because as analysts, we have to model every kind of scenario, we think. And then what I'm thinking is the job loss recession becomes massive for some reason. Mortgage rates stay higher than normal because inflation stays high. And there is no, the thing is that”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Money goes into the builders just because tenure yields are falling. And just like when 10-year yields are rising, money goes out.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“That's how you should look at recessions. You want to look at credit risk, the foreclosure process when it's you're talking about nine months plus no for taking any kind of forbearance off the equation so much different dynamic than what we've seen in the past, but we have had such a hit on mortgage rates. You can see what's happening to demand. Demand has fallen off noticeably and that only changes with lower mortgage rates. So we've had, we're like halfway there to where the housing market usually does a lot better when the 10-year-old's under 1.94%. That means under 4% mortgage rates. We're just maybe slightly under 5% right now. So we're kind of halfway to where you would say, okay, now rates are a positive for the housing market. And you can see the builder stocks have rallied really coinciding right when the 10-year yield has been falling. They typically trend together no matter how bad the new home sales data is.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Growth in such a short amount of time that I don't think lower rates will have the same kind of boost like we saw in the previous expansion. But that's what traditionally happens to a degree. I know a lot of the, let's say the bearish home price growth people think that mortgage rates are going to go up higher because the Fed has to fight inflation like we saw in the late 70s. I just think this is a much different dynamic than the late 70s. But we've seen home sales fall as mortgage rates really picked up so right now I would tell everybody keep an eye on mortgage rates because they made a big move lower. And if we go into a recession, don't think 2008. Think that we have over 150 million people working and a lot of people that buy homes, they make over $100,000. They're typically the most employed as well. The generational buying group is usually employed in mortgage rates to just help them out.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Short sales, all this would happen. And if you look at it inventory from 1982 to 2022, that was the anomaly period historically. Credit boom, credit bust. Here, homeowners on paper look better than ever. And on top of their positive cash flow, the nested equity they have is massive, right? They have so much equity in their homes. So you typically traditionally can't foreclose on a home that has equity. And also 40% plus of homes in America don't have a mortgage. If you look at adjusting to inflation, mortgage debt is not even posited from the housing bubble years. That's how we don't have this massive credit boom like we saw then. So you have to like throw 2008 out of the equation and look at previous cycles. And what happens a lot of times is that mortgage rates start to go down a recession. Demand gets stabilized or picks up a little bit. I think the difference here now is that we've had so much home price.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Well, you know, in 2000, inventory actually went down. Home prices went up. People bought homes because mortgage rates were going lower. So it really depends on where you are on sales. Now, the new home sales sector slowed down a little bit. In this last recession, which was very brief, home prices went up. Sales went up. So there was a very brief decline of a very short amount of time. It came up. What happened in 2008 was such an anomaly in historical portions that I like to show these inventory charts going back to 1982. So this is the NAR data. Total inventory traditionally is about two to two and a half million because we had such a credit boom and we had forced selling inventory skyrocketed to 4 million in 2006, seven, eight period. Foreclosures forced bankruptcy.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Real sales falls. You notice we're not there, but we're getting there. And I think the bond market sees it. I'm pretty sure the Federal Reserve must see this. I mean, some of this stuff is so basic, but all my six flags are up. So what the bond market is doing is what I think it traditionally does, even for somebody like myself who has quote-unquote part of team higher rates, because we need to create some balance in housing. I understand the limits of what an economic expansion and cycle recessions have on the 10-year year old and mortgage rates. So this is why a lot of times I say, you know what? I'm kind of worried mortgage rates peak. They fall back down. We'll see if that stalls out the inventory growth. So we're right here. All six flags are up. So I cannot be part of the 7% to 8, 9% mortgage rate camp unless I can create a premise that rates are going to go up during a recession. And we've just never seen that post-1982.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“Is the irony that this, the community conference board, has asked me to present my sixth recession red flag to them this week. Leading economic index traditionally falls four to six months before every single recession. So having the five recession red flags, knowing the components of this data line, there's 10 different things. new orders, housing permits, credits, credit spreads. I said, okay, We've peaked. I just need the fourth month to raise the red flag just to go with traditional cycles. April was the peak. It was a very small month to month decline. I'm just waiting for the next month to do it. But if you know the components of the data line, you know the state of line's falling, right? So if you look at every single economic expansion recession, this data line has peaked and then it falls into a recession. Whatever people want to define a recession as I kind of look at a job loss recession, industrial production falls.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“When rates fall in 2019, we'll be okay. In a few months, monthly supply came back down for the builders. Everything was fine. Here it's a much different case. They've had so much price inflation. Rates have gone up so much. And they have all these homes that are under construction. They have to make sure they sell them. So that is done. And then the final last one is leading economic index.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT
“New home sales housing starts, they fall into a recession, sticking true with my 1.94% line in the sand on the 10-year yield. Once we broke above that after March, all right, here I am. The new home sales sector is a risk. And by June, I raised a recession red flag saying the business cycle is over for construction. The builders are going to have too much supply. They have to work that off. So they're not going to be building more single family homes. And we see single family homes declining. The builder's confidence index collapsed recently. That's a very good, that's probably our best survey in America is a builder survey because it's really based on profit only, not ideological takes. So when it falls, it falls. You know, in 2018, it fell on paper looked like the recession red flag was raised. Back then, I said, I'm going to put it in the penalty box just because new home sales are so low and housing starts to solo. And here comes a better demographic patch.”
2022-08-09 · Forward Guidance · Real Estate Market Will Stay "Savagely Unhealthy" For A Long Time | Logan Mohtashami · IDENTIFIED FROM THE TRANSCRIPT