The hawks are fully in charge at the Fed

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about the Fed meeting and where mortgage rates are likely headed.  Related to this episode:  Hawks Lorie Logan and Beth Hammack run the Fed for now  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  HousingWire AI Summit – August 11  HousingWire Mortgage Banking Summit – October 1  More info about HousingWire  The Top 5:  Fed pauses rates again as Middle East tensions risk hotter inflation  Hawks Lorie Logan and Beth Hammack run the Fed for now  Pennymac trims lending, fulfillment roles in layoff round  Foreign buyers purchased $45.3B in U.S. existing homes, NAR says  Real estate brokers say rising mortgage rates derail early 2026 housing rebound Want more from Sarah? Don’t forget to subscribe!  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.

Transcript

00:10Welcome, everyone. I'm joined today by lead analyst Logan Motoshami to talk about the Fed

00:15meeting and what we learned from the Q&A session that could impact mortgage rates. Before we dive

00:20in, here are the top five trending stories from HousingWire.com. First is our Fed Day coverage,

00:25both the news story and Logan's analysis, followed by Penny Mac trims lending fulfillment

00:30rules in layoff round. Then we have foreign buyers purchased $45.3 billion in U.S. existing homes.

00:38And finally, real estate brokers say rising mortgage rates derail early 2026 housing rebound.

00:44Okay, let's get right to it. Logan, welcome back to the podcast.

00:48Yes. Everyone's trying to digest what Kevin Warsh is saying at these conferences. And a lot of market

01:00participants weren't really happy. They thought it was a lot of gibberish. So for me, I just kind of

01:06want to think that how am I going to explain this to everyone when market people are just up in

01:13arms

01:14and not really understanding. So I'm going to try to take a different path to try to tell everyone

01:19what I think the Federal Reserve just talked about. The Federal Reserve had three dissenters. Of course,

01:27the people that we've always talked about, Beth Hammock, Lori Logan, and Neil Kashkari,

01:32they wanted a rate hike. The September rate hike is in play, of course. But what we have right now

01:41is

01:44you and I have talked about, you know, real yields and nominal yields. We've written about it,

01:49that the bond market has gotten ahead of the Federal Reserve. And Kevin Warsh talked about that a lot.

01:56He said that, you know, I do believe that the markets are pricing in what we're saying. So to me,

02:02he was almost, in a way, giving like forward guidance that the September rate hike is in play.

02:13But I look at it as, you know, I think he tried his best to calm people down for not

02:20a rate hike this time.

02:22And I think he's hoping for the conflict to end and the next CPI report not to be bad. And

02:31then he could

02:31maybe hope for another pause. And then eventually, you know, if the conflict, I mean, so much of this

02:40recently, I mean, the conflict moves the bond market and rates more than the Fed does at this stage,

02:45because we're either on or off, on or off, on or off. And we saw that again this morning where

02:51the

02:5110-year yield and oil prices went up again. This is, I think he's biting for time.

02:58I just, just, just watching him talk and reading his body language. I saw a man who's trying to

03:04convince everybody just, okay, rates went up. We know real yields went up and nominal yields went up

03:09and, and it's big, but, you know, we're going to sit and wait to see, you know, how we make

03:17our

03:17decisions a little bit later and take all the incoming data. And however the market plays off,

03:23that market's going to have to, you know, judge things on their own and not play me or not play

03:28the Federal Reserve. What he, what he really wants is markets to go ahead, do what you do, but don't

03:32look

03:32at us. I don't know how that operates. I will tell you this. I think Kevin Warsh is

03:39strategy might work with someone not as volatile as Trump or trying to do trade wars and, you know,

03:48fighting wars at the same time. But that's kind of what I kind of read. And I know a lot

03:55of people

03:55just didn't like it because they thought it was a lot of gibberish, but I saw a man trying to

04:01buy time

04:02and hopefully, you know, the, the market doesn't exaggerate itself onto the upside, but he, I think

04:10he was okay with where the 10 year yield you we've written about this in the part that where the

04:1510

04:15year yield, two year yield and 30 year or three month yields are at, they said, yeah, the market's

04:21already priced in and that's tightening. So we'll just wait. So that's, that's my take from,

04:27from that conference in the feds action. Yeah. He talked a lot about inflation. Obviously he talked

04:32about the higher rates over the last five years. And at one point he said, there is no soft inflation

04:38target. There's no implicit inflation target. The inflation target is 2%. In other words, it hasn't

04:43changed. What did you make about, what did you make about his comments on inflation? You know,

04:49I will always stress this point over and over again. If the fed really wants to target 2% inflation,

04:58then they need wage growth to be below 3%. And the labor market just isn't breaking enough or

05:07the demographics of it, where we just have to keep the people that just have to keep hoarding labor as

05:13much as they can. So they can't afford to, you know, wage growth go much lower. Uh, if you're,

05:20if you're targeting inflation, you have to have wage growth go in 3% because productivity,

05:25he's made some strong productivity arguments. I just, I don't see that in the data to like justify

05:32what he's, what he says. So I just go back to what the federal reserve, the federal reserve in general

05:37does not believe in a productivity miracle. Uh, they believe productivity runs at 1%, wage growth

05:43has to go below 3%. And that's how you get 2% inflation. So him talking about inflation being

05:48above trend is just, I think, you know, just trying to make sure that the marketplace is that we're not

05:54pushing for higher inflation targets. 2% is the number and that's it. And when you make 2% the

06:01number,

06:02it's difficult when you have tariffs and a conflict together. Um, and again, I think if it was a more

06:10calm situation with tariffs or if there were no tariffs and there were no conflicts, I think this

06:16strategy from Warsh might play better, but the problem is every 24 hours, something is moving the bond

06:24market or, or pricing. And right now, even with a softer inflation report, even with a softer labor

06:32report, the conflict is really pushing yields. And you know, the, where the bond market is right now

06:39is pricing in rate hikes. So he's going to have to deliver at some point, you know, uh, or the

06:47federal

06:47reserve is going to have to deliver, or I think in his eyes, the market might not be pricing it

06:53correctly,

06:53but he doesn't have, he's got the September meeting. So he, he, if he's trying to buy time,

06:58he's going to need the conflict end and a, and a, and a better CPI, uh, report similar to what

07:04they

07:04saw in the last report. And one of the things he said is that the economy is showing impressive

07:09resilience. Um, what do you think about that? Of course, we we've talked about housing demand being

07:15resilient in the face of a lot of, um, things. The 10 year old hasn't gone up as much as

07:19maybe,

07:20uh, we, you would think under these kinds of circumstances. What do you think

07:23overall about the economy? So regarding the housing market, existing home sales are at very,

07:30very low levels. So it's holding up because, you know, it's held up really for the last few years.

07:36It just hangs around here. Uh, when mortgage rates are near 6% demand grows when mortgage rates get

07:42below above 6.64% demand slows down. So what do we see in purchase application data today? Uh,

07:48negative 3% week to week, uh, or at a negative year over year print. So we're above that threshold.

07:54So we're working at very, very low levels. That is not, you know, uh, something that's just,

08:02we're not cracking below a level that we've never cracked before. It's just at record lows.

08:06The builders on the other hand would basically say, if we don't do mortgage rate, mortgage rate buy

08:12downs, then housing starts and permits and everything would be much less. That's the only way

08:17we're keeping things at bay. So the housing market, which they impact the most is not,

08:24you know, doing anything right. Consumption of goods and services and investments, of course,

08:30the AI boom, uh, other types of investments that are coming in. He was very happy to see that. Uh,

08:37but you know, it, it, it is, it is interesting because a lot of people just say that the labor

08:43market

08:43isn't, uh, uh, uh, as strong as the Fed thinks, but remember the federal reserve has adjusted to

08:48demographics. He brought the demographic story into play. Older economies, older countries don't

08:55really have really big investment booms unless it's something new like tech, like AI. Imagine if

09:01there was no invention of AI, where would the, where would the construction boom be? It's not in

09:06residential. It's not in commercial manufacturing is very limited. Um, so that CapEx is there, but

09:14outside of that, the economy is just pushing along, but just remember if, if it really wasn't for COVID,

09:20we would still have the longest economic and job expansion in history. So in that context,

09:25it's very resilient in terms of dealing with higher inflation and higher rates, just because I believe

09:31as always, uh, I, my, my core foundation belief is that the household balance sheets in America have

09:36changed unbelievably and nobody gives it enough credit. I think it's the most dynamic, uh, thing

09:42for the U S economy for the rest of the century. Um, so in that step, the, the, the, the

09:48train is still

09:49moving, but there's sectors of the economy that, uh, are weaker than others. Clearly for sure.

09:55He talked about unemployment and, um, he, he doesn't seem to be phased about the unemployment level,

10:00right. What he sees for the rest of this year and into next year, kind of what we've already seen,

10:04um, over 4% doesn't, doesn't bother him at all. Uh, what did you think about his labor remarks?

10:09Well, I mean, to me, it's, I I've always looked at the federal reserve as jobless claims people.

10:14Um, the job openings love the job openings data, even though it's, uh, uh, fallen from the peak,

10:21it's, it's at elevated levels that we've never seen in history really outside of the, uh, uh, COVID,

10:27a boom and job opening. So, uh, we are deporting a lot of people where, uh, uh, immigration has

10:34slowed down. So the lack of, uh, people coming in has brought the labor force growth lower. So

10:40you don't need to have, you know, uh, 200,000 jobs per month to keep the unemployment rate at bay.

10:47So the, like we've always said, the, the fed doesn't pivot like people think until the labor

10:52market's breaking and the labor triggers that we've used in our recession, where that we talk

10:56with the conference board that does talk to the white house and the federal reserve, those triggers

11:02have not gone off. So it's to me, it's, uh, the labor market where they are looking is stable. Uh,

11:08and it doesn't matter if 10,000 jobs are created or 70,000, as long as the breadth of jobs

11:15is there

11:15and the level of employment still keeps unemployment rates lower. They're okay. Now,

11:21if the labor force grows and more people are looking and then the unemployment rate rises,

11:25that's a different equation for them. But for right now, they just feel like the labor force

11:28growth is low enough to where the unemployment rate, uh, can stay low. Did anything surprise you

11:35in, in either his remarks or the Q and a, it was a lot of gibberish. It was a lot

11:40of trying to talk

11:41around things. Um, I, I, I, uh, not a lot of people liked it, but I saw a man who

11:47was just trying to

11:47bite for time. Right. So, uh, um, you know, one of the questions that were asked to him, like, why,

11:54why haven't you raised rates? The market's already raised rates for you. Are you behind? If you're

11:58really attacking, attacking inflation, uh, then why haven't you raised rates? This is why the September

12:04rate hike is in play. But what we've said, the fed got what they wanted, right? I don't think he

12:10could

12:10say that, you know, well, we, the, all the rates are already risen a lot and you have to look

12:17at it

12:17in this light. We went into this year with two to three rate cuts. Okay. The federal reserve hawkish

12:25people wanted that easing bias away. They got that win number one for the Hawks. Okay. They wanted the

12:31rate hike discussion to be part of the conversation nationally too. They got it. Okay. They wanted real

12:39yields and nominal yields to rise up on all the duration curve of rates through short and middle

12:45and long. They got it. The Hawks got their trifecta. The last is, you know, hiking rates.

12:52Uh, um, but again, I think the Hawks won. Like when I, when I look at this and I look

12:57at what he's,

12:58he said, Hey, the market's already priced in everything higher. So just for everyone here,

13:02if you're, if you're thinking rates are going to go lower, you need a, you need,

13:06you need a war to end. You just need, and, and we cannot get into another like tit for tat

13:13trade

13:13war kind of, uh, uh, tariff thing, a brand new one. Um, so Kevin wants less, but you know, I

13:23think,

13:23I think this is not Kevin Warsh's fed. I think this is Lori Logan's fed. I think this is Beth

13:27Hammock's

13:28fed. You know, I think they're, they're the ones, they're the ones pushing this because of real

13:33yields have risen, right? So Kevin Warsh doesn't want to play the game. He doesn't want to give his

13:39opinion, but right now they're running with what Lori Logan and Beth Hammock is doing. Uh, so right

13:45now it's, it's their fed, not his, right? And they're winning and they got what they wanted. So

13:51I think they're okay with, you know, the other committees not, uh, approving a rate hike, but

13:57they're saying, Hey, listen, I, we're always going to be a rate hike as long as this inflation story

14:03comes up. So you're going to need to see multiple inflation reports come in below estimates. You're

14:08going to need the conflict and you're going to need a bunch of stuff to get them off of this,

14:12uh, uh, uh, hawkish tone because, um, uh, they had a chance to say, well, real yields are up and

14:19we

14:19don't agree with it. They did not take it. So I think September is in play. The data becomes more

14:25valuable, how markets react to it. Uh, and Kevin Walsh is kind of just going to stay back and just

14:32say, Hey, listen, don't look at us, look at the data, but you know, the data has already made the

14:38decision for them. Oftentimes when Powell would have a conference, we would see, um, the yields or the

14:44rates, you know, uh, move, he would move the markets by what he said. What happened today? Um,

14:49after this speech, you know, bond yields fell and then they picked up and then, you know,

14:56toward the end of the end of the day, they picked up again, especially the 30 year, uh, yield. So,

15:02you know, it's the market is to me, I mean, I, I just look at this. I think this is

15:09Lori Logan

15:09and Beth Hammock's fed, you know, they're the ones pushing this. So I think the market just runs off of

15:16them and they're going to run off the data because we, we, we didn't have like, you know,

15:21an inflation report that was booming. We didn't have, um, a labor data that was, you know, showing

15:27over 150,000, a thousand jobs and they still took yields higher. Now, part of this is the conflict,

15:34right? The conflict has consequences. And if you go look at how the bond market is trading,

15:40it trades more off of Iran than the, than the fed. I mean, we just have these moves up and

15:46down.

15:46So the, the conflict has to end if you want, because if Kevin Warsh wants to pull back,

15:53we can't have an economy, which is three headlines within a day. That's confusing. Um, so that's

16:00where we're at. These are just, everyone is trying to adjust to Kevin Warsh's, uh, talking points, but

16:06I just look at it as conflict is still going. Bond yields are high. The Beth hammock and Lori Logan

16:12wanted rate hikes. They got it through market pricing. And now September is next on the list.

16:18And we're going to have to see how this goes, but it would be more interesting to see how the

16:23bond

16:23market would react if nothing was happening in the middle East and ships were flowing and stuff like

16:29that. So, and I go back to what president Trump said with Stephen Meyer and everyone else. If energy

16:36prices fall, everything falls with it. That was their marketing line because they said, we are

16:41kicking people out of the country and we're allowing less in there. So there's going to be less need for

16:46rental supply and the growth rate of, you know, rents will go down. That was their two talking points.

16:52Well, the conflict took away the other one. Right. And you know, the rental disinflation that we saw

17:00in, in CPI doesn't really portray itself to the PC data where it's like, you know, shelter is like

17:0540, 44% of CPI. It's like 16, 17% of PC. So the durable goods and those things are

17:12going to really

17:13matter. It gets really fascinating, but I just, I just think Beth hammock and Lori Logan one, this is,

17:18this is their fed. And, uh, uh, there wasn't a real pushback, um, from, uh, Warsh except for him

17:25saying, Oh, we're looking at markets and, and seeing what they do. And to me, it's a lot has

17:31already been priced in here. And to make that next leg higher, you need the conflict to get worse

17:37because that's a big thing. Now, um, you need the fed to get even more hawkish in what they're

17:42talking about because the market has already got that rate hike into the system. So, you know,

17:46you made the point yesterday that like, or, or, and just now, you know, if you wanted rates to fall,

17:51here's what has to happen. We have to, you know, the conflict has to be over this, but it doesn't

17:55feel like there's a, there's a really good, you know, clear path to rates going a lot higher either.

18:00So you feel like we'll stay in this range. You know, I mean, today's pricing, or, you know,

18:05I think mortgage rates were like 6.78, you know, bond yields ticked up a little bit. So, uh,

18:11Sarah, where if you ever see a mortgage spread, give it a Christmas, Valentine's, Thanksgiving,

18:18Easter, every holiday, you might give it a birthday gift. If mortgage spreads, we're not

18:23almost back to normal. We are near 8% today. Everyone's having a different conversation. And,

18:29you know, the federal reserve, you know, it is interesting when Beth hammock said, well, I know

18:34that the rates are restricted for housing, but we can't do anything about it because of the mortgage

18:39rate lockdown. Do you see how much I despise the mortgage rate lockdown conversation that it

18:44doesn't matter if, even if mortgage rates get to 6% and nobody's going to give up their rates.

18:50The mortgage industry stabs itself in the heart, in the head, you know, by constantly saying that,

18:57oh, right. Nobody's going to move or nobody. And you've got a fed official saying it, even though

19:03we've seen the data improve when rates get near 6%. But if that's a mindset of Beth hammock,

19:09who I think is more powerful right now than Kevin Walsh, it doesn't matter to her. There's no way

19:15housing will never grow again because we're not going to get rates down to 3% or 4%. And that's

19:19just not how it works, right? We have seen growth get there. We just get near 6%. So thankfully,

19:26the spreads are there, right? But again, hopefully now people can realize whatever people thought about

19:32Kevin Walsh bringing rate cuts in, you know, or, you know, mortgage rates going lower or the fed funds

19:39rate. It's not going to happen with this board. You know, he is a toothless tiger in a zoo with

19:46big

19:46lions, right? And, you know, the lions don't really like him. You guys don't know what you're doing for

19:52all these years. It's your fault. We're going to bring in all these new people in and we're all going

19:58to learn. We're all going to be at a learning curve with Walsh and everyone out here. But I thought

20:03it

20:03was a day for Beth hammock and Lori Logan to, to stand on top of the podium and go, we

20:08won

20:09because where real yields are. So we talk about it in our articles, but I think it was good to

20:14see

20:15that Kevin Walsh, Hey, listen, the market already priced in some stuff and we'll see how it goes next.

20:20We absolutely will. Thanks for being all, uh, all over it today, uh, with the article,

20:25with this podcast, obviously with your social appreciate that and appreciate you bringing

20:29all the nuance to it. Thank you so much, Logan. Pleasure Wheeler.

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