On The Market

What Happens When Rates Drop?

Dec 30, 2024

Logan Mohtashami, a renowned housing market analyst, shares his insights on the current state of the housing market. He discusses how increasing inventory and falling mortgage rates could signal a healthier market. However, he warns that this positive trend might reverse, complicating affordability for homebuyers. Logan also challenges the belief that lower rates always lead to rising home prices, emphasizing the importance of labor market conditions in predicting mortgage rates. Tune in for an eye-opening look at the future of home buying!

37:33

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Logan Mohtashami

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Quick takeaways

The current housing market is experiencing a split, with new home sales increasing while existing home sales struggle due to lower mortgage rates and historical price behavior misconceptions.

Improvement in housing affordability is reliant on mortgage rates dropping to the mid-fives, influenced significantly by labor market trends and overall economic health.

Deep dives

Current Housing Market Dynamics

The housing market is currently experiencing a confusing phase known as the 'baby pivot' stage, marked by a divergence between new and existing home sales. New home sales are increasing, particularly among publicly traded builders, which can thrive in a sub-6% mortgage rate environment. In contrast, the existing home sales market remains stagnant, unable to adapt to lower mortgage rates, partly due to misunderstandings around how nominal home prices behave historically. Despite a lack of inventory, real estate market participants are misinterpreting the current dynamics by equating home sales drops with inevitable price declines, which historically are not guaranteed.

Intro

5min

Understanding the Importance of Home Sales Volume

3min

Navigating Housing Inventory Trends Amidst Mortgage Rate Fluctuations

5min

Impact of Interest Rates on Housing Market Dynamics

12min

Economic Trends and Housing Market Insights

6min

Navigating Future Mortgage Rates and Housing Affordability

4min

Are we finally at the end stages of this harsh housing market? With housing inventory increasing, mortgage rates steadily falling, and inflation cooling, we might be returning to a much healthier time to buy a house. But one of these improvements we’ve seen over the past year could begin reversing, and that’s creating some interesting future scenarios. One that even we’re surprised to hear as we bring on top housing market analyst Logan Mohtashami.

Logan has referred to 2022-2023’s housing market as “savagely unhealthy,” but he’s a bit more optimistic now that we’re seeing relief. While we’re still not at 2019 inventory levels (which were already low), we’re slowly getting there. However, we could see the positive inventory trend start to reverse, leading to even more affordability problems for homebuyers. So what has to happen for affordability to see meaningful improvement?

Today, Logan is giving us his take on housing inventory, where mortgage rates could be heading, and why we may NOT see a spike in home prices even if rates fall significantly (something most analysts are bullish on).

In This Episode We Cover

Logan’s housing market, mortgage rate, and inventory forecast

Why our increasing housing inventory could reverse once rates start to fall

The one thing holding affordability back and whether Logan has hopes of it improving

Why watching the labor market and jobs numbers will help you predict mortgage rates

Were we wrong about the “lower rates = higher home prices” premise?

And So Much More!

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