Mohtashami:
Read
the
data

Mohtashami
kicked
off
the
sessions
by
talking
about
the
differences
between
the
current
mortgage
rate
environment
and
some
of
what
was
seen
in
the
early
days
of
the
financial
crisis
of
the
2000s,
saying
that
Americans
generally
are
in
a
much
better
position
than
they
were
back
then.

The
Fed
has
recently
indicated
that
it
is

not
likely
to
reduce
interest
rates
anytime
soon
due
to
economic
indicators,
and
Mohtashami
revived
a
2022
prediction
about
what
it
will
take
to
get
the
Fed
to
“break”
on
rates.

“In
2022,
I
brought
up
the
premise
that
the
Fed
will
not
pivot
until
the
labor
market
breaks,”
he
said.
“So,
if
all
of
you
are
looking
for
a
sustained
lower
move
in
mortgage
rates,
that’s
what
you’re
going
to
see.”

While
a
lot
of
the
oxygen
in
the
discussion
is
taken
up
by
inflation,
Mohtashami
asserts
that’s
not
what
the
Fed
is
primarily
focused
on.

“What
the
Fed
wants
to
see
is
the
labor
market
get
very
soft
and
to
the
point
that
it’s
breaking,
and
then
they
will
find
all
the
confidence
in
the
world
to
do
rate
cuts
and
talk
about
making
sure
we
have
a
soft
landing,”
he
said.

Reading
the
data,
he
said,
might
tell
a
different
story
about
the
situation
as
opposed
to
strictly
paying
attention
to
what
Fed
officials
are
saying.

Illuminating
data
points
include
wage
growth,
job
openings,
the
number
of
people
quitting
to
find
higher-paying
work,
and
jobless
claims
on
a
weekly
or
monthly
basis.
These
help
observers
to
monitor
changes
in
the
labor
market
similarly
to
the
Fed,
he
explained.

From
there
—
and
when
combined
with
employment
in
construction
and
housing
permit
data
—
the
thinking
around
rates
will
become
clearer.

“If
the
labor
market
gets
softer
and
the
Fed
starts
getting
a
little
bit
more
dovish,
then
not
only
can
the
spreads
get
better,
but
if
the
10-year
yield
goes
down,
there’s
your
6%
[or]
sub-6%
mortgage
rates,”
he
said.
“But
this
means
the
labor
market
has
to
break.
So,
we’re
all
focusing
on
inflation,
but
not
what
really
matters.”

Simonsen:
More
data,
less
‘vibes’

A
lot
of
the
conversation
in
the
housing
market
can
be
focused
on
“vibes,”
or
general
feelings
about
the
way
things
are
going.
Simonsen
explained
to
attendees
at
The
Gathering
that
focusing
instead
on
real-time
data
is
key
to
having
accurate,
predictive
indicators
about
where
the
market
is
at
and
where
it
will
go.

Simonsen
began
his
presentation
by
talking
about
an
early
Altos
interaction
with
both

Goldman
Sachs
and

Lehman
Brothers.
In
2007,
right
around
the
time
he
started
Altos
Research,
he
was
attending
a
conference
where
representatives
of
both
companies
were
speaking.
After
they
finished
speaking,
he
aimed
to
pitch
both
companies
on
why
they
might
need
the
kind
of
data
Altos
specializes
in.

He
recalled
his
pitch.

“I’m
Mike
Simonsen,
my
company
is
Altos
Research,
and
we
track
every
home
for
sale
in
the
country
every
week,”
he
recalled
saying.
“We
check
all
the
pricing,
all
the
supply
and
demand,
and
all
the
changes
in
that
data,
and
we
give
that
to
you
because
traditional
housing
data
is
months
behind
the
curve
before
you
see
what’s
happening.”

The
Lehman
representative
turned
him
down
flatly,
saying,
“We’ve
got
so
much
more
data
than
you
can
possibly
imagine.
We’re
making
so
much
money.
Don’t
even
bother,”
Simonsen
recalled.

The
Goldman
representative
was
more
open
to
hearing
what
he
had
to
say,
and
12
weeks
later
engaged
with
Altos
as
a
client.
A
year
later,
Lehman
Brothers
went
out
of
business,
Simonsen
explained.

Simonsen
asserted
that
monitoring
changing
data
points
on
a
daily
and
weekly
basis
—
including
inventory
levels,
new
and
pending
home
sales,
and
home
price
data
and
signals
—can
help
to
more
efficiently
track
the
impact
of
mortgage
rates.

“I
believe
that
our
obligation
is
to
communicate
with
the
data
for
everybody
in
the
cycle,
from
the
biggest
players
down
to
every
single
homebuyer
and
seller,”
Simonsen
said.

He
began
by
looking
at
fresh
inventory
data.

“The
biggest
takeaway
from
when
we’re
looking
at
the
inventory
numbers
is
rising
rates
constitute
rising
inventory
—
or
put
another
way,
demand
slows,
inventory
grows,”
he
said.
“And
that’s
actually
counterintuitive
for
a
lot
of
folks
who
are
just
casually
looking
at
the
data.

“They
think,
‘Mortgage
rates
are
higher,
nobody’s
going
to
sell,
therefore
inventory
is
going
to
fall
when
rates
fall
again.
Then
we’ll
finally
get
some
inventory.’
But
the
data
shows
that
actually,
the
opposite
is
true.”

Multiple
years
of
higher
rates
will
be
needed
to
return
inventory
to
pre-pandemic
levels,
but
inventory
growth
is
rising
across
the
country,
particularly
in
states
like
Florida
and
Texas,
he
explained.

More
home
sellers
are
also
starting
to
enter
the
market.
Last
year,
rising
rates
depressed
seller
participation,
but
higher
rates
are
starting
to
be
seen
as
more
of
a
norm.
A
general
sense
of
predictability
will
allow
more
sellers
to
enter
the
market,
he
said.

Prices
are
likely
to
remain
stable
due
to
higher
rates,
he
added.

“More
data,
less
vibes,”
Simonsen
said.

Fairweather:
Less
affordability

Daryl
Fairweather
of
Redfin
primarily
spoke
about
housing
demand;
generational
participation
in
the
market;
the
impact
of
climate
events
and
natural
disasters
on
homebuying
activity;
and
the
flexibility
that
renters
might
experience,
particularly
as
weather
events
become
more
prominent
nationwide.

“People
are
spending
more
and
more
of
their
money
on
housing,
and
housing
isn’t
getting
any
more
affordable,”
she
said.
“We
still
have
this
underlying
shortage
of
homes.”

But
the
presentation
was
primarily
designed
to
be
forward
looking,
and
in
that
respect,
interest
rates
and
inflation
are
elevated,
but
the
economy
is
growing.
Demographics
are
also
changing,
with
millennials
being
the
largest
generation
and
Gen
Z
being
smaller
but
increasingly
influential
in
the
economy.

Changing
preferences
and
economic
realities
are
also
disrupting
long-standing
paradigms
related
to
housing
in
the
U.S.,
she
said.

“It
used
to
be
that
homeownership
was
the
American
dream,
and
now
it’s
more
the
American
pipe
dream,”
Fairweather
said.
“People
just
feel
like
it’s
a
‘pie
in
the
sky’
thing
for
them
to
achieve
because
housing
affordability
keeps
getting
worse
and
worse.”

Climate
is
also
a
very
real
issue
having
an
impact
on
the
housing
market,
Fairweather
said.

“For
a
long
time
I
would
talk
about
a
changing
climate
and
people
would
say
‘That’s
a
problem
for
the
future,’”
she
said.
“But
now,
we’re
seeing
insurance
costs
going
up
and
people
are
deciding
where
to
live
based
on
the
climate.
It’s
becoming
a
more
and
more
important
issue
in
the
housing
market.”

Fairweather
shared
that
Redfin
experimented
in
2020
to
analyze
the
impacts
that
climate
change
can
have
on
homebuying
behavior
over
a
three-month
period
in
which
users
were
divided
into
two
pools:
one
that
showed
them
a
view
of
flood
risk
and
one
that
did
not.

“In
the
control
view,
there
is
no
flood
risk,
and
then
in
the
treatment
view,
you
could
see
flood
risk
for
every
single
home
that’s
on
Redfin,”
she
said.
“The
people
that
were
shown
flood
risk
—
if
they
were
previously
looking
at
severely
or
extremely
risky
homes
for
flood
risk
—
they
went
on
to
buy
homes
that
had
half
as
much
risk
when
they
saw
that
information,”
she
said.

This
communicates
a
potential
value-add
opportunity
for
mortgage
professionals
to
offer
more
robust
climate
information,
in
addition
to
where
interest
rates
are
projected
to
go
or
demographic
information.

“[That
can
help]
inform
them
about
how
to
make
the
best
homebuying
decision,”
Fairweather
said.