Logan Mohtashami on housing market economics
This week, HousingWire’s Editor in Chief Sarah Wheeler interviews Logan Mohtashami, HousingWire’s lead analyst, to discuss how the housing market performed despite impacts from the COVID-19 pandemic.
Additionally, Mohtashami dives into his most recent HW+ article that asks: should Americans buy a home in a super-hot housing market?
Here is a small preview of the interview, which has been lightly edited for length and clarity:
Sarah Wheeler: Housing market demographics is one of the hallmarks of your work and what you’re looking at to predict what’s happening next. So, tell us why 2020 to 2024 is so unique and why that informed your whole model.
Logan Mothashami: So, if economics is demographics and productivity, then housing economics is really driven by demographics and mortgage rates. So, coming from the weakest housing market recovery ever, the labor force peaked in 2007 and declined. Household formation has to work itself up because demand will never warrant it, which is probably my biggest disagreement with every economist and analyst who thinks we don’t build enough homes. Builders only build off of their own demand curve. It was the weakest new home sales cycle ever recorded in history; 2013 was a miss, 2014 was a miss, and 2015 missed estimates. In 2018 the housing market had a supply spike, but builders said it was the worst quarter since the great financial crisis: there was not only an 82% crash in new home sales, but we had the weakest recovery. However, come years 2020, you got a little bit more buyers, you have a little bit more demographic buyers than you had in the past. So, that should kick in and demand should pick up a little bit. That’s it, there’s no credit boom, you just have a little bit more buyers coming in. So, the demand should be there and stable. This is why I use the term replacement demand, stable demand. If I use the word boom, I need to show a credit boom and we don’t have a credit boom, just look at the purchase application data from 2002 to 2005. Compare that to 2018 to 21. No, it’s not credible, you just have people who just want to buy homes. That’s it. That’s all it is.
The Housing News podcast explores the most important topics happening in the housing market, mortgage, real estate, and fintech. Each week a new mortgage or real estate executive joins the show to add perspective to the top stories crossing HousingWire’s news desk. Hosted by Sarah Wheeler and produced by Alcynna Lloyd.