The Fed hawks send mortgage rates higher

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about who the market is paying attention to at the Fed, and what that means for mortgage rates.   Related to this episode:   Fed hawks are on the war path, sending mortgage rates higher  https://www.housingwire.com/articles/10-year-yield-fed-hawks/   HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q   HousingWire AI Summit – August 11  https://events.housingwire.com/AI-summit-2026?utm_source=housingwire&utm_medium=website&utm_campaign=hwd_podcast_0728   HousingWire Mortgage Banking Summit – October 1  https://events.housingwire.com/mortgage-banking-summit-2026?utm_source=housingwire&utm_medium=website&utm_campaign=hwd_podcast_0728   More info about HousingWire  https://lnk.bio/housingwire   The Top 5:   Fed hawks are on the war path, sending mortgage rates higher  https://www.housingwire.com/articles/10-year-yield-fed-hawks/   Chris Gallo enters guilty plea in federal mortgage fraud case  https://www.housingwire.com/articles/chris-gallo-guilty-plea-bank-fraud/   How Compass used technology to chart its course to the top  https://www.housingwire.com/articles/compass-ai-assistant-home-platform-2/   ICE posts strongest quarter for mortgage tech since 2022  https://www.housingwire.com/articles/ice-mortgage-tech-557m-q2/   NEXA’s Mike Kortas criticizes loanDepot, pitches LOs to switch companies amid ongoing lawsuit  https://www.housingwire.com/articles/nexa-loandepot-los/   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

00:11Welcome, everyone. I'm joined today by lead analyst Logan Motoshami to talk about who the

00:16market is paying attention to at the Fed and what that means for mortgage rates. Before we dive in,

00:22here are the top five trending articles on HousingWire.com. First up is Logan's article,

00:26Fed hawks are on the warpath, sending rates higher, followed by Chris Gallo enters guilty plea in

00:32federal mortgage fraud case. Then we have how Compass used technology to chart its course to

00:38the top and ICE posts strongest quarter for mortgage tech since 2022. Finally, we have Nexa's Mike

00:46Cordes criticizes Loan Depot, pitches LOs to switch companies amid ongoing lawsuit. Lots happening

00:52over there. You can read all of that by becoming a subscriber using the code podcast 20 to get a

00:5820% discount. Okay, Logan, welcome back to the podcast. Sarah Wheeler, right before we go on air,

01:04make sure to let me ask some questions, you know, so I know I can I could go on a

01:10rant at times, but

01:13it is Friday morning. And what a day what a week, what a week this has been. So this is

01:18going to be

01:18more of a generational talk in terms of how to look at the the housing market and the Federal Reserve

01:25going out for the rest of this year, until someone wants to put their big boy pants on and do

01:31their

01:31job and how we should think about mortgage rates with the new Fed chairwoman, Beth Hammock from the

01:39Cleveland Fed. She's running the show, the bond market's running off of her. So I upgraded her title.

01:46Yeah, so okay, we had the three Fed hawks come out today, after the FOMC statement, giving their

01:53statements on you know, why they dissented, why they wanted to raise rates. And so you did a deep dive

01:59into it into why each one of these hawks feels the way they do and why they're now running the

02:05Fed.

02:06You know, it's all I care about is how the bond market trades. So it doesn't really matter to me.

02:15Now, of course, I have a bias. I know this. I'm hashtag anyone but Warsh tattooed on my chest. I

02:22wouldn't let the guy 500 feet near the Federal Reserve. So I realize that some people might take

02:29this the wrong way. But he doesn't want to play right now. He wants to make water balloons at a

02:37birthday party and wait for his task force. Well, the bond market doesn't wait up for anyone. And so

02:41right now, to me, the 10 year yield and mortgage rates, thankfully for mortgage spread today more

02:48than anything else. But the bond market is really moving off of the most hawkish person in the Federal

02:56Reserve. And that's Beth Hammock. And, you know, the question is, what does Beth Hammock want?

03:01Because they ain't Warsh, right? All they need is four more people for rate hikes. But it doesn't

03:06really, I mean, we are pricing in, you know, a good amount here on the long end. And, you know,

03:12some people could say this, you know, there's the Japan effect, you know, they're going to intervene

03:16in the end of Treasury. But all I know is Friday morning, we had a trifecta of bad news on

03:22the

03:22conflict. We always said that the 10 year yield to go much higher from here really needs bad news

03:27from the conflict. And we had missiles at bases, we had tankers blown up. And we also had, you know,

03:33this leak that maybe President Trump and Netanyahu want to do a land blockade. So you put all those

03:39things together, missiles, bases, tankers, and a possible land. And then Trump also throughout the

03:49day said, we're going to hit them hard. We're going to hit them hard. They're almost out of

03:53missiles or they're, you know. So that's, if you look at how the bond market trades on these

03:58headlines, as the Fed got more hawkish throughout the year, it really does not like any of the negative

04:03news on the conflict. But then on top of that, you know, after the Fed meets, usually, some of the

04:10Fed members go out there and give their why they did this. All the hawks tend to do it together.

04:16So it's not by accident, but Lori Logan, Neil Kashkari, and Beth Hammock all came out. And to

04:24me, Beth Hammock had the more kind of aggressive take in terms of, you know, she was a hawk all

04:32this

04:32time, but she couldn't get, you know, realistically, she could not get her rate hikes in last year with

04:40the job market where it was. Because remember, Beth Hammock was like, the labor market's fine. There's

04:43nothing wrong with it. And, you know, we'll play catch up if it does. So she's leading the show,

04:49but she sees full employment at 4.3%. So in this context, you know, she needs multiple rate hikes.

04:59So the bond market is starting to say she's going to run the Federal Reserve and the 10-year yield

05:04is

05:04going to be really run how hawkish she'll be. And if she could get four more people to follow her,

05:10they can get a hike in September. But because, you know, she probably wants six rate hikes into

05:16the system. I don't know if there's enough votes right now for something like that. But

05:21that's where the 10-year yield is going on days where you see Fed hawkish statements,

05:26but also conflict bad news. Because Beth Hammock was one of these people when

05:30oil prices fell. I mean, a lot of the Fed members were saying the conflict is bad. But when oil

05:36prices

05:36were falling, she even said, hey, this is bad news itself for inflation because consumption,

05:41people could consume more. So you kind of want to go with her until Kevin Warsh wants to do his

05:47job.

05:48And then in this context, you know, we're all kind of somewhat held hostage to the Iranian conflict

05:55news until that settles down. But again, a lot has been priced in. But on a day like this was

06:02a

06:02really good example. When you have conflict and all Fed hawks together, double whammy on top of,

06:08you know, some news overseas on what Japan was dealing with.

06:14Yeah. So the Iran conflict continues to be this other variable, right? And as you said,

06:20the hawks were very vocal when oil prices started going up, especially when they were over 100.

06:25They haven't been as vocal now that they've come down, but now they're rising again. So do they

06:31have a point on the inflation at this point? The concern is always now, we had a few weeks where

06:40oil was getting through. And that's kind of somewhat now, I think oil is getting through more

06:45than what the data shows, but still time, right? We're, you know, you know, every week that goes by

06:52and nothing gets done in terms of, and now you have to worry about the Red Sea and the Houthis,

06:59you know, you can get oil prices to shoot right back up higher. And because of that,

07:06diesel prices and everything that's, you know, Neil Kashkari talked about, we've had multiple

07:11supply shocks into inflation. We had the pandemic, we had the Ukraine war, we had the trade war,

07:16and now we have the Iranian conflict. And, you know, you're supposed to, in theory, just let the

07:22supply shock work itself out to get back. But multiple years of shocks and multiple years of

07:28having inflation above target, you know, at where they are right now with the Fed funds rate,

07:34they're not comfortable with that. And they also say this AI is not the disinflation that people are

07:41talking about that, you know, we're going to lose 20, 30 million jobs, and, you know, everyone's

07:45going to be unemployed. But in a sense, the unemployment rate is fine. The labor market is

07:50solid. In their eyes, jobless claims are low. But the AI spending, the data centers, the electricity,

07:57the construction, right? I mean, if you look at how construction is going, right, commercials not

08:02getting built, housing starts is probably worse than what the data even shows. But construction in terms

08:09of AI data centers being brought out. And then also, you know, they're, they need labor, right? So

08:16the kind of the hunt for labor out there, and you put them all together, they have a kind of

08:22a coherent

08:23thesis all working together, they need to get the other ones on board, you get four more people to

08:31join the Hawks, you got your rate hike in September. But I still think Beth Hammock runs the Federal

08:37Reserve and monetary policy in the United States of America right now, not Kevin Walsh, or, you know,

08:43the market tends to go with her view at this stage. But Friday, I thought was a really good thing.

08:48You

08:48had everything. If you wanted higher yields, you had all of it into one basket on one day. And with

08:55all

08:55that said, mortgage rates, 6.83%. Not that much different from last year. So mortgage spreads are doing

09:05their thing. This is why I say it's difficult to get mortgage rates above 7%. But we're willing to go

09:1037 to 43 basis points higher if the conflict continues. And the Fed gets more hawkish from

09:19that 6.75 limit. So we're still kind of in that range. And for the right reasons, these things are

09:25kind of working together in this market environment.

09:30So tell me about, you know, you mentioned the task force. You're not a fan of this,

09:34of Kevin Walsh's task force. Why not? Wouldn't it be great to get more input into the system?

09:43Sarah, I just don't trust this guy. Okay. So if you're telling me you're doing a task force

09:50to get data that you want to use, you know, for your, maybe to please your boss to get rate,

10:01you know, cuts into the system. So this is why I just,

10:07I don't care if you want to get a ton of data. Listen, if the Fed wants to use us

10:11for our tracker

10:12data, that's fine. I just think when the market tries to sniff out you trying to

10:19massage things for your point of view, they're not going to care because the Federal Reserve

10:25members do not like Kevin Walsh, whatever anybody says. So they are, they are specifically being

10:32hawkish, you know, maybe louder than they would have been. So this is why I, it's not that not

10:39having more data sources. That's fine. But the market is viewing this as Kevin Walsh trying to

10:47pinpoint, you know, pinpoint stuff that he wants to use and then try to make a dovish case.

10:53But if the other inflationary data is running there, all the other Fed members are going to go,

10:58listen, there's more of us than you. So, but the task force itself, which I don't care,

11:05I don't really care that they're doing the task force, but he's, it seems like he just got the

11:10job and just says some things that I'm not going to do anything until the task force is ready.

11:15You know, so

11:18with the president we have now and all these wild variables between trade wars and Middle East

11:24conflict, it's more difficult for him to do that job, right? If it was, if it was less drama out

11:33there, he might be able to easily get away with this, but everyone cares about what's happening

11:39today. So the leader is Beth Hammock. So that's why all I care about is how the 10-year yield

11:43trades.

11:44I don't care if it's Walsh, Waller, Hammock or anything. All I see is conflict, bad, and the market

11:51is taking Beth Hammock. So this task force thing, you know, people are trying to like, you know,

11:56I know one Wall Street strategist says, you know, we're not buying it. We just think he's trying to

12:01get the data he wants to try to convince for rate cuts, which I know a lot of people in

12:06the mortgage

12:06industry or real estate would like, but that's not how the Fed, all the Fed members have to believe

12:12in that. So the concern I had, which you and I have talked about, is that Kevin Walsh has pretty

12:18much for eight years disrespected the Federal Reserve. He kind of says, you guys have done

12:22everything wrong. We're going to do this whole new way. And the people working there are like,

12:28so it's, it's a conflict, right? You know, I mean, could you imagine if I had a doomer for eight

12:35years, say, Logan, you're wrong. I go, homie, no, it's your take. Then he comes and housing wire and

12:40I have to work with him. And he says, we need to do, we need to use different data. Cause

12:44we don't like,

12:45hell no, we're not doing it. So trust has to be built here. And it's, it's unfortunate for Kevin

12:55cause he's doing this in middle of a conflict, which is impacting yields. But I don't, it just,

13:02it just seems like people are looking at this task force more like him massaging data. So I love,

13:07I love all data, more data, the better, right? I, this is not, you know, me being against the task

13:13core itself, but it's like, people don't trust it. So it's interesting how often in what you're

13:20saying, it really comes down to personal relationships, right? We think of these

13:23things as like, Oh, it's all data-based and it is to some extent, but also, I mean, a lot

13:28of politics

13:29is knowing how to make friends and influence people. Right. And especially on the fed, you have to be an

13:35influence there. Um, and even, you know, uh, Jerome Powell, who, who you had, you liked on certain

13:42things, thought he was way too slow on other things. Um, you know, he wasn't able to, to win

13:47over all these people either. You know, the, the thing is this, um, we might have something in the

13:54first time in history, at least I think it is, I might be wrong here. Um, we might have the

14:02fed

14:02hike rates with the fed chairman, not agreeing with it. I don't think that's happened. I know I

14:09might be, I might be totally wrong, but I don't believe that has happened. Now, if Kevin wants to

14:15talk about it. Okay. But it's just a very, this is what I was concerned about. Kevin comes in,

14:25nobody trusts him. He's doing his task force. Nobody trusted that wall street doesn't trust the task

14:30force, you know, and then he's not talking much. And then we have drama everywhere. The show 24.

14:38If it was little house in the prairie, you know, Michael Landon, you know, walking around milking

14:44cows, whatever he did, but it was more calm. It's, it's workable. It's just in this environment,

14:51it's probably the wrong, you know, wrong time. So maybe it gets better. Let's hypothetical.

14:57Let's say the conflict is over. Let's say the trade war is over. Could you imagine this?

15:03We have no tariffs. We have no conflict. It's just boring consumption-based economy. You know,

15:08things just, I think the last, last decade, it was a lot of drama, but now, you know, I think

15:16it's,

15:16it's, it's difficult for him to what he wants to do in this environment. And nobody cares about,

15:22well, we'll give you six months until, you know, so I just think he's, he was put in an unfortunate

15:28spot for his own agenda by having chaos and Jack Bauer and Chloe and, you know, all the things that

15:36are happening around the world. But, well, we should probably get the task force up and ready

15:42in 2027. So I'll be more curious to see if he's willing to talk more, if that's the case,

15:48or show data lines that, you know, people are looking for, because if we're supposed to all

15:53follow new data, then, then, you know, we all have to track it, which I don't, I don't, that's fine.

15:59I don't really care about what it is, but I'm starting to get a sense from wall street as like,

16:05they don't trust him. I don't trust him, but that's, that's my own personal thing before this.

16:11But if wall street is starting to lose faith in you, then who did it go to Cleveland president,

16:17Beth hammock and Beth hammock wants rate hikes because the unemployment rate is low and full

16:23employment. So you got to go with her takes more than anything else. And she is taking charge

16:27of the federal reserve while somebody is making party balloons and giving it to kids until the task

16:35force is ready. Okay. So the one thing that could change all the Hawks minds, right? Is if jobless

16:41claims break, or if we get more softer economic data, what are the chances that we're going to see

16:46that? Well, I mean, here's the thing with, with, with the jobs data, as we try to explain over the

16:53last year, I have never seen the trade war first year work. I've seen it twice now and it, things

17:02don't

17:02work out, but we had a trade war, we had a shutdown, we had all this stuff. So we actually

17:06had negative

17:07job prints last year. Um, population growth is slowing down because immigration is slowing down

17:13and we're deporting people. So there's less people, right? If my theory is correct, the rebound that

17:20we've had in jobs is really, this is like what we saw in 2019 when there was the second year

17:25of a trade

17:26war, things just operate a little bit better because everyone's just adjusting to all the noise. And then,

17:30you know, what Trump did in 2019 is, was that, you know, he started to make deals and that was

17:34a

17:34very, very small trade war. I mean, that was like NAFTA 2.0 and, you know, back and forth between

17:39China, Larry Kudlow would come out and go, we are, we're doing, you know, here is, it's, it's much

17:44different. But what, what we've seen is that the collection of revenue is, is much less than what

17:50people were expecting. So there's, there's some massaging of that on the side. And the Federal

17:55Reserve went into this year thinking, Hey, listen, we are going to let the trade war thing

18:00work itself out. And then in the second half, that should fade away. But the problem is we did

18:04that. And then the conflict happened. And then it's like the labor data got better. So the labor

18:09data got better. And the conflict are the two things that to me drive rates up there. So

18:16conflict ends, you take one variable out, then you need to see if the, you know, tariff inflation

18:22winds itself out, then you could get a little bit more calming down because then that's where

18:27the Neil Kashkari's, even though he's hawkish said, I'm going to wait and see, you know, we'll

18:33manage it because it's, it's a very, it's a very unique situation. What can the Federal

18:38Reserve control on the long end mortgage rates, but the housing market existing home sales are

18:44already low. Housing starts are heading toward a recession. The labor data in the residential

18:50is rolling over. It's not crashing yet on that side. So what are they, what are they

18:55getting? The long end of the market mortgage rate, it's not like the housing market was like

19:00becoming a big part of GDP. So it's, it's difficult, right? In this, in this sense, because people

19:07go, well, all they're doing is putting mortgage rates higher right now. And, you know, so I

19:13understand it's, it's confusing for everyone, but just remember, man, you're going to hug a

19:19mortgage spread, man. Hug a mortgage spreads, do a slow dance, whisper in its ear, say good,

19:25good, good spread, good spread. Because the only reason mortgage rates are not 7% and higher today

19:33on this Friday morning is because mortgage spreads got better. And we're, we're not quite back to normal

19:39yet, but it's good enough to keep things at bay. And we're not that far from what we had last

19:43year

19:43out there. But last year, the labor data was getting softer and stuff. So

19:49the AI taking all the jobs didn't pan out. I'm shocked. But again, if we're, if we're limiting the

19:57labor force growth, that means there's less people working or looking for jobs that can keep the

20:03unemployment rate low. So just remember Beth Hammock. That's what she said today. She said 4.3%

20:08unemployment rate. That's my full employment data. I'm good with that. So we got to go with what she

20:14says. She's the leader right now. So. So interesting. Well, you know, we have to give our

20:20caveat, caveat, whatever on, on Fridays, because we could reach a deal, maybe sort of as a lasting deal

20:29tonight, tomorrow, Sunday, or we could see like a huge escalation. There really is absolutely no way

20:35to tell right now. Um, because things are so volatile, but you know, it's Friday morning,

20:40who knows what's going to happen over the weekend. I do really like your idea that like little house

20:45on the prairie. That's what we should have been talking about. We should have said it was, it's

20:49our fault because we said, Sarah, it doesn't matter. You know, uh, president Trump's an agent of chaos,

20:57you know, there, there, there are, there are no normal times. And, you know, this isn't like Steve

21:03Mnuchin is here or any, any, you know, the, the people that are surrounding him, the white house are

21:08like, you go homie, you do what you do, you know? So, um, the only caveat, right. I'm going to

21:19give you

21:19is that it's August getting closer to midterms, right? We get closer to midterms. And if the

21:30Democrats take the house so far, I don't think it's a, the Senate is still going to be Republican,

21:38at least from what I've seen, but at least maybe there's some balancing there, uh, out there. Cause

21:44kind of Trump's doing his thing. And people ask me like, why, why are we, why are we doing the

21:48Iran things? Guys, let's think about this. We went into Venezuela. We were going to go into Cuba if

21:53the Iran thing, and then we're talking about taking Greenland. This has all been planned guys.

21:58This is all, but this has nothing to do with nuclear weapons per se. This is, I, I, you don't

22:03go into Venezuela, Iran, and then Cuba, and then talk about taking Greenland, unless this is a bigger

22:08strategy. And to me, it's, it's China, right? But also if it's China and the oil thing, it's, it's

22:13problematic, right? So conflict creates chaos, right? So, uh, this is, this is, this is what

22:20happens, you know? Um, but maybe closer to midterms, you know, you get a little bit more

22:26pressure from, uh, Republicans, especially if some of these close Senate areas are getting closer,

22:31uh, uh, maybe you get some of the, but all I know is that the 10 year yield, now that

22:36the Federal

22:36Reserve hawkish does not like this conflict and any kind of bad news, you know, and even when we get

22:43good news, it's not like the 10 year yields going down to four and a quarter or anything

22:47like that. You just see a reprieve, but, but the escalation of this conflict at this stage

22:52is I'm, I'm mindful of now, uh, because the Iranians simply are just like, you know, it's

22:59like every time Trump does a, does a truth social post, they like counter it right away,

23:04you know? So there are, they are doing whatever they can in a sense. They're trying to be

23:10kind of a, a, a, a more of a, of a pest to a social media strategy, but boy, I

23:16don't know.

23:17It's that's the, that's the only caveat I could say is that the closer you get to midterms, maybe

23:21you get a little bit more pushback from Republicans in the Senate. The house always tries to rebuke

23:26the war, but then the Senate kind of pushes it back. So we'll see. I mean, it's, you know,

23:30you know me politics, political economic theory, I'm not a fan of, but if you're,

23:34if you're trying to think about a way to, to close this Iran situation, I'm pretty sure

23:40we're going to go into Cuba right after that. Um, but maybe the con getting closer to midterms

23:47gets, gets Trump to deal in a way that he doesn't really want to, but you know, he's almost forced

23:52to. So interesting. Okay. Well, thank you so much for keeping up on it. You're writing articles

23:58every day. You're, you know, we're talking about this on the podcast because things are changing

24:03fast, but we've got you covered. I never thought I would say fed chair woman,

24:08Beth hammock, but that's what the 10 year yield is doing. So I think it's what the market pays

24:17attention to. Yeah. It really is. It's a very, very unique year. I mean, to go from, because I,

24:25I still think it's so many people, it's hard for people to believe that the labor market rebounded

24:29because we always have these negative revisions, but always remember the federal reserve told us

24:33or told the marketplace, we have very, very low break evens. So 33,000 and above for them is okay

24:42because that keeps the unemployment rate, you know, a low and Beth hammock, she's the main hawk. Now,

24:48you know, she said my full employment is 4.3%. So the thing has to go up higher for her

24:54to change

24:54her tune. If she changes her tune, Neil Kashkari will be, yes, yes, Beth, you're in control.

25:00Lori Logan would agree, but as of right now, you know, follow Beth's words.

25:07Okay. We will do it. Logan, thank you so much. We'll talk again soon.

25:11Pleasure.

25:12Have a great weekend.

25:13Will do.

25:14Will do.

25:15Will do.

25:16Will do.

25:17Will do.

25:22Will do.

25:23Will do.

25:24Will do.

Category

Transcript

Comments

Recommended