Why some parts of US 'may not be livable' for homebuyers

HousingWire Lead Analyst Logan Mohtashami joins Yahoo Finance to provide insights on the current state of the housing market.

Mohtashami emphasizes that housing affordability "depends on the labor market." He explains that if jobless claims increase, mortgage rates will likely fall, but if not, "then we'll stay at these levels." However, he highlights the improving spreads between the 10-year (^TNX) and 30-year Treasury yields (^TYX).

Mohtashami highlights the impact of climate change on the housing market, going as far as to say that "parts of the country might not be livable for a lot of homebuyers." He points out that as housing insurance costs rise amid natural disasters, "that's a problem" that could last for decades.

Despite these challenges, Mohtashami sees a "good story" in the housing inventory for 2024. He notes that new listings and active inventory are growing, although not significantly, but "it's good enough to give people more choices."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith

Video transcript

JOSH LIPTON: Logan, Mortgage News daily tells me that 30 year fixed we're back up to 7.34%. Where do we go from here. Logan, 6, 12 months ago, 12 months from now, where do you think we're at?

LOGAN MOHTASHAMI: Well, it really depends on the labor market. I think if jobless claims start to increase then the 10 year yield and mortgage rates will fall with it. If not, we're just going to be staying at these levels or even higher. And I think the labor market is the key for mortgage rates and mortgage rates could just get down toward 6%. The housing market could hold some of these sale gains. But I think another positive story for 2024. That wasn't the case last year, is that the spreads between the 10 year yield and 30 year mortgage.

They're improving this year. Last year that wasn't the case. The Silicon Valley banking crisis made the spreads worse. So we might have been a half a percent higher today if that wasn't the case.

JULIE HYMAN: Logan, even as we are seeing maybe mortgage rates forecast to come down a little bit this year. There is also increasing attention being paid to the other costs of owning a home that are not coming down. Things like insurance, things like property taxes. How much of an obstacle is that? And maybe even in some cases, a hidden obstacle that homeowners aren't entirely bargaining on.

LOGAN MOHTASHAMI: We have an issue in Florida where this might be the ground zero of does climate change really impact the housing market materially enough to where parts of the country might not be livable for a lot of home buyers. If your insurance costs are going up 20, 30% and you're at a risk of a hurricane, and it's very difficult to get insurance, that's a problem. And I think that's going to be a story with us for many decades to come.

Places like Texas that rely on property taxes as home prices have gone up. There's a sticker shock for a lot of homeowners and a lot of angry homeowners as well. So the total cost of housing is not just home prices accelerating, not just mortgage rates. But you've got to put property taxes and insurance into the equation. So it's pricey for a lot of people, especially for first time home buyers that finance more than 90% of their home purchases.

JOSH LIPTON: And Logan, another issue I want to touch on is inventory. What does inventory look like right now?

LOGAN MOHTASHAMI: Now this is the good story for 2024. That wasn't the case last year. Last year new listings data was trending at the lowest levels ever recorded in history. Inventory didn't go anywhere, home sales were at record lows and home prices were appreciating. Not a very healthy market. This year active inventory is growing, new listings data is growing. It's not by much. There's no silver tsunami or anything like that happening. But it's good enough to give people more choices. This means this will put pressure on price growth.

But to me, that's a healthier market this year that wasn't the case last year.

JULIE HYMAN: And Logan we haven't had a chance to catch up with you since the settlement with the National Realtors Association. And trying to figure out what effect this is going to have on commissions, on buyers and sellers commissions. What's your estimation of the effect that is going to have on the overall housing market?

LOGAN MOHTASHAMI: I always will believe that there's going to be a huge question mark for the buyer now because the buyer has been able to finance their home purchases through the selling equity that has been created through trillions of dollars of equity built in the housing market over the decades. And now they don't know if the seller is going to pay for it or not. So I think that will be something that we need to see at least 12 to 18 months of data to see how does that impact the buyer.

Of course, the seller gets to keep a little bit more of his money. But most sellers or buyers. So then that seller is going to be on the other side of the equation. So for right now, big question mark to see what it is. But definitely for buyers, they're just not a 100% sure how much money they need to bring in. And I think that's going to take time for it to work itself out on the visuals of how that's going to impact the home buying season.

JOSH LIPTON: Logan, always great to have you on the show. Thanks for joining us.

LOGAN MOHTASHAMI: Pleasure to be here.