Will Spring Home Sales Fall Flat?


Mortgage Purchase Applications

Last year (2014) we had double-digit declines in mortgage purchase applications year over year, even with falling interest rates .  So far this year, as we are in month three, demand has been flat, year over year, to slightly higher, but it is not meeting my expectations of 5-10% growth, which would still be quite modest since we are comparing it to a 21st century low set in 2014. Interest rates are lower this year as the 10 year yield got near to my predicted 1.60% level with a 1.64% print in 2015.  The low rates however, haven’t created increased mortgage demand.

Mortgage Purchase Applications and Mortgage Rates Declines Since 2007 (credit  Professor Anthony Sanders)


Today’s mortgage purchase applications number showed 3% year over year growth, which is a start.  But better than 3% growth is  needed to  improve the market from the 21st century low set in 2014. There are still a few more months in the spring selling season to make up for our slow start in 2015 but by June the season will be over and mortgage purchase applications will start their traditional seasonal decline in volume.

Existing Home Sales

Existing home sales, so far this year, are showing year over year growth but since last year sales were so soft, this is not necessarily evidence of a healthy market in this sector. Cash buyers are under 30% for the first two months of this year, whereas in January and February  of 2014 they were 33% and 35% percent of the market, respectively.  Cash buyers have been holding up the housing market with their “over-participation”. Now that we are seeing fewer cash buyers  mortgage buyers will need to pick up the slack in order to have growth in this segment.  I predict a slight year over year gain for total existing home sales as long as cash buyers stay in the market with their current participation rate. We have just started the spring selling season so we will need to see a strong uptick in the Seasonally Annual Adjusted Rate of Sales (SAARS)  in order to achieve over 5.4 million peak sale for the year.

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First Time Home Buyers

We’ve heard a lot of hype about first time home buyers making a comeback in 2015 to pick up this slack and drive overall growth in the market.  But the painful truth is that first time buyers  are  still below 30%  of the market (last year they were 29% of the market) whereas in a healthy market we would expect them to make up about 40% of the market. Household formation numbers are improving which is the first step in the social cascade that leads to home purchase. Rent , date, mate, marry, 3.5 – 6 years after marriage home purchase, is the social sequence we need to improve this segment.
Our biggest age group in America is the 23 -25 demographic.  They will need some time to mature into  first time purchasers.

New Home Sales

After a huge miss in sale expectations in 2014, new home sales are showing growth in the first two month of the year.  The numbers reported are confounded with large margins of error but do show upward momentum. I expect total growth of 8%-12%, year over year, for this sector, but keep in mind this makes up only about 10% of total home sales.  Builders could potentially generate more sales if they were willing to incentivize the middle-income buyer instead of focusing only on the wealthy buyer. We saw some growth in 150K -$299K price range, but a large percentage of sales still, are in the over $400K range.



So what can we look for in the Spring of 2015 for housing?  Mortgage purchase applications are flat to slighter higher, existing home sales look to be  slightly higher for the total year number.  New home sales are showing  double-digit growth but are still tilted toward the upper income home level and make up only a small part of the overall market.

These metrics are no surprise to me because my core thesis since 2010 has been that we don’t have enough qualified home buyers in America (once you remove the wealthy cash buyers) to drive a normal healthy market.

Added proof of this is that the Federal Reserve’s emergency interest rate policy of zero percent is still in place seven years into this economic cycle. The 10 year note is below 2%, a low which hasn’t been seen since 1941-1945..  These facts demonstrate that the Fed does not believe we have fully recovered no matter what they verbalize to the market place. In fact mortgage rates have been below 5% since early 2011 and so has the zero interest rate policy  but this has not driven strong mortgage  demand from Main Street.


Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial contributor for Benzinga.com

Interview With Joe Fairless On The Rental Demand In America

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Starting at 1:50

Prime takeaway, demographics equal rental demand for years to come



Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial contributor for Benzinga.com

Bloomberg Financial Interview: Housing 2015 & The Truth About Demand

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A key emphasis this year.

If cash buyers went back to their normal historic %, then both 2013 & 2014 existing home sales would be at the lowest level of this economic cycle.
We are talking about year 5 & 6 in this economic cycle not the first few years coming out of the recession. This troubling trend is why mortgage demand needs to grow to keep sales from falling more as total cash volumes continue to dwindle slowly.

Starting around the 1:50 mark

From Professor Anthony Sanders

Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial contributor for Benzinga.com

Gauging Housing Demand for the Spring of 2015 – Caution in the Wind



2014 was unique but predictable in regard to mortgage demand  for purchase applications. Looking back on the data now, it was down every single week of the year, year over year,  and negative by double digits every week except for four weeks. The good news ( cough cough) is we have pulled ourselves out of the morass that was 2014 and the New Year is upon us.

Comparatively speaking, my outlook for purchase applications is not as negative this year. My 2015 housing predictions include at least 5%-10% growth, year over year, in purchase applications. This is primarily due to having such a low bar in 2014.

Because we experienced 21st century lows in mortgage purchase applications in 2014 and we are now in the 7th year of this economic cycle with employment to population rising, it is not a stretch to expect at least 5%-10% year growth in this purchase applications in 2015. Of course, year over year growth in purchase applications doesn’t mean a recovery when we experienced such low numbers in 2014.  Expect housing bulls to highlight the year over year growth without adding the appropriate context.

Let’s remember the 2014 bar for housing metrics is low as is shown in this graph from Anthony Sanders.


With regards to interest rates,  the ten-year note is near my predicted low-level range of 1.60% , keeping mortgage rates near the lowest rates of this economic cycle. If the 1.60% level breaks lower, expect a new low print of 1.34%.

However, if I am wrong and we don’t see any growth in 2015 purchase applications and existing home sales stay flat or even go negative, then we will need to admit that home prices have surpassed peak affordability in relation to income capacity. We know this is true for some areas of the country already. The rich can only buy so many homes and there hasn’t been strong household formation to drive first time home-buyer demand. No matter how low rates go, no matter how many jobs are created, no matter what all the king’s horses and all the king’s men try to do… if we don’t have and uptick in household formation  and see wage growth, we will not have a true housing recovery.

From now to the end of March we should see  some positive year over year prints. By the end of March we will be able to tell how the rest of the year will shape up. I expect existing home sales to benefit from the massive price inflation we saw for new homes in the past few years.  In 2015 builders are unlikely to cut prices in order to be competitive with existing homes.  New home sales only make 1/10th of  total sales though, so the buyer switch from new to existing homes will only have a marginal impact in total home sales.

I expect our prime middle class mortgage buyers to move forward with caution, to be price sensitive and budget conscious and thus drive a trend toward the purchase of older less expensive homes which will marginally help the total existing home sale numbers . And to that rejection of builders over pricing homes I say “Bravo”!

Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial contributor for Benzinga.com

2015 Housing Prediction Interview With David Lykken

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Interview with David Lykken starting at the 33 minute mark, talking about 2015 housing predictions and what we saw in housing for 2014.


2015 Housing Prediction Article Here:


Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial contributor for Benzinga.com

2015 Housing Predictions: The Bar Is So Low We Might Trip On It


2014 was not a great year for the housing market. Higher inventories in many areas and low mortgage interest rates lead to lofty promises of booming mortgage purchase applications and “nirvana” for new home sales. Alas, to the dismay of our many mislead pundits, these promises remained unfulfilled like the aspirations of a democratic candidate during the midterm elections. Despite the fact that mortgage rates were low all year-long, existing home inventory was up and rents have been high and rising, we still experienced negative demand year over year, even with the number of cash buyers 20% above historical norms. Starts, permits and all sales were disappointing in 2014: Mortgage purchase applications were down every single week of the year (year over year) and for only a few weeks had less than double-digit negative prints. The number of first-time home buyers who closed a deal hit a 21st century low. Thus, another chapter in the housing saga ends with the hard boot of reality kicking us squarely in the assets.

What went wrong? Forgive me for repeating myself (for the past four years, I’ve been singing this same tired song) but my number one thesis for why the housing market is not living up the tearfully whispered fantasies of real estates agents, economists, housing analysts and other experts is that we simply don’t have enough qualified home buyers to have a true housing recovery in America.

You get my drift: The bar for housing is so low that some housing bulls might try the predictable tactic of bellowing about exponential growth portending a miraculous recovery when all that is occurring is a bump up from a pitifully low base. I take a more measured (or perhaps jaundiced) view of what the future holds.

1. For existing home sales – I predict we will see somewhere in the area of 5.0 million -5.20 total number of homes sold in 2015, with these caveats; cash buyers continue to make up to 30% of the market, and, buyers continue to migrate away from the purchase of new homes in favor of existing homes due to their better value for money and their dispersed geographical distribution. If cash buyers back out of the housing market, and new homes are able to attract the upper income buyers then there is a risk that we will once again experience negative existing home sales, year over year compared to the 5.10 million homes sold in 2013. My prediction, however, is that cash buyers will remain in the market, soaking up the increased inventory and new home sales will remain weak because builders will refuse to lower their prices to meet the current economic realities. This is an increase from the number of existing home sales in 2014 but like last year, we will need the wealthy and the cash buyers to continue to buy a big portion of the homes.

2. For mortgage rates – I predict the 10 year note yield will be in a range of 1.60% – 3.04%, which means mortgage rates will be in the 3.50%-4.5% range. Even with stronger economic data from the U.S., other areas around the world such as Japan, Europe, Russia and even China are now experiencing economic slowdowns. My yield range prediction is based on recent history: In May of 2013, the 10 year note yield was 1.6% before it climbed to 3.04% over the next 18 months. If we see an upside break in the yield to over 3.04% this would be a bullish indicator for the economy, but it would also lead to increased mortgage rates. The bottom line is that I see no significant increase in mortgage rates from the 2014 peak which was roughly 4.5%. The short end of rates rising makes it very interesting for 2015 as the Fed dots are set to raise short terms rates in 2015.

3. For mortgage purchase applications- I predict some growth on purchase applications year over year, because we are at century lows. By the end of March to the first 5 months of the year we will see how much real mortgage demand we will have in 2015. I expect 5%-10% gains for the year. We have been hearing predictions of up to 5.5 million existing home sales. However, for that to be true you would need to see a 30% increase in mortgage purchase applications year over year, with no decline in the number of cash buyers. This is highly unlikely.

4. For the new home sector – I predict a replay of what we saw last year with a conservative estimate of 8% growth to an aggressive estimate of 12% growth. Other “expert soothsays” are predicting an over 25% increase in new homes sales in 2015, because demographics show a buildup in the need for homes. However, the Median Income to Median Home Prices (MI2MP) metric shows that new homes are more expensive than ever and therefore only an option for the wealthy buyer. If builders decided to provide some real incentives and discounts for their products, it is possible they could increase sales dramatically in 2015, capturing more of the “average buyers” – but the discounts and incentives would need to be significant before new homes could compete with the existing home market – and this would mean lower margins – a trade-off I don’t believe the builders are willing to make. Our experts made some epic misses in their prediction for new home sales, starts and permits in 2014. Hopefully their horrible performance provided a much-needed wake up call that debt to income capacity matters in an economic sector that is 90% dependent on mortgages.
For the multi-family new construction market, I predict rental demand will remain strong so starts, sales, permits and multi-family construction will rise but not as fast as many think.

5. For the rental market – I predict the trend to rent instead of buy will continue in 2015. Home prices are too high and even a 3% down payment is more that most Americans can afford at this point in the economic cycle. I’m enjoying the low gas prices as much as the next guy, but the extra $20 to $100 per month that is being saved at the pump is not nearly enough to improve the affordability of a home purchase. Our beloved, yet oh so often wrong housing experts are also predicting “the young” will come back into the housing market in 2015, leading to a significant uptick in first time home buyers. In order for this to happen however, we would need to see a corresponding uptick in the formation of dual income/dual assets households, but this hasn’t happened. The young will continue to make up less than 40% of mortgage buyers in 2015.
The 2.5 million home loans that are in some stage of delinquency are another factor to consider in the 2015 rental market. Some of those owners will lose their homes and have to rent – and those who foreclose are out of the purchase market and in the rental market for at least the several years it takes to repair their credit.

6. For home prices – I predict a modest increase of 1-4%. The low supply of homes on the market gives pricing power to sellers even with the soft demand. I expect inventory of available homes to reach a balance point of 6 months at some point in the year. Year over year price gains are cooling down and this is a good thing as the housing inflation in terms of price gains was simply too much for main street America.

7. The rich will still be a big part of the market place. The wealthy (cash buyers and those who make over 2.5-3 times median income) made up 45% of existing home purchases in the last several years. (For more on this and how hard it is for the middle class to own the debt of housing due to the massive price increases since 2012, see my Bloomberg interview at the BNY Mellon Stock Conference : http://wp.me/p1gHkh-oO ). I predict some decrease in cash purchases in 2015, but the wealthy will still be over-represented in terms of percentage of purchases in the coming year.

In general, I predict the economy will grow at least 2.5 -2.6% in 2015, an improvement over 2014 levels. Look for job creation numbers to be between 210K – 225K with some improvement in the wage growth. We have some positive economic indicators in the later part of 2014, such as increased industrial production, improved confidence in the small business survey, rising employment to population numbers and the best  monthly job creation numbers since 1999, which should set the stage for a healthy 2015 in terms of economic growth.

In a “normal housing market” we would expect to see 90% mortgage buyers (thus only 10% cash buyers) and first time home buyers would be 40% of monthly sales. Obviously we haven’t had a “normal” year in housing for nearly a decade and 2015 will not break this run of abnormality. So, although we will see an uptick in some housing indicators such as number of purchase applications and number of new home sales, this is largely due to the very low bar set in 2014.


Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial contributor for Benzinga.com

Bloomberg Financial Interview at the BNY Mellon Conference: Housing Reality


Podcast time 2:30 – 13:30

Thanks To Kathleen Hays, Vonnie Quinn & Bloomberg Financial for the invitation to the St. Regis hotel in Monarch Beach


Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial contributor for Benzinga.com