According to HousingWire, analyst Logan Mohtashami spoke at the American Credit Union Mortgage Association conference this week and outlined several structural factors keeping mortgage rates elevated above six percent. He explained that even if geopolitical tensions ease and oil prices fall, rates are likely to stay around six and a half to six and three quarters percent until the Federal Reserve signals clearer direction on rate cuts. Mohtashami noted that mortgage rates simply have not spent much time below five and three quarters percent in recent decades, making the current environment more typical than many realize.
One of the key dynamics holding rates up involves mortgage spreads, which represent the gap between Treasury yields and what lenders charge borrowers. While these spreads have improved significantly from their worst levels during the banking crisis of 2023, they remain a meaningful factor in the rate equation. Mohtashami pointed out that if spreads were still at their worst 2023 levels, mortgage rates would be substantially higher, which shows how much the market has actually normalized compared to that period of stress.
The labor market is unlikely to provide much relief for borrowers in the near term. Mohtashami discussed the concept of breakeven job growth, which is the monthly jobs number needed just to keep unemployment stable. With that threshold now estimated at roughly thirty three thousand jobs or potentially lower, the economy can absorb several weak months of job reports without triggering real concern about unemployment rising. He suggested that jobless claims would be a more important metric to watch for signs of serious labor market deterioration.
Despite the persistent affordability challenges, Mohtashami characterized the overall housing market as becoming healthier. Home price growth has cooled considerably, inventory is rising at a measured pace, and home sales are no longer declining sharply. He pushed back against comparisons to the pre-2008 crisis, noting that today's homeowners carry substantially more equity in their properties, down payments are larger, and loan-to-value ratios are far more conservative than they were in 2006 to 2008.
Mohtashami also addressed the popular narrative that homeowners with low mortgage rates are locked in place and refusing to sell. He explained that this group represents a declining share of the market as existing owners continue to transact and move through the market, with baby boomers, Gen X, millennials and Gen Z all actively buying and selling. The real constraint on housing demand is affordability and the cost of financing, not a shortage of homes or sellers unwilling to move.
What I am seeing locally in the Bay Area and East Bay is that Mohtashami's perspective aligns with what our clients are experiencing. The conversation with buyers is still fundamentally about whether their household budget can support both the down payment and the monthly payment at current rates, not about finding inventory or negotiating with reluctant sellers. For those of us working in Fremont and the broader region, understanding that rates may stay elevated for longer should help us reset expectations and focus on helping people make realistic decisions based on their financial situations rather than waiting for rates to drop to levels we may not see for some time.
