Do Interest Rates Even Matter Anymore?

The Weekly Recap

Good morning and happy Friday! The Fed held rates steady, the US experienced the second year in a row of increased home sales, single women own millions of more homes than men. DeepSeek scared the markets as a competitor to OpenAI as the ladder accused the former of IP theft, commute times have dropped in Manhattan since congestion pricing took effect, the US economy grew 2.5% in 2024 and the Blue Man Group is coming to an end in NYC.

If you missed last weeks newsletter How Is the Luxury Market for Homes Performing in NYC, you can read that through the link.

Do Interest Rates Even Matter Anymore?

This week was a big week for my firm Nest Seekers International as we held our annual Q1 Summit here in NYC where our partners from around the world came in to discuss everything from expansion, to the health of global marketplaces, strategies for professional growth amongst many other topics. I hosted an Economic Forum with some stellar guests that ranged from a wealth advisor to a home financing specialist to a PhD in Economics and a new development expert. As the panel progressed we got to the question of, Do Interest Rates Matter Anymore?

Coincidentally, a few hours later, Jerome Powell gave his briefing following this months Fed meeting, saying that the data suggest that interest rates are no longer hampering growth, allowing the Federal Reserve to take a pause on reducing rates while monitoring the trajectory of inflation. With the new administration still in its infancy, Powell mentioned wanting to see new policies “be articulated” before making further decisions on cuts.

My panelists, in complete unison also agreed that interest rates are no longer playing a predominant role in the decision making process of most people and play almost zero role in the process for High Net Worth and Ultra High Net Worth individuals. December housing sales beat out expectations nationwide during a time when rates had 5 consecutive weekly increases leading into the end of the year. What we are seeing now in the market is the acceptance that rates will be between the 6% and 7% until at least the medium term, and that buyers understand the value of equity creation while sellers realize they will never be able to sell in a sub 3% rate environment.

Yes, elevated rates make borrowing money more expensive, but the psychological impact that the duration of living in an elevated rate environment has had on individuals has positioned them to be in the final phase of the grieving process, which is acceptance. The more we look at the future of the economic landscape, we can predicate along the lines that at least behaviorally, markets will recover and grow faster due to acceptance, rather than the Federal Reserve lowering rates 25bps at a time.

Market Performance

Here are how some other indexes and asset classes have performed as of this morning’s opening bell.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past WEEK as well as newly signed contracts in Manhattan.

Mortgage Rate Update

The 30-year fixed-rate mortgage has existed between 6% and 7% for most of the last two and a half years. As rates remained relatively flat week over week, the number of home sales nationwide exceeded expectations in December showing that demand remains consistent from homebuyers in a market that is slowly seeing new inventory join the marketplace.

News You Can Use

• US Economy on Solid Footing Setting to Hold Fed’s Move on Interest Rates Bloomberg

• Fed Holds Rates Steady, Takes Less Confident View on Inflation CNBC

• Trump Goes After Fed After No Change In Interest Rates BBC

• The US Economy Had Another Robust Year CNN

• What Is China’s DeepSeek and Why Is It Freaking Out the AI World? Bloomberg

• US New-Home Sales Jump at End of 2024 to Post Second Annual Gain Bloomberg

• GDP Grew at 2.3% in the Fourth Quarter, Less than Expected CNBC

• Office-to-Apartment Conversions Are Booming in NYC and This Is Why NY Post

• Ultra Wealthy Travelers Are Splurging on Luxury Rental Apartments in NYC NY Post

• US Business Activity At Nine-Month Low in January; Hiring Accelerates Reuters

• Scott Bessent Wins Senate Confirmation to Be US Treasury Secretary CNBC

• Single Women Own Millions More Homes than Single Men in the US- and the Gap is Only Growing NY Post

• Manhattan’s Morning Commute time Drops with New Congestion Toll Bloomberg

• The End of Blue Man Group’s 33-Year Run In NYC The Gothamist

The Deep Insight

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