Fed Cuts Rates and Signals More Are Ahead

The Weekly Recap

Good morning and happy Friday! The Fed lowered interest rates 25 bps, mortgage rates continue to fall, refinance applications are through the roof, home builder sentiment is still low but consumer spending over the summer was higher than anticipated. Dumbo is leading NYC in rental price declines, the US Open raked in $17 million just from the sale of their famous Honey Deuces and if you’ve ever thought that you could probably walk faster than the bus you were sitting on you were more than likely right.

If you missed last weeks newsletter on More Signs Point to Rate Cuts, you can read that through the link.

Fed Cuts Rates and Signals More Are Ahead

The Federal Reserve finally cut rates for the first time in over 9 months by 25 bps, reducing the overnight fed funds rate from 4.25% to 4%. Over the last several Fed meetings there had been growing dissent as to cut rates slowly, cut them aggressively or remain flat. In the September meeting, it was near unanimous for a 25bps rate cut with one dissenting opinion suggesting a 50bps cut. That is an aggressive about face from the Fed as they take a more dovish stance towards monetary policy.

On the back of the news, mortgage refinance demand spiked 60% as mortgage rates hit a three year low and the stock market had mixed reactions. These cuts come amidst a backdrop of continuous downward pressure on pricing as homes remain on the market longer than they did previously and sellers readjusting pricing strategy.

Powell in his comments mentioned that the decision to reduce rates was an exercise in risk management as there have been negative revisions to jobs numbers over the last few months, exhibiting a weaker job market. Markets are expecting another two rate cuts before the end of the year of another 50bps total, with Goldman Sachs leading the way on the prediction. A majority of the FOMC is seen to be targeting further rate cuts this year and it is welcome news for both buyers and sellers alike.

Powell did push back on the idea of a predetermined cutting cycle stating that the Fed will remain ‘data-dependent’ even as the trajectory for rates seems to continue to drift lower. It is prudent that the Fed continues its cautious approach as a weakening labor market and sticky inflation continue to be concerns for the overall economy.

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 NYC market activity over the past week.

Mortgage Rate Update

The 30-year fixed-rate mortgage decreased another 9 bps this week. The share of mortgage applications that were refinances were 60%, the highest since January 2022. Rates have come down almost three-quarters of a point since the beginning of the year as optimism of seeing the 30-year fixed-rate be below 6% increases.

News You Can Use

• After Fed Rate Cut, Powell Says Job Market No Longer Very Solid Bloomberg

• US Corporate Bond Deal Making Jumps After Rate Cut Reuters

• SEC Prioritizing Trumps Push to Cull Quarterly Reporting Bloomberg

• Why Wall Street Is Okay With a Little Sticky Inflation Axios

• Mortgage Rates Dropped to Three Year Low Ahead of Fed Meeting CNBC

• US Housing Starts Fall to Lowest Levels Since May Bloomberg

• US Retail Sales Beat Forecasts In Sign of Solid Summer Spending Bloomberg

• US Home Builder Sentiment Stays Low Despite Interest Rate Drop Bloomberg

• Affluent Brooklyn Neighborhood Dumbo Leads NYC in Rental Price Decline NY Post

• Winklevoss Twins See Bitcoin Hitting $1,000,000 in Ten Years CNBC

• NYC Buses Are Slower than Central Park Joggers SNY

• The 15 Most Exciting Shows to See in NYC This Fall Bloomberg

The Deep Insight

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