The Federal Reserve Just Gave Us a Gift for the Holidays

The Weekly Recap

Powell announced that rate hikes are done as the Fed held rates steady and indicated 3 rate cuts coming in 2024, inflation slowed to 3.1% hitting its lowest level since April 2021. Mortgage rates fell for the seventh straight week, the Dow hit an all-time record high, Manhattan median rents fell YoY for the first time since 2021 and ‘Bully Cutlets’ a longhorn bull escaped a slaughterhouse in NJ and was caught running up and down the tracks at Newark-Penn Station because why not.

The Federal Reserve Just Gave Us a Gift for the Holidays

It’s always a big financial news cycle when the new CPI number comes out and the Fed hold’s its meeting on monetary policy. Right before the holidays we’re given fantastic news that the end is nigh and we’re close to being out of this high rate environment nightmare that has stalled everything from real estate to main street and wall street business growth.

This weeks Fed meeting was the most pivotal of the past cycle as 2023 ended up being a much better year than the Fed has anticipated on every front as GDP came in higher and as unemployment and inflation came in lower. The below chart demonstrates how 2023 headed off a hard landing disaster.

The news of lowering rates reverberated throughout the market as the Dow rallied to hit a new record, closing above 37,000 for the first time ever. Markets have believed that July was the last rate hike we would see but the conversation shifting from raising, to pausing to cutting rates over the last 6 months completely changes the narrative for the outlook in 2024. Maybe the notion of ‘higher for longer’ no longer remains the mentality of the Fed if the market keeps bullying them into sooner and deeper cuts.

The Fed consensus projection is that we will see at least 75 basis points of rate cuts in 2024 but there are others who are way more bullish with Goldman now expecting cuts in March, May and June, while traders priced in 150 basis points of reductions for next year.

All the positive rate news has had an immediate impact in plummeting treasury yields and as treasury yields continue to fall, expect mortgage rates to fall alongside them even without Fed cuts and quantitative easing measures.

Market Performance

Here are how some other indexes and asset classes have performed as of this mornings 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

Potential homebuyers received welcome news this week as mortgager rates dropped below seven percent for the first time since August. Given inflation continues to decelerate and the Federal Reserve Board’s current expectations that they will lower the federal funds target rate next year, there will likely be a gradual thawing of the housing market next year.

News You Can Use

• Fed Holds Rates Steady, Indicates Three Cuts Coming in 2024 CNBC

• Fed Begins Pivot Toward Lowering Rates as Inflation Declines Wall Street Journal

• CPI Slowed to a 3.1% Annual Rate in November CNBC

• Manhattan Median Rents Fall For First Time Since 2021 CNBC

• US Year-Ahead Inflation Views Drop to Lowest Since April 2021 Bloomberg

• November Jobs Report is ‘What a Soft Landing Looks Like’ Yahoo Finance

• November Jobs Report Shows Labor Market Flourishing Axios

• US Unemployment Rate Falls to 3.7% Axios

• NYC’s Financial District Gets Luxury Apartments in Former Office Tower Bloomberg

• Michael Milken Says the Fed Won’t Move Too Early and Risk Massive Inflation Like the 1970’s CNBC

• Why the US Economy Has Powered Ahead of Other Richa Nations CNN Business

• How High Mortgage Rates Stalled the Housing Market Axios

• Dow Rallies More than 500 Points to Record, Closes Above 37,000 for the First Time CNBC

The Deep Insight

Contact Me

Feel free to reach out to discuss more in-depth about your real estate goals, share your thoughts about my newsletter, or to share what you're experiencing in this market. Looking forward to hearing from you!