Insights of the Newly Released Fed Minutes for Rate Cuts

The Weekly Recap

Happy New Year Everyone! Recently released Fed minutes from their latest meeting suggest rate hikes are over and done with, Mortgage rates ticked up a bit after almost two full months of weekly decline, Manhattan home prices rose while almost 68% of all deals done were all cash, hitting a record high. 4.5 million Americans bought a home in 2023. Everyone has their eye on the upcoming jobs report and folks are becoming more bearish on the treasury yiled.

Fun fact, 2024 is a leap year, so that’s exciting and if you’re taking the subway today, expect delays and more crowded trains as a 1 Train derailed after getting hit by an unmanned mechanical car at 96th street, shutting service for the 1,2 and 3 train lines through today.

Insights of the Newly Released Fed Minutes for Rate Cuts

Fed minutes from the December meeting pushed back against the idea of an imminent rate cut which is something this newsletter has stressed over the past few weeks. Although the announcement and tone of the meeting all but declares rate hikes to be at an end, the debate now shifts to how many cuts and how much of a decrease. Markets have priced in 150 bps for 2024 with rate cuts happening as soon as Q2 which might be hyper aggressive. When Fed minutes are released they may not reflect the entire discussion and according to Bloomberg Economics, near-term reductions can’t be ruled out.

All of this comes on some big market and purchasing behavior changes in the Manhattan market with prices increasing for the first time in more than a year in an early sign that the market is rebounding. The median closed purchase price of a home was $1.16 million in the fourth quarter, up over a little more than 5% year over year.

Manhattan also hit a record with almost 70% of all deals being completed using all cash. On average, all cash buyers make up about half of market share in Manhattan except for in markets like 2019-2021 when borrowing money was practically free and the super wealthy withheld all cash deals in favor of leveraging other people’s money to grow equity. The average sale price also rose to $2 million in Q4, up 3% from the previous quarter while luxury sale prices increased 12% over the same timeframe.

We can expect that even as rates start to come down, prices will continue to rise which means we can see more buyers enter the arena of home purchasing sooner than later as rate drops may lag behind price increases. What is a helpful tool for buyers is that most lending institutions let you lock in your rate so it doesn’t go any higher, but will also give you the future lower rate if there is a decline in points from when you locked in.

Market Performance

Here is how the market ended the Year as of the 12/29/23 close.

And here is how those same 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

Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point. Since then, rates have moved sideways as the market digest incoming economic data. Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, mortgage rates will likely continue to drift downward as the year unfolds. While lower mortgage rates are welcome news, homebuyers are still dealing with the dual challenges of low inventory and high home prices that are continuing to rise.

News You Can Use

• Manhattan Home Prices Rise in Early Sign of a Market Rebound Bloomberg

• Fed Minutes Suggest Rate Hikes Are Over, but Offer No Timetable on Cuts Wall Street Journal

• All Cash Home Sales in Manhattan Hit Record High Axios

• US New Home Sales Fall to One-Year Low in November Yahoo Finance

• Home Prices Continued Climb in October Reuters

• Why Stocks Are Falling to Start the Year Yahoo Finance

• NYC Aims to Build Affordable Housing in Wealthy Neighborhoods New York Times

• 4.5 Million Americans Bought a Home in 2023 CNN Business

• Inflation Has Created a Dark Cloud Over How Everyday Americans View the Economy CNBC

• Why 2024 Could Be A Year of American Optimism Axios

• Why Everyone Was So Wrong About the 2023 Economy Axios

• 11 Charts That Explain the Year in Business, Technology and the Economy New York Times

• Why the Most Widely Anticipated Recession in History Never Came Yahoo Finance

• US Labor Market Seen Cooling in 2024, Regional Fed Surveys Show Bloomberg

The Deep Insight

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