It's Officially Rate Cut Season!

The Weekly Recap

Good morning and happy Friday! The Fed finally cut rates, mortgage rates fell to their lowest levels in two years, home builder confidence continues to rise. Whole Foods is opening up a ‘smaller format’ store in NYC, Powell admits the Fed probably should’ve cut rates back in July, its almost the best time of the year to buy a home, some scammers are making $6k a month using Citibike and Donald Trump remains undefeated against assassins.

If you missed last weeks newsletter on What The New Development Landscape in NYC Looks Like, you can read that through the link.

It’s Officially Rate Cut Season!

Christmas came early this year as the Federal Reserve announced a 50bps cut to rates surprising almost everyone with the size of its first reduction in over four years. Markets have reacted positively not just to the news of this cut but to the idea that the we may see another 50bps rate cut after the Fed’s meeting in November. Another cut would be an even bigger boost to homebuyer sentiment and the overall economy. Here are some immediate, short (not so immediate) and longer term impacts to the Fed’s decision on real estate.

Immediate Impact of Cuts- The declining mortgage rates that we’ve seen over the past several weeks indicate that this cut was somewhat already priced into the market. With that we will not see a drastic reduction in rates but more of a slow and steady decline. Anecdotally, buyers who have been holding steady have been re-engaging with their lenders to see how this alters the rates for which they have been pre-approved for. We saw a 14% increase week over week on new mortgage applications and can expect to see that number increase as well as that of refinances.

Short Term Impact- within the next 2-6 months we should see the Fed start to get even more aggressive with rate cuts as to its frequency and not necessarily the size of cuts. Powell admitted in his press conference that the Fed was behind in cutting rates and probably should have done so by 25bps in July which is why we saw the 50bps cut this week. We will see treasury yields soften as more rate cuts are priced into the market place which will lower mortgage rates and bring more buyers off the sidelines.

Longer Term Impact- The long view here is that over the next two years we can see an additional 200bps worth of cuts. With that we can expect to see more sellers enter the market place as the delta in interest rates between when they bought and when they are going to sell will become more palatable. The supply of buyers at some point will be equal to the supply of actual homes on the market which will put downward pressures on pricing. With first time homebuyers leaving the rental market, it will create less demand in the rental space which will also lower pricing.

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

Mortgage rates continued declining towards the six percent mark, reviving purchase and refinance demand for many consumers. While mortgage rates do not directly follow moves by the Federal Reserve, this first cut in over four years will impact the housing market.

News You Can Use

• Fed Cuts Rates by Half Point in Decisive Bid to Defend Economy Bloomberg

• US Mortgage Rates Fall to Two Year Low Reuters

• The Fed Forecasts Lowering Rates By Another Half Point Before the Year is Over CNBC

• Weekly Mortgage Demand Surges 14% As Interest Rates Hit Two Year Low CNBC

• US Borrowers Get Quick Relief As Fed Cuts Rates Reuters

• What a Fed Rate Cut Means for Your Bank Accounts, Loans and Credit Cards Yahoo Finance

• Powell Doesn’t See Signs of Recession Risk in US Economy Bloomberg

• Mortgage Rates Below 6% Will Drive Home Builder Activity CNBC

• US Home Builder Confidence Edges Up Yahoo Finance

• The Best Time of the Year to Buy a House is Almost Here NY Post

• US Housing Starts to Fastest Increase Since April Bloomberg

• US Multifamily Housing Completions Surge in Good Sign for Rents Bloomberg

• Whole Foods to Open New Smaller Format Store in NYC PIX11

• Meet The Hustlers Making $6k A Month Using Citibike New York Times

• Trump Was the Subject of An Apparent Assassination Attempt at Florida Golf Club AP

The Deep Insight

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