Fed cuts rates by .5%

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Fed cuts rates by .5%

Michael BaumPro Member

Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes

Just announced. More than many thought including me. I figured 1/4 point then another in a couple of months.

Should be interesting to see how things shake out.

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Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

@Michael Baum

I believe they noted to be another 1/2 point and down to 4.5 by end of year, 3.5 by end of 2025 and 3 by end of 2026.

Again mortgage rates are closerly correlated to 10 year not short term rates - so we can see how that reacts and how investors price the 10 year to gauge mortgage rates

I think people think rates will drop tomorrow but the last month rates have been dropping knowing the fed was reducing rates

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Andrew SyriosPro Member
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Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
2y
I definitely thought they would cut rates but that's more than expected. Will be good for real estate but might indicate the economy is weaker than we had thought. And I thought it was rather weak to begin with.
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Michael BaumPro Member
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Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
2y
Well @Andrew Syrios, I am not thinking the economy is weaker that we thought, but I am more of the mindset it is a political move, maybe.
It is hard to tell. I think it is time to start lowering rates but 50 basis points is a lot at once.
7 Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
2y
More rate cuts coming. End of next year should look pretty good.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Michael Baum
I believe they noted to be another 1/2 point and down to 4.5 by end of year, 3.5 by end of 2025 and 3 by end of 2026.
Again mortgage rates are closerly correlated to 10 year not short term rates - so we can see how that reacts and how investors price the 10 year to gauge mortgage rates
I think people think rates will drop tomorrow but the last month rates have been dropping knowing the fed was reducing rates
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Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
2y
Inflation isn't dead; I think the Fed capitulated.
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Matthew CrivelliBusiness Member
Lender · MA · Member since 2021 · 1k+ posts · 1k+ votes
2y
The treasury yields are actually moving up since they announced the cut. The bond markets are worried about inflation.
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James R.
Investor · Member since 2015 · 222 posts · 173 votes
2y
Quote from @John Underwood:

More rate cuts coming. End of next year should look pretty good.

Yep. I'm hoping that my finances are much better at this time next year and continue to improve as the economy gets cleaned up, with the right person at the helm. People will hopefully have more money to take a vacation. Right now, my only guests are the very well-to-do who don't feel the pinch that your average family does.
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Jon Martin
Member since 2022 · 1k+ posts · 1k+ votes
2y
Seems like it has already been priced in for a bit. Quick search I did on bankrate last few weeks had owner occupied rates in the mid-5s ( albeit with hefty fees attached)
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Andrew SteffensBusiness Member
Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
2y
I think they missed the first 1/4 point and made up for it this go around. Also looks political perhaps. Not sure how much effect it will have in the very short term going into slower months for real estate and other sectors. Still would wait on refi's too, but good to see the blunt instrument beating the RE market has been put back in the closet.
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Mike H.
Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
2y
I think when you can start seeing rates in the low 5's, people will start to jump back in again. But I still believe we have a huge supply and demand issue and the government needs to do something to spur new construction. As it is, there are more households forming than there are new construction starts coming online. Way more.

And there are also more people locked in with rates in the 3's or low 4's, that may never sell their house because they can't part with that financing.

I saw a mention of providing first time homebuyers more down payment assistance. That doesn't do anything but help people buy homes that probably can't afford to do so.

What I'd like to see is the government pay down a mortgage rate for X number of years if a buyer buys a new construction home. We have to create real demand for growth in new construction if we're going to fix the problem - and its a big problem.

If rates were to come down to 5.5%, then the govt could offer to buy down the rate to 4% for say 7 years. I think that would cost 225/mo? or 2700 a year? Do that for 5 years of the 30? It would cost the govt 15k but think of all the jobs it would generate in new construction and taxes it would add to the states. Maybe the states could kick in some of that 15k too.

Plus they'd get money back from the taxes on the builder's profits. If the builder makes 30k on a house, the govt is getting 4k to 6k in income taxes. Not to mention the taxes they get on salaries of the construction workers.
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Michael BaumPro Member
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Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
2y
Quote from @Chris Seveney:

@Michael Baum
I believe they noted to be another 1/2 point and down to 4.5 by end of year, 3.5 by end of 2025 and 3 by end of 2026.
Again mortgage rates are closerly correlated to 10 year not short term rates - so we can see how that reacts and how investors price the 10 year to gauge mortgage rates
I think people think rates will drop tomorrow but the last month rates have been dropping knowing the fed was reducing rates

Well I sure hope we don't see that much of a drop by the end of the year.

Like @Collin Hays said, inflation is far from over. Originally they said they would do anything and everything to get inflation at or below 2%. All of a sudden we get a 50 basis point cut?

That is inflationary. Either there is something in the indicators we don't know about or...you give it your best guess.

I don't want to see a recession (full bore). It won't do anyone any good.

1 Reply
Thomas McPherson
Lender · Member since 2024 · 60 posts · 26 votes
2y
Quote from @Michael Baum:

Just announced. More than many thought including me. I figured 1/4 point then another in a couple of months.
Should be interesting to see how things shake out.

Agreed, I think the market will really start to spur up when rates get a little more competitive. People can't justify leaving their 4% mortgage right now this causes a little bit of a stalemate.
0 Reply
Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
2y
The problem is, economic contractions (recessions) are a normal market of a free market economy. Our refusal to accept a recession is actually only making the pain much worse, and is the underpinning of a massive wealth transfer from the middle class to the rich.
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Michael BaumPro Member
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Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
2y
Hey @Collin Hays, I agree with you. That is why I said Full Bore.
There are recessions and there are RECESSIONS.
I don't want a repeat of 2007-2009. I would rather have it be more like early 2001.
1 Reply
Alan F.
Flipper/Rehabber · CA · Member since 2023 · 1k+ posts · 1k+ votes
2y
In terms of the overall economy I don't think it was a good idea.
FWIW the dot bomb was very bad in SJ, the affects of which are still felt today. It was a very bad idea to have hardware manufacturing move offshore.
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Andrew SyriosPro Member
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Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
2y
Quote from @Michael Baum:

Well @Andrew Syrios, I am not thinking the economy is weaker that we thought, but I am more of the mindset it is a political move, maybe.
It is hard to tell. I think it is time to start lowering rates but 50 basis points is a lot at once.

I'd agree it's time to start lowering rates. I wouldn't be shocked if there's a political motive, but I definitely think it has to do with worries about the economy in general.
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Terry Ouimet
Investor · CO · Member since 2020 · 59 posts · 42 votes
2y
Who actually believes inflation is about 2%?
Besides Powell I mean. Look at your bills. I don’t believe their numbers , don’t believe the media, inflation is still alive and could get worse
4 Reply
Paul Azad
Member since 2024 · 162 posts · 232 votes
2y
For the last 20 years the Federal Reserve's dual mandate has been to prop up both the SP 500 and the Nasdaq, not its purported goal to maintain price stability and maximize employment. 5 days ago a collection of Democratic senators wrote a letter haranguing Jerome Powell and asking him to cut by 75 basis points. And four years ago, we all remember Donald Trump threatening to fire Jerome Powell if he didn't cut interest rates further at a completely unnecessary time, other than to help him try to win re-election. Both parties as long as I can remember want interest rates at 0. in order to inflate the assets of their donor pool which holds stocks, bonds and real estate. If you listen to the end of Powell's speech yesterday the most important part was rarely commented on by the media which is when he said, We will continue reducing the balance sheet. translation, They are continuing to let Mortage backed securities and US Treasuries roll off without renewed purchases. They have been doing this for two years now, and it is what's called quantitative tightening, The opposite of the quantitative easing over the past 15 years. This quantitative tightening fights inflation, and Most economists estimate that it adds another 100-150 basis points implicitly to the Fed funds rate so we have really been at 6.375 to 6.675% the last year. But now inflation has been tamed, core PCE run rate at 1.9% now, and headline CPI at 2.5%. So why would the FED fight itself by doing Q.T. and cutting FedFunds Rate at the same time, as they have the opposite effect?
I don't know, but I suspect, it's just to inflate the Markets which were up 2% today. One of the 800 economists who work there may have told them that since they decreased the M2 money supply by 4% over the last 2 years and currently now growing at only 1.26% not the pre-covid 6%, that they have stalled the plane, so forget the soft landing, get ready for some CHOP. So, they should have cut yesterday by 100, and they should have cut in July, but they don't want to crash the Markets (their true masters-as they are appointed by politicians beholden to asset owning donors). I think they will stop the quantitative tightening soon as well, but it won't help. Inflation will continue to fall/unemployment to rise/the insider c-suite/director Sell/Buy ratio now over 25, (so the dudes running America think a Recession or hard landing is coming). So put your trays and seat backs in the upright position because we are probably in for a Hard Landing or at least a lot of turbulence.
4 Reply
Nathan M kiefer
Rental Property Investor · south carolina and michigan · Member since 2023 · 348 posts · 226 votes
2y
Quote from @Thomas McPherson:

Quote from @Michael Baum:

Just announced. More than many thought including me. I figured 1/4 point then another in a couple of months.
Should be interesting to see how things shake out.

Agreed, I think the market will really start to spur up when rates get a little more competitive. People can't justify leaving their 4% mortgage right now this causes a little bit of a stalemate.

4%- thats so 2019 lol, were at 2% as a lot of others are, one of my buddies actually has a 1.875%. As low as the market went for mortgages and housing shortage, the only sure bet in my opinion is housing prices will continue to rise.
Inflation and rates are all boomeranged off each other, next year will be one of the most interesting i have seen in the 25 years i have been doing this
2 Reply
Nathan M kiefer
Rental Property Investor · south carolina and michigan · Member since 2023 · 348 posts · 226 votes
2y
Quote from @Michael Baum:

Hey @Collin Hays, I agree with you. That is why I said Full Bore.
There are recessions and there are RECESSIONS.
I don't want a repeat of 2007-2009. I would rather have it be more like early 2001.

07-09 did suck but we also purchased 6 houses for under 100k and we learned from that period so with cash on hand I wouldn't mind it.
1 Reply
Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
2y
Quote from @Andrew Syrios:

I definitely thought they would cut rates but that's more than expected. Will be good for real estate but might indicate the economy is weaker than we had thought. And I thought it was rather weak to begin with.

Weaker than who thought?
Politicians and federal agencies were lying about the strength of the economy. Everyone visiting the grocery store knows it. They are just now getting around to telling the truth.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Paul Azad:

For the last 20 years the Federal Reserve's dual mandate has been to prop up both the SP 500 and the Nasdaq, not its purported goal to maintain price stability and maximize employment. 5 days ago a collection of Democratic senators wrote a letter haranguing Jerome Powell and asking him to cut by 75 basis points. And four years ago, we all remember Donald Trump threatening to fire Jerome Powell if he didn't cut interest rates further at a completely unnecessary time, other than to help him try to win re-election. Both parties as long as I can remember want interest rates at 0. in order to inflate the assets of their donor pool which holds stocks, bonds and real estate. If you listen to the end of Powell's speech yesterday the most important part was rarely commented on by the media which is when he said, We will continue reducing the balance sheet. translation, They are continuing to let Mortage backed securities and US Treasuries roll off without renewed purchases. They have been doing this for two years now, and it is what's called quantitative tightening, The opposite of the quantitative easing over the past 15 years. This quantitative tightening fights inflation, and Most economists estimate that it adds another 100-150 basis points implicitly to the Fed funds rate so we have really been at 6.375 to 6.675% the last year. But now inflation has been tamed, core PCE run rate at 1.9% now, and headline CPI at 2.5%. So why would the FED fight itself by doing Q.T. and cutting FedFunds Rate at the same time, as they have the opposite effect?
I don't know, but I suspect, it's just to inflate the Markets which were up 2% today. One of the 800 economists who work there may have told them that since they decreased the M2 money supply by 4% over the last 2 years and currently now growing at only 1.26% not the pre-covid 6%, that they have stalled the plane, so forget the soft landing, get ready for some CHOP. So, they should have cut yesterday by 100, and they should have cut in July, but they don't want to crash the Markets (their true masters-as they are appointed by politicians beholden to asset owning donors). I think they will stop the quantitative tightening soon as well, but it won't help. Inflation will continue to fall/unemployment to rise/the insider c-suite/director Sell/Buy ratio now over 25, (so the dudes running America think a Recession or hard landing is coming). So put your trays and seat backs in the upright position because we are probably in for a Hard Landing or at least a lot of turbulence.

a klabamo landing where the oxygen masks drop :)
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Nathan Gesner:

Quote from @Andrew Syrios:

I definitely thought they would cut rates but that's more than expected. Will be good for real estate but might indicate the economy is weaker than we had thought. And I thought it was rather weak to begin with.

Weaker than who thought?
Politicians and federal agencies were lying about the strength of the economy. Everyone visiting the grocery store knows it. They are just now getting around to telling the truth.
costco is a great indicator of inflation on grocery items.. Fresh cracked dungess crab was 25 for a one pound container for years.. it flew up to 50 bucks.. there is no shortage of dungess crab in the Pacific oceans .. its down to 35 now.. but still high.. the meats the same way most all went up at least 50% and have not dropped.. chilean seabass was 15 bucks a pound went to 25k and has stayed there.. I am in KC last few days gas is 2.75 a gallon.. gas is still 4.50 a gallon in OR WA CA if not higher in some spots..
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James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
2y
I think many novices miss, don't know or forget that "the market" and it's market makers/movers/etc. have a kind of tri-lingual way of speaking.
- There is what they say, the actual words being stated.
- There is what those words really mean, or there true intent, which all too often is the exact opposite, such as saying the economy remains strong and a-ok with no recession risk being seen, because there is risk seen for it, but to say such would be to make it happen, and to say there is-not, may induce stabilizing actions that thwart the happening of such.....
- And there is what they DO.... There actions, the actions.
When we look at the 10yr treasury, for years we bounced around 2'ish %. Today, we note that the vast majority of western nations are similarly bouncing around a 2'ish % mark.
The US, hit a high this summer and started ticking down, coinciding with the media blitz of expected and impending rate cuts, which didn't come, didn't come, didn't come, and now happened. And, the result...... Bond rate UP, not down.
What does that mean when it's going UP vs down? That's a kind of vote on the future by those of informed stature. I think we would be wise to listen to there predictive votes.
It's saying they need more incentive to purchase that, not less.
Now, here is key thing to remember, it's almost double what most other western nations are currently trading at...... Why is the US require almost twice the incentive vs say Germany, Norway etc.?
There is "do" "votes" happening that is saying the USD is not looking good vs pretty much any/every other western nation....
No, it's not some doomsday eminent collapse thing, were not talking 20, 30, 70% stuff ok, but still double IS significant.
When I read the actions, the "DO" it's saying the rate cut's are political in nature. That it's an inflationary action, not huge one but still, that's those "votes" as I am seeing it.
yes, one could argue those were priced in weeks ago, although that's a valid argument for trading sideways not upwards. 50bps is the biggest of the anticipated and many expected 25. And the bigger item is the calling out of expecting the series of rate cuts coming. And were trading UP....... That is a clear "do" "vote" of inflation expectations.
The elephant in the room is fact that all this fkry played out in US today, is coming at the cost of loosing confidence on world stage for USD, loosing confidence in US economic system, loosing confidence in the US as a whole.
We see this expressing itself not just as Bric's works to do things but as more and more accept bric's, work with them, toy with them, consider a replacement world currency, effect trade in other items than USD.......
The #1 thing that sustained the US, the #1 export of the US for decades, has been DEBT, US Debt...... When demand for that export slows, starts ending...... Holly cow, those are some terrifying chickens coming home to roost.
And we are flirting with exactly that, we see it playing out in actions. And we keep hiring sock-puppet morons to run this lunny-bin we call "merica"..... We the people need to pull our heads out of our social media butt's, stop accepting BS, lies, antics and hate and start demanding answers, responsibility and accountability from our leaders again or were gonna reap the consequences.
1 Reply
Bud Gaffney
Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
2y
Economy weaker than you thought? Dow is above 42K (record) Economy booming. Rates going down.
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