Fed Finally Cuts Rates Today. Where is the Bottom?

• The median listing price has dipped by 0.3% year-over-year, continuing 15 weeks of price easing. Sellers are adjusting to what buyers can afford, resulting in the highest rate of price cuts in over five years for August.

• New listings are up 9.9% compared to last year, thanks to lower mortgage rates. However, the share of new listings as part of total listings slightly declined by 0.7%.

• Active inventory has risen by 33.4% from a year ago, marking 44 consecutive weeks of growth. This increase is largely due to homes staying on the market longer, with the average home taking eight more days to sell than it did last year.

We will be previewing today's Fed meeting today September 17th at 11:00 AM. We can expect a cut to the federal funds rate. What’s not known is how much they are going to cut rates and how fast they will cut in the near future.

What is their strategy to avoid a recession? Let's find out.

Why Does this Meeting Deel More Important Than Others?

First things first, this will be the first meeting where the Feds are going to cut rates.

People have been waiting a while for this to happen so it tends to attract more eyes than usual, but that is not all it. The drama arises from how much the Fed is going to cut rates. The market is expecting a quarter Co interest rate cut which is the normal increment. Nevertheless, some officials sounded like they were not ready to close the door on a half-rate point cut.

There are two key reasons why a rate cut seems likely. First, inflation is finally easing, similar to what we saw last year, but the Fed is still aiming for its 2% target. Second, while the labor market looked strong in the early part of the year, it has since started to cool off. The big question now is whether it will level off at a healthy pace or continue slowing down to a weaker state.

How Does the Federal Reserve Determine What Direction the Rates Should be Moving?

The Federal Reserve decides the direction of interest rates through the Federal Open Market Committee (FOMC), which sets the country’s monetary policy. While Jerome Powell, the Fed Chair, plays a key role, the FOMC is a collective body. It meets every 6-8 weeks in Washington, D.C., and consists of 7 Governors who oversee the Fed, along with 12 presidents from regional Fed banks. While all 12 presidents participate in discussions, only 5 have voting power each year.

Before these meetings, Powell and the FOMC usually have a strong sense of what direction they’re leaning toward, using this knowledge to plan for the upcoming meeting. Essentially, they’re always asking, “Where do we think the economy will be in six weeks?”

How Much Will They Cut?

If the Fed opts for a quarter-point cut (0.25%), it’s likely to have broad support. However, there could be at least one policymaker pushing for a larger half-point cut. Ultimately, the Fed tends to defer to the chair, recognizing that he’s balancing the trade-offs, which can often be a very delicate decision.

Risks to Real Estate

Many of the higher inflation risks we saw earlier have eased this year. For instance, wages are cooling, signaling a potential drop in inflation. However, if the Fed cuts rates too quickly, it could overheat the economy, posing significant challenges for the housing market.

It’s hard to predict exactly how this will play out. One of the best indicators to watch would be the Mortgage Bankers Association's Purchase Application Series. The key question now is whether a 30-year fixed mortgage rate of 6% to 6.5% will spark the housing market as expected. Ultimately, it all comes down to whether the Fed can guide the economy to a "soft landing."

I’m eager to see how this meeting unfolds and what it means for real estate.

UCLA Acquires Nearly Finished Apartments for $39M

UCLA has purchased a nearly completed apartment building in L.A.'s Cheviot Hills neighborhood to expand its student housing. The property, known as Canfield Apartments, is located at 3301 South Canfield Avenue and was developed by West Hollywood-based firm Helio.

UCLA acquired the 62-unit complex for $39 million in cash, equating to $629,032 per unit. The 83,931-square-foot building, situated just five miles southeast of the UCLA campus, includes 50 three-bedroom apartments. As part of the deal, Helio will also construct 12 ground-floor accessory dwelling units (ADUs) to further increase housing capacity.

Link to learn more.