U.S. mortgage interest rates jump to 7.16%, highest since 2001

I'm getting increasingly agitated by this claim that rates were irresponsibly low over the prior decade. It's honestly shocking to me that so many people who should know better are even making this claim because I feel it's misleading people like yourself to believe there is some responsible level for interest rates.

The truth is were rates not "low" the US would have probably have entered a period of either extremely slow growth, recession or out-right deflation over the last decade. Reason being there is such a thing as the neutral rate of interest which is basically the interest rate require to keep inflation at a constant pace if you go above or below that inflation is likely to start increasing or decreasing.

What central bankers are basically trying to do is keep core inflation somewhere around 2-3% so the value of money is stable, but it also doesn't pay to horde cash. Then when you get to that 2% target you want to try to keep rates around the neutral rate of interest to remain at that 2% inflation target.

This idea that I suspect you're heard that interest rates were "ultra low" assumes that there is some normal rate of interest which there isn't - the average rate is different for different economies. The appropriate interest rate simply depends on the economic conditions - specifically growth trends. As real economic growth slows interest rates will naturally need to fall which is why they have been trending down in the US and other developed economies for decades now.

Now where I think people are specifically going wrong here is that there is no dangerous or irresponsible level for interest rates. What's dangerous about interest rates isn't the level, but the change. For example were interest rates closer to 5% over the last decade then they suddenly shot up to 20% in 2022, that isn't any better than what we see today. Because what matters here isn't the specific rate of interest, but how affordable debt is and that affordability can only be assessed in a relative manner.

So where mistakes are made imo is in excessively sharp cuts to interest rates followed by excessive hikes. I'd argue that yes, what's been happening since Covid has been so extremely irresponsible it's almost beyond belief. But if you're going to claim interest rates were "low" you need to explain what you mean. Do you mean relative to the neutral rate or relative to what they were during a pervious period in time when economic conditions were completely different? The former is a valid conversation to have, the latter simply asserts that the historic average, or the rate at some specific point in time is the correct rate for today which is an argument that holds little merit.

> Real estate IS A LONG TERM investment, not day trading.

US history over the last 3 decades suggests otherwise.

The US is not the only country raising interest rates. It's happening in developed countries worldwide.

https://www.reuters.com/markets/europe/central-banks-raise-r...

Not only that, new listings are down YoY while inventory continues to grow. That's a bad combination if you want prices to continue to go up.

There's so many predictions but my take is simple, the only thing for sure is that prices are not going up anytime soon again.

I'm still renting as I moved around a lot for jobs. I've saved hundreds of thousands of dollars, and intend to strike in 2023. I'm still looking for deals in the meanwhile, but most of these sellers are bitter that the market from even at ~5% in the summer is gone. And by and large the buyers disappeared in March in my region.

At a certain point, prices do have to match the cost of borrowing money. That's the trap of cheap loans. Those that got ~3% loans are stuck in whatever home they chose without a loss. They can't sell because most used that cheap money to pay ahead on decades of gains. Finding a sucker at 7%+ is going to be impossible, because short-term minded people simply don't have the money or means. And there's only so many generous and wealthy fathers to go around. Even those dads or investors don't want to take a risk in a market that hasn't bottomed out yet.

Once again, as always, cash is king.

I similarly bought about a year ago with a similar interest rate, closing just a month or two before rates started climbing.

The house isn’t the most amazing thing out there, just a run of the mill mass built suburb house, but it’s such a huge upgrade over the apartments I had been living in and the payment is much lower than the rent I had been paying, and more importantly it’s mostly static (no increase to brace for impact for each year), so for now I’m pretty happy to be “stuck” with it.