Quote:
Originally Posted by Boomer
Does anybody else think the Fed is myopic and has been for the past 20+ years of too low interest rates?
When the housing crisis hit, the Fed had been lowering rates and propping up unqualified buyers for overpriced houses.
This time, buyers were more qualified, but the housing market had a nutty emotional component brought on by one of the two Black Swan events. (Covid) I never thought Covid would sell houses, but it sure did.
I don’t think housing prices are going to tank like they once did, but the market will slow. Supply and demand issues are going to be with us for a while. The frenzy is probably coming to an end across the country, but people are still buying houses.
As people see their overall net worth shrink with the market, many might decide to sit tight in their current house for a while. Others will jump right in with a now-or-never philosophy and decide to put some money into buying a house, a hard asset, to be seen every day and enjoyed.
But these draconian interest rate increases are putting me in mind of a neighbor who used to holler at his kids, “STOP IT OR I AM GOING TO GROUND YOU FOR A YEAR — OR EVEN LONGER!”
Boomer
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Yes! Interest rates were held foolishly low for way too long. I hope mortgage rates moderate at their historic averages and we do not replicate the 1970s and 1980s..
In the early 1980s I had an incredible opportunity to buy a commercial property due to the owner having a variable rate mortgage on it when the interest rate he was paying hit 21%!
"The Federal Home Loan Mortgage Corporation, more commonly known as Freddie Mac, began tracking average annual rates for mortgages starting in 1971. In the first few years of recording, rates started out between 7% and 8%, but by 1974, they climbed up to 9.19%. We finished out the decade by finally entering double digits with 1979’s annual average of 11.2%.
As we headed into the 80s, it’s important to note that the country was in the middle of a recession, largely caused by the oil crises of 1973 and 1979. The second oil shock caused skyrocketing inflation. The cost of goods and services rose, so fittingly, mortgage rates did too. To jumpstart a flailing economy, the Federal Reserve increased short-term interest rates. Thanks to their efforts, more people were saving money, but that meant it was also more expensive to buy a home than at any point in recent time.
The annual rate reached 13.74% in 1980, and in 1981, the 16.63% rate was and still is Freddie Mac’s largest recorded figure. Luckily, we’ve generally been on a downward trend ever since that fateful year. The rest of the 80s were a steep hike down from the decade’s peak. We rounded out the 80s just under the last recorded rate of the 70s at a hefty 10.32%."
From:
A History of Mortgage Rates