I think I’ve got some bad news.  Probably more for me than for most of you. You who are sitting on a 2.75% mortgage rate and have neither the need nor the desire to move anytime soon need not be concerned.  But it you’ve bought a home in the last 16 or so months and have been waiting for rates to drop, or if you currently need/want a new place but are waiting for interest rates to come back down, you might be in a holding pattern for longer than either of us find desirable.  If you’re wondering, the image above is a flight map of the SLC airspace and harkens back to my days as a pilot when maps were tangible sheets of paper you kept folded on your lap.  This one doesn’t show the prescribed holding patterns, but the colors are more interesting than the other ones.

There are two truths about interest rates that bear repeating, with some brief commentary. The first is that rates are quick to rise and slow to drop. There are a lot of economic factors that play into the equations behind the scenes, but in my mind it boils down to one easy explanation.  And that is that the people/institutions who make and package the loans are the ones with the money, and their livelihood is to collect interest on those dollars that they have invested into their businesses. If your business can earn more money for the next 15-30 years, you’re going to do everything you can to try and make that to happen.

The second truth is that in order to effectuate change as quickly as possible, people tend to overreact. Someone feeling cold will walk into a room and crank up the heat to 80 degrees until they start sweating, at which point they’ll turn the thermostat back down to a more comfortable temperature and open a window to speed up the cooling process.  A more efficient way of course is to notch up the Nest a few degrees and throw on a sweater for a minute until you’re comfortable. Here’s a personal example that occurs several times per week: I skip breakfast and when lunchtime rolls around I act as if it may be the last meal I ever have and devour everything in sight.  Then after all the unnecessary indulgence I feel pretty miserable for a few hours.  We’re shortsighted idiots sometimes.

Keeping the world’s biggest economy on track is like trying to manage the body temperature and metabolism of 334 million people.  It’s impossible.  The country’s brightest minds collaborating on the most sophisticated solutions still manage to overcorrect almost every single time.  Here’s another map with fewer colors on it, showing rate hikes and recessions.  Every, single, time. Rates go up too much, BAM, recession. Rates go down. Take a break, repeat.

As I’ve said many times before, it could be worse.  Look at any other country in the world; their economic cycles are far deeper than what we’ve got.  But then again, most of the world is still using coal or kerosine to heat their homes so it comes with the territory.

So two quick points in conclusion.  The first is that I don’t believe that short of a natural disaster or the outbreak of war, interest rates will probably stay close to where they’re at for another three-four months at the very least.  The second point, which I believe holds farther reaching consequences, is that after interest rates begin to decline a bit, we’ll enter a recession and they’ll drop even more.  Timing is TBD, so for now, we hold.