“My theory is that rates will be low for the next 3-6 months and then inflation will take its toll and we will never be below 7% again – and likely spend many years in 9-10 range.”

I have been studying this situation closely for the last 12 months (so I’m far from an expert) but I don’t think we will see interest rates in the 7% range for at least 5-10 years. At least.

It is unlikely we will see much inflation (most think we are in deflation) for the next 5 years. Even if we do see inflation, the government is going to be very very slow to act on it.

I think the one thing we can count on during this debacle is low interest rates.

Also keep in mind that 7% rates would destroy this low-end market recovery we have seen which would send prices even lower IMHO.