In the '80s, Mortgage Rates Were Almost Three Times As High — But It's Still Harder To Buy a Home Now
While the Fed has hiked up mortgage rates as a means to tame inflation, but it's nothing compared to 40 years ago.
The 30-year fixed-rate mortgage hit 6.70% this week, sending some prospective homebuyers into a frenzy, and others backing out of contracts in droves.
While the recent hikes are jarring, it's actually nothing compared to rates back in the 1980s.
In September 1981, a 30-year fixed-rate mortgage was at a double-digit high of 19%. Connie Strait, who started her career in real estate in the '80s, told CNN she remembers how "delighted" she was when closing her new home at a rate of 19%, fearing rates would rise to 20% the following week.
"Unfortunately, now people don't remember how Baby Boomers were getting rates of 10%, 12% and higher for most of the 1980s," Strait told CNN. "Meanwhile, our kids are shocked by 6%."
However, given factors like inflation and skyrocketing home prices, buying a home is still more expensive for many prospective buyers today than it was 40 years ago, despite mortgage rates being significantly lower.
In October 1981, the average home cost $70,398. Today, it's $434,978.
To make matters worse, rising home prices have significantly outpaced changes in income. In the past five years, average home prices have risen by 60%, while income has only increased by 15%, according to CNN.
So while mortgage rates are looking slim compared to the 1981 highs, the current economic conditions have made homebuying farther out of reach than four decades ago.
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