By Dave Gallagher | Real Estate News
Key points:
- Elevated interest rates, lack of affordability, low inventory and slow sales were all hallmarks of the early 1980s market.
- Demographic changes were also similar, with a large number of people moving into the prime homebuying age.
- Falling inflation and stabilizing mortgage rates helped the ‘80s market get back on track.
There’s plenty to love about the early 1980s — mix tapes, neon everything and MTV, to name a few — but the housing market dynamic is something many in the real estate industry would be happy to leave in the past.
Still, cycles seem to come back around. Today’s challenges of elevated interest rates caused by the Fed’s efforts to knock down inflation, high home prices, low inventory and sluggish sales were all present in the late 1970s and early 1980s, noted Mark Fleming, chief economist for First American Financial.
In a blog post earlier this month, Fleming said we are in a “déjà vu” moment, pointing out the similarities between what’s happening today and the state of the market four decades ago. In addition to similar economic factors, demographic changes influenced the market as baby boomers aged into the prime homebuying years, much like the millennials are today, creating a generational “echo,” Fleming said.
Between 1978 and 1982, home sales fell nearly 50%, Fleming found. Home prices jumped 14% in 1978, then slowed to 1% in 1982. It’s a trend we’ve seen again in recent years, as the pandemic-era market led to a 16.9% spike in home prices in 2021; this year, price growth has been slowly waning but still showing annual gains.
“History doesn’t repeat itself, but it often rhymes,” Fleming said.
Read More (subscriber content)
Some stories may only appear as partial reprints because of publisher restrictions.