The following is an example of one of the hundreds of data sets that will be available on TRD Pro — the one-stop real estate terminal that provides all the data and market information you need.
There’s no debate: Mortgage rates have been on a wild ride this year, with borrowing costs climbing to heights not seen in two decades.
But did you know that the average rate for a 30-year fixed-rate mortgage pales in comparison to those of the 1980s?
Forty years ago, homebuyers would have been knocking down bank doors to lock in today’s average rate of 6.67 percent. The rate in 1981 peaked at 18.53 percent, according to FRED data.
Source Note: Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States, retrieved from FRED, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/MORTGAGE30US, Nov. 28, 2022.
Of course, homes in the ’80s were much cheaper than they are today, but what that era had in common with this one is that interest rates ate up a significant portion of homeowners’ incomes.
In the mid-1980s, when rates dropped just below 10 percent, monthly mortgage payments took up 30 percent of a household’s income. Today, with rates over 6 percent and the average home price over $430,000, homebuyers are spending 36 percent of their income on their mortgage, according to mortgage data company Black Knight.
Because wages have not kept up with home prices, homebuyers feel every single point that the average mortgage rate ticks up.
As a result, purchases and mortgage applications are slower than they have been since 1997 and 2015, respectively. And also, refinance applications are down by 86 percent compared with last year.
There has been some let-up in rates’ rise. Agents have seen buyers come back as the national average dipped below 7 percent in the past two weeks. It could signal buyers’ acceptance of rates that are uncomfortably high for the 21st century, but historically quite normal.
[FRED Economic Data – St. Louis Fed]