Laserfiche WebLink
<br /> <br />With rates increasing, what effect will this have on the housing market? Will there be less <br />competition among prospective homebuyers for the same house? Will home prices start to fall? <br />Will they become affordable for the average American? <br /> <br />Historical Context: <br />Let’s start by looking back at the highest rates in recent history. In 1981, the average 30-year <br />mortgage rate was 16.64%, assuming the borrower also put 20% down and had decent credit. <br />Just four years earlier in 1977, the average borrower would have gotten 8.85%; easily the most <br />dramatic interest rate swing in the past 50 years. <br /> <br /> <br />This historic increase in mortgage rates hit the residential housing market hard, dramatically <br />reducing mortgage and housing activity. According to a Freddie Mac article, <br />• “New mortgage originations fell nearly 40%, from $162 billion in 1977 to $98 billion in <br />1981. <br />• Annual single-family home sales dropped 36%, from 4.5 million to 2.9 million. <br />• The biggest decline was in construction, with housing starts for single-family homes <br />plummeting over 51%, from almost 1.5 million to 705,000 by 1981.” <br />Since the 1980s, mortgage rates have mostly trended downward (along with interest rates, <br />generally). Obviously, they could dramatically increase again, but the Fed has indicated in past