Past vs. Present: Inflation, Mortgage Interest Rates, and Home Appreciation

Let’s take a look back through the previous decades and see where we were in terms of Inflation, Mortgage Interest Rates and Home Appreciation, and we compare today.

1970s

Inflation Rate: 7.1%

Mortgage Rate: 8.86%

Home Appreciation: 9.9%

1980s

Inflation Rate: 5.6%

Mortgage Interest Rate: 12.7%

Home Appreciation: 5.5%

1990s

Inflation Rate: 3%

Mortgage Interest Rate: 8.12%

Home Appreciation: 4%

2000s

Inflation Rate: 2.6%

Mortgage Interest Rate: 6.29%

Home Appreciation: 2.3%

2010s

Inflation Rate: 1.8%

Mortgage Interest Rate: 4.07%

Home Appreciation: 4.9%

Interest Rates Today

Inflation Rate: 8.2%

Mortgage Interest Rate: 7.19%

Average Home Appreciation 2020 to Today (in Orange County, CA): 10.9%

Final Thoughts

Right now the early 2020s are looking pretty similar to the 1970s. In the 70s, we saw higher inflation, higher mortgage interest rates (compared to today, not then), and solid home appreciation. Since 2020, homeowners have enjoyed never before seen home appreciation gains of 30%+. So even if we plateau or slightly correct, the 20s are off to a roaring start in terms of home appreciation.

This look back in history goes to show that just because inflation is elevated, just because mortgage interest rates are higher, doesn’t mean home values will crash. Even if we never see mortgage interest rates in the 2’s or 3’s again, much like we did for new Covid rules/restrictions, we will adapt. We will still remain within our means, calculating our monthly mortgage payments based on the rates of today, and then offer a price that makes sense. If that means home prices need to adjust slightly to make sense, then that’s what may happen.

However, don’t expect a crash. We don’t have the inventory we need and the labor market is still too strong. I don’t see the labor market weakening much in the long term either. In fact, as Baby Boomers continue to retire, we’ll have an even stronger demand and need to find quality workers. So this means those that are going to be in “need” of housing, will be able to afford housing.

Let’s keep an eye on the rest of this decade and see if we do end up finishing like the 70s

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