Interest Rates: 2021 vs 1980s. How does this impact current home prices?
Are your parents and friends skeptical about today's real estate market? Are they scared they’ll find you accumulating debt or finding yourself in a bad investment? Why might that be?
Let’s compare today’s housing market with the generation our parents grew up in to find out why this generational divide exists. It all boils down to the interest rates of today compared to a generation ago. Today's interest rates are at record lows. In fact, it's the lowest they’ve been in history! This is fantastic news for our current housing market. Clients can get loans as little as 2.7% for 30 years fixed, taking in to account debt, income, credit score and the bank you choose to work with.
Whereas in our parents' generation, interest rates were exponentially higher which made our parents much more cautious about debt overall. They experienced a different housing market altogether with interest rates well over 18% and an average of over 8%. With numbers like those, it made it extremely difficult to pay back.
The key takeaway when buying a home is "can I beat this interest rate percentage when it comes to a long-term investment?". Where it made sense why out parents were scared of accruing debt, we don't feel the need to be as scared as because the math equation is completely different now than it is back then.
Next time you have a conversation with your parents, friends or family about the housing market, be sure to share the information you learned here and get there thoughts and opinions!