Wednesday, January 1, 2020

The history of interest rates have been up and down.

I am writing this as a "food for thought article" Please take it as that...

The history of interest rates have been up and down-- that is their nature. As the economy changes so does the interest rate. It is not a natural thing for either to be up for too long or down too long... it must change with the times. 

I think that has been forgotten. in the past 10 years or so-- as a healthy economy needs to grow so does the views about it.  When the stock exchange continues to see new records broke though month after month-- I question the validity. 

The American dream has always been (as long as I can remember) to own your own home- to be the person who reaps the benefits of ownership. To control one's life by knowing what your mortgage will be for a lifetime. God Bless America to allow that right of ownership- to allow each citizen the right to have a piece of the american dream.  

Below is a chart showing the past interest rate and some comments about what the nation was going through at the time... thanks to Chris Butterworth for the chart.

    We can see that, while the entire decade had extremely low interest rates, the rates started ticking upward in 2018 before falling again in 2019 (thank you, Fed.) We’ll have to see where rates go in the 2020’s, but it does seem like they would have to skyrocket before we could really consider them “high”. As an average of 6-8% is the average. 

A look back in time:

1970s - Real estate was relatively flat (as was every part of the economy), with rates averaging about 9% before spiking up to 18% in 1982.

1980s - Real estate was a go-go, with the market growing fast and furiously while rates trended downward but averaged about 12% for the decade.

1990s - Another big-time growth decade, with rates averaging about 8% on a somewhat downward trend. The decade started with a slight downturn in 1991, and ended with a stock market bubble amid Y2K concerns of a world-wide computer meltdown.

2000s - The biggest boom and bust in our country’s history, caused by greed throughout the system (from top-level bank executives all the way down to regular home buyers) and aided by “liar loans” and subprime lending. Rates dropped significantly over the 10-year span, but averaged about 6%.

2010s - Housing growth rebounded nicely, both in new construction and existing home sales. This was helped by rates hovering near 4% for most of the decade; the lowest interest rates in history.

Overall - we’ve had 50 years of exciting news, crises, boom and bust cycles, international concerns, technological breakthroughs, etc., but through it all real estate has continued to increase in value, making the cost of a loan negligible. 

My wish for us going into the next decade is to have that realization- to have that dream come true for more people... and I will fight hard to make it a reality!  So, if your dream is to own a home-- no matter what your credit rate, or your savings account-- I want to hear from you, so we can get you on the right path to home ownership!  Elaine Beery 480-570-1912