20 years ago, back in 1992, a 30-year mortgage here in the U.S. was running at around a 9% interest rate. 10 years ago, back in 2002, this same type of mortgage was generally around a 6.5% rate. A quick look at a mortgage calculator can tell you what kind of impact a big drop in interest rates can have on one’s mortgage payment. Keeping that in mind, it’s quite interesting how low today’s interest rates are.
A quick check I did, as of this writing, showed 30-year loans having interest rates of under 4%. Consider the comparison of approximate rates across time:
Clearly, while there were some ups and downs between those years, it’s clear that 30 year mortgage rates at historical lows is basically the current situation. If you want to buy a home, and need to borrow some money in order to do so (like most people), this appears to be a time to get a loan at a very low rates compared to recent times.
This gets me thinking, though, about the direction home prices have been going: down. Of course, no two real estate markets are exactly alike, but I’ve taken a look around what’s probably a fairly typical market: my local one here in suburban Chicago. What I’ve noticed over the last few years is that prices have continued to slide on a regular basis. Now, the declines may not be as steep as what might have been seen in many other areas, such as certain parts of Florida, Nevada, Arizona, and other locales. However, I’d say that in the last 5 years, prices seem to have dropped 25%. That’s just a ballpark estimate based on my own observations, and the actual figure might be different – but you get the idea: home prices have declined.
What’s interesting is that despite interest rates trending lower, home values continue to slide in some places.
What is this telling us about the economy, and where we are today versus the past? It makes you wonder when the market will truly stabilize, and what it will take for housing prices to stop falling and perhaps go back to the old patterns of slow but very steady increases? Not gains like we saw in the housing bubble days, but at least holding value as we saw in pre-bubble days.
What’s interesting to me is that while we are getting more “mobile” in terms of technology, but less mobile in terms of being able to move as easily.
My Questions for You
How has the housing market been in your area?
Do you think it’s a bigger issue that despite interest rates being so low, many housing markets continue to show declining prices?
How long do you think it will be before the housing market here in the U.S. will straighten out?