Will We Ever See 1980s Interest Rates?

Interest Rates

I was with a Realtor® friend of mine this past week, and we discussed what the real estate market is going through at present with inflation, rising prices, shortage of available properties, and increasing interest rates affecting the market. We have been practicing real estate in the lakes region since the mid to late 70s. So we were comparing some of the similarities from the late 70s to early 80s to what we’re experiencing now.

Back in 1980-1981, I was 31 years old, and I guess I was born at the peak of the baby boom generation. That generation was in its full homebuying stage. Additionally, the millennial generation was just starting that year. Interestingly, both of these generations have been affected by similar patterns…swiftly rising interest rates and, in both instances, caused by several rate hikes by the Federal Reserve to fight inflation.

I can remember the 1980s vividly. Huge inflation and a recession in the late 70s triggered the Federal Reserve to do the unthinkable. The 30-year fixed rate mortgage reached an all-time high of just over 18% in October of 1981. I was marketing Broadview Condominiums in Gilford at the time, and it decimated the real estate market for a short period. It was pretty scary back in 1981 because the rates had increased almost 5 points in only 12 months. Before that, the rates went up considerably in 1980 to compound the increase.

Broadview Condos on Lake Winnipesaukee

Broadview Condominiums in Gilford, New Hampshire on Lake Winnipesaukee

Those massive increases in interest rates pushed many potential homeowners away from purchasing a home and creating havoc here in the Lakes Region with the second home market. I remember back in 1980, home sales decreased by 20-22%, and then again in 1981, sales dropped another 15-18%.

It becomes interesting when you look at today’s market. We have experienced a similar trend as the 80s, but not to that grand scale. According to the National Association of Realtors® existing home sales have dropped 28.4% for the last 12 months ending in October 2022. It’s starting to look on a smaller scale, like in 1980, because interest rates have increased by 4.1 points in 12 months, like in 1980. (In November 2022, the rates peaked at 7.08%) keep in mind that 1980-1981 prices were much lower. For example, a Broadview Condominium back then was priced at $117,000-$121,000, a big difference from today’s prices at $675,000 (and that’s for an upper-level unit, not a waterfront unit.) That’s almost 6 times the price paid in 1981 compared to today. But remember, the interest rates in those days were 2.5 times higher than todays.

Fortunately, as inflation ebbed in the 1980s, US mortgage rates gradually slid downward and kept sliding well into the 21st century. For example, the average fixed rate was 12.43% in 1985, 10.13% in 1990, 7.13% in 1995, 7.86% in 2000, 5.93% in 2005, 4.86% in 2010, 3.99% in 2015, 4.13% in 2019, 3.38% in 2020, 3.15% in 2021 to a record low of 2.65% in January 2021.

However, when you look at the average 30-year mortgage rate in the US from 1971 until 2022, it averaged 7.76%. The record high was 18.63% in 1981, and the low was 2.65% in January 2021.

If you look at today’s 12/8/2022 national current average rate for the benchmark 30-year fixed mortgage, it’s at 7.32%, up 15 basis points over the last week, according to Mortgage News Daily and Freddie Mac. Today’s rate is still lower than the 50-year average rate of 7.76%. Where rates will go from here is anyone’s guess. The chief economist for the National Association of Realtors® said, “it may be another year or two” before mortgage rates begin to fall. Whereas the Mortgage Bankers Association has a more optimistic view, with rates for the 30-year fixed mortgage dropping to 5.4% by the end of next year.

In any case, I feel we have been spoiled with record low-interest rates and huge stimulus since the great recession in 2008, and today’s interest rate of 6.32% is not crazy.

Another similarity comparing the 1980s to today’s market is that I see homeowners not putting their homes on the market as often as in the past because they don’t want to lose their low-rate mortgages. Back in 1980, sales were slowed down because nobody wanted to give up their low-interest rates and move on to a higher rate, close to 18%. We are starting to see this occur again in the Lakes Region. Many families are locked in a very attractive rate around 2.75% and it’s hard to give that up and take on a new rate of 6.4%.

However, back in the 1980s, we did all kinds of creative financing to keep the original mortgages in place. Some of the loans were a “contract for deed” or a “wraparound mortgage,” and sometimes, we put together “leases with an option to buy.” It was not a fun time; it was a complicated period to get through…so much different from today.

So yes, we have seen soaring prices with rising interest rates and the inventory of available houses on the market remaining at a historic low (although we are starting to see an uptick.) Capital Economics predicts that housing affordability will be at its worst in 2023 since 1985. The company also predicts prices will fall 8% next year, but the group feels mortgage rates will hold close to 7% over the majority of the next year, and they projected rates will go back down to 5.75% by the end of 2023.

Year to date in the Lakes Region in 2022, the median sales price for a single-family home is $425,000. In New Hampshire statewide, it’s at $440,000. During 2021 in the Lakes Region, the median sales price was $353,000; in New Hampshire statewide, it was $395,000. These are pretty steep increases to absorb, considering the year before saw similar increases, and the cost of financing has pretty much doubled in the past year.

Boston Harbor

Boston, Massachusetts where the median single-family home price is $698,900

We’re still lucky living in the Lakes Region when you compare the median price of $425,000 to the median price in San Jose, California, at $1.69 million, San Francisco at $1.3 million, Boulder, Colorado, at $826,900, Naples, Florida at $746,000 and Boston at $698,900.

If you look at price growth, Florida by far experienced the largest year-over-year price growth ranging from 18.8% in Tampa to a 23.8% increase in Sarasota.

In summary, we know the Federal Reserve is waging war on inflation with the goal of achieving 2% inflation. We are not experiencing the exuberant levels of interest rates we saw in the 80s. The banking system is on solid ground. We are not seeing the leverage and overbuilding we experienced during those years stimulated by the Economic Recovery Act in 1981 and the deregulation of the saving and loan industry, allowing thrifts and commercial bankers to lend out more aggressively. We are on much more solid footing, and history tells us that the housing market will improve, even if we go through rocky times on the way to recovery.


This article was written by Frank Roche, president of Roche Realty Group in Meredith & Laconia, NH. Frank can be reached at (603) 279-7046. Please feel free to visit www.RocheRealty.com to learn more about the Lakes Region and its real estate market.

Samoset Condominiums on Lake Winnipesaukee

Condominium Sales Surge in New Hampshire’s Lakes Region!

As we start entering October’s bright fall colors, I thought I’d take a look at …

Read More →
Empowering your offer

Empower Your Offer in a Sizzling Real Estate Market!

As a seasoned real estate professional, I often consider the market conditions to keep myself, …

Read More →
Reviews of New Hampshire's Lakes Region

Reviews of New Hampshire’s Lakes Region

We’ve had a great summer in New Hampshire’s Lakes Region, and we’re approaching the brilliant …

Read More →
Waterfont Sales Activity Wolfeboro, New Hampshire

Waterfront Sales Activity in the Lakes Region

As we head into September, I have compiled data and insight into what is happening …

Read More →
Labor Day Weekend

Labor Day Weekend in The Lakes Region

Labor Day Weekend has arrived, and the weather forecast for the Lakes Region looks fantastic, …

Read More →
Interest Rates

The Mortgage Interest Rate Dilemma

This past week, we saw an increase in mortgage rates following a rise in bond …

Read More →
Best State To Live In — New Hampshire at #3

New Hampshire 3rd Best State To Live In!

WalletHub just released its rankings of the best state to live in for 2023. It’s …

Read More →
City/Town Comparison can make the research process easier

City/Town Comparison For Your Move

Some studies place moving to a new location as one of the top ten most …

Read More →
New Hampshire Real Estate Lacks Inventory

New Hampshire Real Estate Inventory Crisis

A Multifaceted Analysis of Rising Interest Rates and Beyond New Hampshire is currently facing a …

Read More →
Peaks of New England

Exploring the Peaks of New England

In my younger years in school, I always loved geography. Living in New Hampshire, there …

Read More →
Climate Exodus: Insurance Companies Seeking Refuge from High-Risk Sates

Climate Exodus: Insurers’ Fleeing High-Risk States

Flooding, Forest Fires, Heat Waves, Tornados, oh my! The recent stretch of weather has certainly …

Read More →
Real Estate News Headlines - Lakes Region NH

Real Estate Tidbits to Consider

Here are a few real estate tidbits I’ve pulled to keep you up to speed …

Read More →
Roche Realty Group Sells out Lakeside at Paugus Bay

Roche Realty Group — 6 Months in Review

Closed sales for the first 6 months of 2023 have been impressive at Roche Realty …

Read More →
Newfound Lake

Lakes Region Waterfront Sales Activity 6 Month Comparison

Below you will find data and insight into what is happening in sales activity on …

Read More →
Buying Land

Buying Land in New Hampshire — Comprehensive Guide

New Hampshire, also known as the Granite State, offers a diverse landscape that includes picturesque …

Read More →
Weirs Beach: A Tale of History, Community, and Natural Beauty

Weirs Beach: A Tale of History, Community, and Natural Beauty

As we celebrate the 100th anniversary of the oldest bike week in the country, let’s …

Read More →
First Five Months of Lakes Region Real Estate

Five Months of Lakes Region Real Estate Activity

The month of May’s real estate statistics just came out for New Hampshire, and it …

Read More →
A bird's eye view of Long Bay on Lake Winnipesaukee

South Down Shores and Long Bay on Lake Winnipesaukee — Its History

When construction started in 1981, Laconia’s South Down Farm offered a picturesque setting for condominium …

Read More →
Memorial Day — rows of gravestones with flags in military cemetery

Memorial Day Weekend Arrives in the Lakes Region!

The long-anticipated Memorial Day weekend has arrived after a long winter, and the Lakes Region …

Read More →
Unlike the dandelions new listings aren't popping up in the Lakes Region

Will Listings Start Bloom Like Dandelions?

Will Real Estate Listings Bloom Like Dandelions? During my rides around the Lakes Region, I’ve …

Read More →
boat launch

Public Boat Launches in the Lakes Region

New Hampshire’s Lakes Region is a paradise for boating enthusiasts and we are now entering …

Read More →
Real Estate Scams

Real Estate Scams to Be Aware of

One of my Realtors® received a call today from a gentleman purporting to be the …

Read More →
Brant Point Lighthouse, Nantucket overlooking the ocean

From the Lakes Region to Nantucket

I spent a few days on Nantucket Island this past week for a quick getaway. …

Read More →
Lakes Region Real Estate Is Still Hot

Lakes Region Real Estate Market is Sizzling

The real estate market in the Lakes Region and the state of New Hampshire is …

Read More →
Lake Winnipesaukee Kayak

Buying a Lake House — Where to Start?

Owning a waterfront home in New Hampshire’s Lakes Region is a treasured experience. For many …

Read More →
Home improvements

Home Improvements Before You Sell

One question I commonly get asked is, “What type of projects or improvements should I …

Read More →
Single-Family units are down

How’s the Lakes Region Market Looking?

We’ve already passed the first quarter of 2023 for real estate sales in New Hampshire’s …

Read More →
Moving into new home young happy couple celebrating toast Champagne

Buying a Home? Follow These Tips & Tricks

Spring has officially arrived and launches the beginning of our spring selling season for real …

Read More →

How Marketing Real Estate Has Evolved

Back in the year 2000, the world was at the beginning stages of a major …

Read More →
Mount Washington, New Hampshire

New Hampshire — 30 Reasons to Move Here!

With lakes, beaches, mountains, forests, rivers, and the ocean for people who enjoy the outdoors, …

Read More →
New Hampshire Ski Resort

Ski Resorts in New Hampshire Are Ready for Spring Skiing!

It’s been a good week, and mother nature hit our region with a blanket of …

Read More →
Market Trends

Real Estate Market Trends to Follow

I’ve been pulling up some current research on the real estate market on a national, …

Read More →
Carol Mattice

Roche Realty Group Welcomes Carol Mattice

Meredith — Frank Roche, President of Roche Realty Group, Inc, with offices in Meredith and …

Read More →
Kevin Shaw - Roche Realty Group

Kevin Shaw of Roche Realty Group is Top Producer for 2022

Laconia— Frank Roche, president of Roche Realty Group with offices in Meredith and Laconia, recently announced …

Read More →
Lisa Lewis

Lisa Lewis Joins Roche Realty Group

Meredith — Frank Roche, President of Roche Realty Group, Inc, with offices in Meredith and …

Read More →
Wanda Keenan

Wanda Keenan Joins Roche Realty Group

Meredith— Frank Roche, President of Roche Realty Group, Inc. with offices in Meredith and Laconia, …

Read More →
Land for sale

Buy Land in New Hampshire — They’re Not Making it Anymore

The science is in and the more trees a state has, the happier and less …

Read More →
The Price of Real Estate

Did The Price of Real Estate Increase in Your Town?

Everyone’s always interested to see how their real estate values have performed over the past …

Read More →
Laid off employee in recession

Are We Headed into a Recession?

It’s pretty big news lately; Microsoft, Amazon, and other tech companies have laid off more …

Read More →
Price Reduced

2022 vs. 2021 — Is The Lakes Region’s Frenzied Market Over?

It’s that time of year to provide all of you with an update on real …

Read More →
Roche Realty Meredith

Roche Realty Group Reports a Record of $181 Million in Sales

               Meredith- Frank Roche, President of Roche Realty Group, Inc, …

Read More →
Hillside Inn Winter

12 Things To Get You Through The Winter Months

On December 21st, the winter solstice marked the start of when days will begin to …

Read More →
Housing Inventory Lacking - Lake Winnisquam, NH

Lake Winnisquam, NH’s 4th Largest Lake is in Strong Demand

There are literally 273 lakes, ponds and rivers to enjoy in New Hampshire’s Lakes Region. …

Read More →
Interest Rates

Will We Ever See 1980s Interest Rates?

I was with a Realtor® friend of mine this past week, and we discussed what …

Read More →
Hikers overlooking the lake in New Hampshire, voted "Best State to Live in America" in 2020.

Squam Lake — a Lakes Region Treasure

This past summer, I was invited for lunch and a nice boat ride around Squam …

Read More →
Shop Local New Hampshire

Small Business Saturday in New Hampshire!

We have many things to be thankful for here in New Hampshire, plenty of natural …

Read More →
Couple downsizing to smaller home

Does Downsizing Your Home in Lakes Region Make Sense?

There are many things to consider when planning to sell your home to downsize into …

Read More →
Newfound Lake, New Hampshire

Newfound Lake is the 8th clearest lake in US

Newfound Lake is the 8th clearest lake in the United States New Hampshire has a …

Read More →
Echo Lake New Hampshire

New Hampshire Rankings are Impressive!

New Hampshire has always been fortunate to land in many of the country’s top 10 …

Read More →
Roche Realty Group Sells out Lakeside at Paugus Bay

Impressive New Construction in the Lakes Region

For new construction sales in New Hampshire’s Lakes Region, 2022 has shown very impressive results. …

Read More →

Leave a Comment