By Mike Bodeen · 29 May 2018
Last week, the Wall Street Journal (WSJ) published a story titled “Era of Ultracheap Mortgages Ends as Rates Hit 7 year High.” https://www.wsj.com/articles/the-era-of-low-mortgage-rates-is-over-1526635801
Well this took me back to a bygone era.
In 1982, a wonderful friend and fellow Realtor in my past real estate life in the Truckee-Lake Tahoe area of Northern California, were discussing home mortgage. I wrongly said to Jim Orebaugh at that time, “Jim, if mortgage rates ever get below 13% again, we’ll be rich!” Just for the record, Jim agreed with me, but though rates got below `13%, then below 10%, and even below 5%, I did not get rich, at least financially.
(See chart: https://www.valuepenguin.com/mortgages/historical-mortgage-rates#nogo)
I wrongly said to Jim Orebaugh at that time, “Jim, if mortgage rates ever get below 13% again, we’ll be rich!”
At that time the 30-year fixed mortgage rated averaged around 16%, which was not even the high point! In 1991 rates dropped below 10%. In 2010 rates dropped below 5% and they have remained under 5% since then, or 9 consecutive years. Just for perspective, most millennials have never seen rates above 5%.
So recalling the early 80’s and the perceived world-wide oil shortage, the fall of the Shah of Iran, Americans being held hostage by Iran for 444 days, long lines waiting at gas pumps, and sky high inflation, I recalled the correlation between inflation caused in no small part by the energy crisis, which contributed to the escalating long term mortgage rates.
So lately, mortgage rates have been on the rise again as the economy has heated up fueling fears of greater inflation. I must admit that it’s humorous to me that since rates are now at 4.61% for a 30 year fixed mortgage that somehow that’s not considered “ultra cheap” as the article title states.
Well, at this time, I’d like to state that if mortgage rates ever get above 13% again, we’ll be broke. And no doubt, if that ever became reality, I’d be wrong again.