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History of the housing market over the last 50 years

  • History of the housing market over the past 50 years

    Stay-at-home orders during the pandemic have forced many people to rethink their living situation. Small apartments have stopped being cozy and are feeling more like claustrophobic places to quarantine for months on end, driving some 22% of U.S. adults to relocate, or at least know someone else who has, according to the Pew Research Center. 

    What’s more, the COVID-19 crisis made many people realize they wanted more control over the place they lived—so larger numbers of Americans pursued homeownership. Data from the Census Bureau shows that the homeownership rate climbed to 67.9% in the second quarter of 2020, a whopping 4 percentage-point boost from where things stood a year earlier. The rates of homeownership in the United States are now poised to rival what was seen before the subprime mortgage crisis of 2007.

    The uncertain circumstances created by the pandemic mean that no one can predict for sure how real estate trends will look for the rest of this year and the subsequent decade. However, taking a look at what the housing market has done over the past 50 years can give potential homebuyers a deeper understanding of what may come. So, The Simple Dollar compiled historical housing data from the Federal Reserve Economic Data (FRED) that included housing sales price, housing starts, homeownership rates, and housing price-to-rent ratio, and inflation adjustments from the Federal Reserve Bank of Minneapolis. 

    The Simple Dollar also looked at news reports, academic papers, government documents, and real estate trade publications to gain a deeper analysis of what happened in the U.S. housing market every year since 1971—from the creation of subsidized housing programs and fair mortgage lending practices to the financial crisis and the recovery over the next decade.

    Thinking of buying your first home and ditching the renter life for good? Click through to learn more about how real estate, mortgages, and homeownership have changed throughout the last five decades.

     

  • 1971

    - Inflation-adjusted average home sales price: $177,412 (+1% compared to previous year)
    - Housing starts: 2 million units (+41.9% compared to previous year)
    - Homeownership rate: 64.3%
    - Housing price-to-rent ratio: not available

    Freddie Mac began keeping track of 30-year fixed-rate mortgage rates in 1971. The data would help give policymakers, economists, and everyday Americans a deeper understanding of the housing market.

  • 1972

    - Inflation-adjusted average home sales price: $183,976 (+3.7% compared to previous year)
    - Housing starts: 2.4 million units (+16% compared to previous year)
    - Homeownership rate: 64.4%
    - Housing price-to-rent ratio: not available

    The year 1972 was a record for housing starts—an economic indicator that tracks the start of construction on new privately owned homes. Construction began on some 2.4 million homes that year, according to the Federal Reserve Bank of St. Louis.

  • 1973

    - Inflation-adjusted average home sales price: $202,141 (+9.9% compared to previous year)
    - Housing starts: 2 million units (-13.4% compared to previous year)
    - Homeownership rate: 64.5%
    - Housing price-to-rent ratio: not available

    President Richard Nixon announced a temporary end to approvals of subsidized housing programs beginning in January 1973. The moratorium lasted until mid-1974.

  • 1974

    - Inflation-adjusted average home sales price: $200,852 (-0.6% compared to previous year)
    - Housing starts: 1.3 million units (-34.8% compared to previous year)
    - Homeownership rate: 64.7%
    - Housing price-to-rent ratio: not available

    Congress passed the Equal Credit Opportunity Act in 1974, which helped open up home financing opportunities to more people. The law prevents creditors from discriminating against potential borrowers based on protected qualities such as their race, religion, sex, age, or marital status.

  • 1975

    - Inflation-adjusted average home sales price: $202,112 (+0.6% compared to previous year)
    - Housing starts: 1.2 million units (-12.9% compared to previous year)
    - Homeownership rate: 64.6%
    - Housing price-to-rent ratio: 1.05x

    The Emergency Homeowners’ Relief Act of 1975 allowed Housing and Urban Development to make mortgage relief payments for homeowners experiencing financial distress. It was aimed at fending off widespread mortgage defaults during an adverse time in the economy.

     

  • 1976

    - Inflation-adjusted average home sales price: $215,929 (+6.8% compared to previous year)
    - Housing starts: 1.5 million units (+32.4% compared to previous year)
    - Homeownership rate: 64.7%
    - Housing price-to-rent ratio: 1.07x

    The early 1970s battered the residential construction industry in the United States, according to The New York Times. Things began turning around between 1975 and 1976, though, putting housing starts on the upswing through 1978, according to data from the Federal Reserve Bank of St. Louis.

  • 1977

    - Inflation-adjusted average home sales price: $229,328 (+6.2% compared to previous year)
    - Housing starts: 2 million units (+27.8% compared to previous year)
    - Homeownership rate: 64.8%
    - Housing price-to-rent ratio: 1.13x

    Congress enacted the Community Reinvestment Act in 1977. The law required the Federal Reserve and financial regulators to encourage banks and lenders to “meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods.” It effectively helped ban “redlining,” a practice of refusing to extend mortgages in certain neighborhoods, usually places with low-income communities or large numbers of people of color.

  • 1978

    - Inflation-adjusted average home sales price: $245,896 (+7.2% compared to previous year)
    - Housing starts: 2 million units (+2% compared to previous year)
    - Homeownership rate: 65%
    - Housing price-to-rent ratio: 1.21x

    In 1978, the federal government banned the use of lead paint for consumer use in homes due to health hazards it presented. Federal law now requires people selling homes built before 1978 to provide buyers with information about the presence of lead paint on the property.

  • 1979

    - Inflation-adjusted average home sales price: $253,235 (+3% compared to previous year)
    - Housing starts: 1.7 million units (-14.2% compared to previous year)
    - Homeownership rate: 65.2%
    - Housing price-to-rent ratio: 1.28x

    The federal government ended its Experimental Housing Allowance Program in 1979. Since 1973, it had provided millions in cash assistance to thousands of families in 12 cities across the United States to help them cover market-rate housing, instead of relying on the construction of new public housing projects. 

     

  • 1980

    - Inflation-adjusted average home sales price: $237,003 (-6.4% compared to previous year)
    - Housing starts: 1.3 million units (-24.3% compared to previous year)
    - Homeownership rate: 65.6%
    - Housing price-to-rent ratio: 1.27x

    Mortgage rates hit an all-time high in 1981 after the Federal Reserve increased the federal funds rate. That year, the highest rate on a 30-year fixed-rate mortgage was 18.63%, according to data from Freddie Mac’s Primary Mortgage Market Survey.