I am surrounded by boomers saying this that in their day interest rates were at 15% and we have it easy! I’m also surrounded by the younger generations saying this is ‘not the same thing’
Explain to me the reasoning…
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The magic of nuance is that both sides can simultaneously be right and just aren’t understanding each other.
During the 80s and very early 90s the interest rates were insanely high. A home that you bought for $100K would require about $400K in overall borrowing costs to own outright. Because of these insane costs it meant that the kind of homes people could afford was limited. If your parents bought their home in the mid 80s to early 90s it’s likely that there weren’t enough rooms for people and that they did a good amount of renovations. If your bought your home in the early 90s to mid 90s there’s a good chance you had a sufficient number of rooms and it’s most likely a detached single family home
And the reason for this is that the incredibly high interest rates depressed the value of homes. People were offloading their homes in what would be called a crisis. And then interest rates went down heavily which gave people a lot more room to buy “more house.” There were winners and losers in this. If you bought a home as interest rates were going up, you were basically fucked, most of your mortgage would have been at historically high rates. If you bought it in the middle or near the end… you were fine.
And we’re kind of in a similar place right now. Incredibly high interest rates ARE depressing housing prices and are reducing the room people have for buying an expensive house. But we also don’t have any wave or even will for de-regulation of the housing market to allow for cheaper made homes that people would have fiscal space to afford. Because of this, housing prices are only going up…. slower than before.
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