Back to the ’80s
Fleming has spoken with Fortune on several occasions about the comparison of today’s housing market to that of the 1980s. Both periods featured high inflation, rising interest rates, and a boom of homebuyers coming of age, he argues.
These three factors, Fleming wrote in an October 2023 report, could create a “housing recession” similar to that of the 1980s—a time period when home sales stay low in a frozen, unaffordable market.
While Fleming has drawn several comparisons to the 1980s housing market, today’s market isn’t exactly the same, he says.
“This time is different,” he says. “When the Fed started to reduce rates after tackling inflation in the early 1980s, house price appreciation declined nationally very modestly. Now, because supply has been so constrained, house price appreciation has been very strong and is expected to continue to remain positive as the Fed begins to lower rates.”
Also from Fortune:
It’s official: The housing market is turning millennials into their parents. A Fortune 500 economist says it’s a déjà vu market that is replaying the 1980s
It might be time for millennials to let go of the “okay, boomer” mentality considering they’re reliving their parents’ 1980s housing journey.
Although current mortgage rates—which hit 8% this week—mimic the early 2000s, the overall housing market is actually more reminiscent of the 1980s, according to a new report by the chief economist for the Fortune 500 financial services company First American.
“Today’s housing market isn’t anything like the housing market of the mid-2000s,” Mark Fleming, chief economist at First American wrote in a Tuesday report titled “1980s Déjà Vu for the Housing Market.” Of course, Fleming was dismissing the ghost of the housing crash of 2008 that precipitated the Great Financial Crisis, when subprime mortgages and other shoddy lending practices were common. Today is just fundamentally different, he wrote: “The housing market today is not overbuilt, nor is it driven by loose lending standards, sub-prime mortgages, or homeowners who are highly leveraged.”
“However,” he added, there is another precedent: ”the current housing market is similar to the market of the 1980s.” That could be a tough pill for millennials to swallow, considering they largely blame baby boomers for their inability to purchase a home in today’s market since they’re holding onto homes longer out of fear of high mortgage rates—and are swooping in with all-cash offers that can’t be matched by their younger counterparts.
Fleming cited three key ways the economy and housing market of today seem to “rhyme” with that of the 1980s, noting that both periods featured high inflation, rising interest rates, and a boom of homebuyers coming of age. These three factors could create a similar “housing recession” to the one four decades ago, Fleming argues—one where home sales stay low in a frozen, unaffordable market, but home prices merely stagnate.
“History doesn’t repeat itself, but it often rhymes,” Fleming wrote in a Mark Twain–ish flourish.