Was it more accessible to buy a home in the 1980’s with a 20% mortgage rate?

In this episode, we’re tackling a question that’s been on my mind for a while: Was buying real estate in Vancouver actually more affordable back when mortgage rates were at 20%?

Throughout my childhood, I frequently heard my parents lamenting how difficult those times were. But was the financial strain truly as severe as they described?

I’m Jessi Johnson, here to guide you with the insights I’ve gained from over 18 years as a mortgage broker and realtor.

Reflecting on the past, homes in the 1980s were astonishingly affordable compared to today – what you’d pay in property transfer taxes now could have bought you a house back then.

Although data varies, the average price for a Vancouver home in the mid-80s hovered around $160,000. Fast forward to today, and that figure has skyrocketed to $2,500,000, marking a 15-fold increase.

But have incomes kept pace? Absolutely not. The average income in Vancouver was about $30,000 in 1982, only to reach approximately $69,000 today – a mere doubling in 40 years, far from the exponential rise in home prices.

The disparity between income growth and housing price inflation has significantly eroded the affordability of homeownership.

Let’s break down the numbers:

In the 80s, a $160,000 home, with a 20% down payment, led to a $128,000 mortgage. At a 20% interest rate over 25 years, monthly payments were about $2,108, consuming 74.4% of the average income.

Contrast that with today: a $2,500,000 home requires a $2,000,000 mortgage (assuming a 20% down payment). With a 5.5% interest rate, monthly payments jump to $12,455, or 215% of the average income.

Despite these comparisons, the actual affordability of homes has drastically diminished due to the disproportionate increase in home prices relative to incomes.

And while I’ve focused on individual rather than household incomes, the conclusion remains starkly similar.

Given the choice, I’d opt for the 1980s’ pricing and mortgage rates any day.

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But why were the 1980s’ interest rates so high? The culprit was rampant inflation, which led to historically high mortgage rates, occasionally topping 20%.

Despite official reports, I’m skeptical about the accuracy of inflation rates, especially in light of recent underestimations.

For those feeling disheartened by today’s market, remember, it’s still possible to find your footing in real estate. Whether it’s through renovating an older property or investing in a presale with a long completion period, opportunities abound.

I’m here to guide you through each step of the process. To get started, book a consultation with me.

And if you’re looking for more real estate wisdom, don’t miss my best-selling book, ‘Rockstar Real Estate Investing,’ available on Amazon. Check the description for the link.

Let’s take charge of our lives and navigate the real estate market with confidence. I’m Jessi Johnson, here to empower you with over 18 years of experience. Remember, the key is to Own Your Life!