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Housing May Actually Be More Affordable Than Ever Before

Today’s Rates vs 1987 Rates

I hear it all the time: “Our parents had it so much easier, houses were more affordable back then.” This sentiment is often echoed in memes and on social media, with many people feeling frustrated by what they perceive as a lack of affordability in the current housing market. But is this complaint actually valid? Let’s take a closer look at the data.

One of the primary factors that impacts housing affordability is interest rates. When interest rates are low, it can be easier to secure a mortgage and make monthly payments. According to, interest rates are currently around 7%. This is relatively low compared to historical rates, which have been as high as 7.75% over the years.

To put this in perspective, let’s look at interest rates from the year 1987, which is when many of today’s adults were born. At that time, interest rates were at 10.35% Avg. My dad got a 14% rate on a home he purchased in 1987! While this was lower than the peak rate of 18.39% in 1981, it was still considerably higher than today’s rates.

Next, let’s consider household income. According to, the median family income in 1987 was $30,850, or $2,570 per month. Today, the median household income is $70,784, or $5,898.67 per month. This represents a significant increase in earning power over the past few decades.

Now let’s turn to home prices. In 1987, the median home price was $104,500. Adjusted for inflation, this is equivalent to $224,781.52 in today’s dollars, according to In 2023, the median home price is projected to be $360,000, according to While this is certainly more expensive than the 1987 median home price, it’s important to note that the average square footage of a home has also increased over the past few decades. In the 1980s, the average home size was 1,785 square feet. Today, it’s 2,650 square feet. When you adjust for inflation, the price per square foot in the 1980s was $126, compared to $135 today. So while home prices have gone up, the increase in square footage means that the price per square foot has only gone up by $10, despite interest rates being nearly half what they were in the 1980s.

Finally, let’s consider the monthly cost of a mortgage. In 1987, a $104,500 home with a 10.35% interest rate would have cost $755 per month, which was 30% of the median family income at the time. Today, a $360,000 home with a 6.32% interest rate would cost $1,786 per month, which is 31% of the median household income.

So, what do all of these numbers mean? While it’s true that home prices have gone up over the past few decades, it’s important to consider the broader context. Interest rates are much lower today than they were in the 1980s, and household incomes have increased significantly. When you adjust for inflation and square footage, the price per square foot of a home has only gone up by $10. Additionally, the monthly cost of a mortgage today is only slightly higher than it was in 1987, despite the higher home prices.

In conclusion, while it’s understandable that many people feel frustrated by the current housing market, the data does not support the idea that our parents had it significantly easier when it came to buying a home. While home prices have gone up, interest rates are lower and household incomes have increased, which helps to offset the higher prices. It may be time to face reality and get your expectations in line. I work with many young first time home buyers who are expecting their dream home rather than a first or starter home.

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