New Home SalesCENSUS
671K
U.S. Housing Market · 1987
U.S. Housing Market in 1987
Existing SalesNAR
3.44M
Median PriceNAR
$85,600
30Y MortgagePMMS
10.21%
In 1987, the U.S. housing market recorded existing-home sales averaged 3.44 million, new-construction sales of 671K, and a 30-year fixed mortgage rate of 10.21%.
Existing-home sales fell 0.9% from 1986. the median existing-home price rose 6.6% to $85,600. the 30-year fixed mortgage rose 0.02 percentage points to 10.21%.
By the numbers — 1987: new-home sales 671K, existing-home sales 3.44M, median existing price $85,600, 30-year mortgage rate 10.21%.
Macroeconomic Context
Nineteen eighty-seven is best remembered for Black Monday — October 19 — when the Dow Jones Industrial Average fell 22.6% in a single session, the largest one-day percentage decline in U.S. stock market history. The crash triggered fears of a 1929-style depression, and the Federal Reserve under new chairman Alan Greenspan responded immediately with an open-market statement pledging to provide liquidity, helping to contain the financial contagion. Real GDP grew roughly 3.5% for the year despite the October shock, and inflation picked back up to about 3.6% as oil prices partially recovered and wage growth accelerated.
The Federal Reserve had been tightening modestly through most of 1987 in response to rising inflation; the federal funds rate rose from about 6% to 7.3% by October before the crash prompted a brief pause. Mortgage rates averaged approximately 10.21% for the year — nearly flat with 1986 — and the housing market continued its mid-decade recovery at a moderate pace. The Black Monday crash, while psychologically devastating, had limited direct impact on housing: mortgage rates actually dipped slightly in the immediate aftermath as investors fled to Treasury bonds.
The S&L crisis was deepening visibly by 1987. The Federal Home Loan Bank Board reported that hundreds of thrift institutions were insolvent or on the verge of insolvency, many because of reckless commercial real estate lending enabled by the deregulation of 1982–83. The full cost of the crisis — ultimately $130 billion in taxpayer funds — was becoming apparent to regulators, though Congressional action to address it would wait until 1989.